This is the first article in a Nikkei Asia series on the COP26 climate change summit, which begins Oct. 31 in Glasgow, and the danger global warming poses to Asia.
BANGKOK — Perched on an exposed outcrop of Asia’s continental shelf, Vietnam has long been at high risk from the effects of global warming: rising seas, violent typhoons, land subsidence and a rise in infectious diseases are just a few of the symptoms.
Prime Minister Pham Minh Chinh has pledged to do something about the climate threat, most recently in a somber prerecorded speech to the Russian Energy Week conference in mid-October. Speaking from Hanoi, he lectured delegates on the critical need to ratchet up the use of clean energy and “proactively” phase out coal, the No. 1 source of carbon emissions worldwide.
Within days of that announcement, however, it emerged that Vietnam would not be taking its own advice: It is increasing rather than decreasing its reliance on coal for fuel. According to a leaked government document, Power Development Plan 8, Vietnam will likely double its coal-fired electricity generation by 2030.
Across Asia, the story is much the same. Country after country has announced optimistic plans for decommissioning coal plants, emphasizing renewable energy and achieving climate targets. But progress is painfully slow or even going into reverse. Rosy public statements have turned out to be premature, and many countries such as Vietnam have backtracked on plans to swap coal for renewables amid panic over future power supplies.
The forthcoming climate summit in Glasgow, Scotland, the 2021 United Nations Climate Change Conference, or COP26, will be staged in the flickering spotlight of gas price spikes and electricity shortages in Asia, crises that highlight the region’s uniquely persistent dependence on coal.
China, for example, has suffered rolling power cuts in many of its southern regions this year due to coal shortages, while India almost ground to a halt in September when supplies were interrupted by heavy flooding of mines and transport infrastructure that compounded COVID-19 management issues.
But these energy crises — arguably due to overdependence on coal — are in the process of being solved in all-too-predictable fashion: more coal.
“I think it’s fair to characterize it as an addiction [to coal], but it’s very important to contextualize it,” Isabella Suarez, an analyst at the Center for Research on Energy and Clean Air, told Nikkei Asia. “Unlike Europe, energy demand has grown and continues to grow at a rapid rate across Asia. This is driven by a growing population, expansion of access to electricity to more parts of the region, and massive economic growth and development.”
Environmentalists find the region’s reliance on coal exasperating. First, Asia is already struggling with the environmental and public health effects of global warming. India, for example, had the world’s third-worst air pollution in 2020, according to IQAir. In the Philippines, where more than 50% of municipalities are coastal, the seashore is being eroded at an alarming rate, and coral reefs are disappearing almost overnight.
Second, the economic case for coal is becoming increasingly hard to make. Renewable energy is already cheaper than many fossil fuels: The U.S. Energy Information Administration estimated in 2020 that by 2025 it will cost slightly over $90 to generate a megawatt-hour from coal, as opposed to just $63 from onshore wind and $48 from solar.
Coal is also vulnerable to supply shocks, something that has been highlighted by the recent jump in global coal prices. ABC News Australia reported that, due to shortages, the price for quality New South Wales thermal coal hit an all-time high of U.S.$269 per ton this month, surpassing the previous peak of a little over $200 per ton in 2008.
By 2025 it will cost slightly over $90 to generate a megawatt-hour from coal, as opposed to just $63 from onshore wind and $48 from solar.
U.S. Energy Information Administration
From an economic standpoint, then, there seem to be few advantages to continued dependence on coal. TransitionZero, a British research company, estimates that replacing China’s fleet of coal plants with zero-carbon alternatives could save it $1.6 trillion over the next 20 years. It recommends that China cancel all new coal plants immediately.
But Asia continues to double down on coal, with China leading the way. China commissioned 76% of the world’s new coal plants in 2020, up from 64% in 2019, according to Boom and Bust 2021, a report produced by a consortium of environmental groups.
Vietnam’s PDP 8 would see nearly a third of the country’s installed electricity generating capacity become coal-fired by 2030 — 41 gigawatts compared with 20.7 GW in 2020. Proponents of the plan say coal is the fastest way to guarantee the power supply can keep up with demand in the fastest growing economy in Southeast Asia.
And Vietnam is not even as coal-dependent as many countries in Asia, where 40% of energy overall is still generated by coal-fired power stations.
The U.S. Energy Information Administration has forecast that increases in coal-fired generation in non-OECD Asia, including Indonesia, Vietnam and Thailand, will account for more than 75% of the increase in global coal-fired generation from 2030 to 2050 if existing laws and regulations remain.
Hooked on coal
Experts agree that Asia is hooked on coal. While 20 years ago, the U.S. and the European Union accounted for more than one-third of global coal consumption, about the same as China and India combined, today China and India account for two-thirds of global coal use, with the EU and U.S. adding up to just 10%, according to Carlos Fernandez Alvarez, senior energy analyst with the International Energy Agency.
“Global coal trends are now firmly driven by Asia,” he said.
That presents a conundrum for experts. If coal is dirty, and coal is expensive, why can’t Asia give it up? Sudhir Sharma, a regional U.N. Environment Program expert for energy and climate based in Bangkok, believes that it is because financiers like to stick to what they know. “Coal has been around for centuries now,” he said. “Coal has all its financial systems set up… A lot of big financiers are willing to finance coal, but there is no such financing at large scale for renewables. Banks are very risk-averse by nature, and reluctant in the absence of clear policies.”
Sharma points out that political will is critical. National grids need to be modernized to support renewables, and plans for labor redeployment and industrial reforms put in place.
Another reason is reliability, say coal industry advocates. “Coal has a fundamental role in providing access to baseload electricity — power that is constantly available,” said the London-based World Coal Association in its literature promoting “clean coal for sustainable development.” According to the WCA, 1.7 billion people gained access to electricity for the first time between 1990 and 2010, and of these around 93% did so through coal. Coking coal is also important in steelmaking. “We cannot produce the steel we need without coal,” the association said.
Sharma said the creation of incentives for renewables lags in Asia. “Policies [favoring renewables] are not backed by a clear regulatory framework to encourage the private sector,” he said.
The European Union, by contrast, has blazed a trail in terms of regulatory reform and creating incentives to switch to renewables. In Asia,…