- Investors are being encouraged to sell their coal-related assets as part of the divestment movement.
- Even coal-mining companies have participated in the movement.
- China and India are increasing their production of coal as part of their growing economies.
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There's a growing divestment movement among investors, including large institutions, to sell off their fossil-fuel assets from businesses and industries responsible for carbon emissions.
A major focus of the social, political, and economic pressure to divest is coal mining, especially thermal coal. The fossil fuel is used to generate 34% of the world's electricity but produces large amounts of carbon-dioxide and methane emissions during its production and consumption, more than oil or natural gas in 2018.
The recently released Intergovernmental Panel on Climate Change report has put a spotlight the urgent need to move into cleaner energy sources and reduce coal-mining activity. But rising prices of more than $170 per metric ton (nearly four times the lowest price in September) indicate a resurgence in demand.
Divestment targets the investment capital required to finance the production, distribution, and sale of coal mining. Despite its polluting reputation, coal-fired power has been attractive to investors because of the generating capacity of the largest plants (5 gigawatts), the often cheap price, and the relative stability of its supply in high-use countries like China, India, and the US.
Coal, both the kind for heating (thermal) and the manufacturing of steel (metallurgical), also makes up about 50% of the world's mining market. And the industry continues to grow, with 432 new mine developments and expansion projects announced or under development worldwide, according to a survey by the Global Energy Monitor published in May.
China and Australia are the leaders in two kinds of coal used in steel production, coking, and metallurgy. Both are among the more than 191 countries that have signed commitments for net-zero emissions by 2050. But to achieve the goal of limiting global warming to 1.5 degrees Celsius, which was set by the Paris Climate Accords, the amount of coal used to manufacture steel would need to decline by 80% in the next three decades compared with current levels, according to analysis by the consulting firm McKinsey.
Companies across several industries have been moving away from coal, and insurers like Allianz have publicly released policies restricting coal or investments in coal-related assets.
"Ideally, companies close coal power plants and do not sell them," the insurance company wrote in a statement published in May on coal-based business models.
The pressure to sell off coal assets has existed for years and has reached coal companies themselves, including the global mining giants BHP and Rio Tinto. But while global coal consumption and production fell worldwide in 2020, and hit a 60-year-low in the US, developing countries are leaning into coal for their economic recoveries.
Last year, China increased both its output and its use of coal to more than half the world's coal-fired power. Despite the country's plans to reach carbon neutrality by 2060, China added 38.4 gigawatts of coal-fired power capacity last year - more than three times the amount built anywhere else worldwide, Reuters reported, citing international research.
The increase in coal-fired electricity generation in India for this year is expected to be three times higher than renewables. This increase in demand is expected to push carbon-dioxide emissions from coal in 2021 to 640 million metric tons, the highest levels since 2011.
For divestment of coal to be successful and global climate goals to be met, it will require greater regulations, economic disincentives, and a true understanding of how carbon emissions do not care about national borders.