Countries like Australia and Indonesia could lose billions of dollars if they continue to invest in new coal mines and exports as the world moves away from fossil fuels, researchers have found.
A team from Imperial College London (ICL) combined data on coal resources and demand into an economic model of trade and prices.
They have modeled the ‘stranded asset’ risk for coal investment under two different decarbonisation scenarios:
business as usual, where investments in coal mining and consumption continue as they are now, and a sustainable path, where coal consumption is reduced in line with global warming.
to well below 2°C.By going the sustainable path – as countries have agreed under the Paris Agreement – a third of today’s coal mines will become stranded assets by 2040.
This means that such assets become economically unprofitable before their operational life ends and must be scrapped.
This will cause coal-producing countries like Australia and Indonesia to lose vital export earnings and jobs as their international trade shrinks.
In this scenario, for example, Australia could lose $25 billion (£18 billion) a year, potentially creating 2.2 million jobs worldwide. A report last year found that falling costs of renewable electricity were already making fossil fuel plants increasingly unprofitable.
Many developed countries, including the UK, have also introduced policies to phase out coal-fired power stations altogether. The ICL team said governments could avoid huge losses from the coal sector if they prepare for the change now.
This may include early divestiture of coal to avoid holding back future development, and financing the retraining of coal workers. Lead researcher Dr Iain Staffell, of ICL’s Center for Environmental Policy, said:
“This is not to say that all new coal investments – such as the planned deep mine in Cumbria – will be unprofitable, but investors should reduce the financial, reputational and environmental risks in pursuing new mining projects.
” China, Europe and India would save money on the sustainable path as they face lower costs from importing less coal, the study finds.For example, Europe could gain $20 billion a year if coal is phased out.
“Companies have limited opportunity to cope with the sweeping changes facing the coal industry,” Staffell said.
“We need to build human and financial resilience so that workers are not duped and make the transition to a coal-free world easier.”