At the Ecosperity Week 2023 conference in Singapore on June 8, business representatives stated that the phase-out of coal from the region’s energy mix requires a combination of cautious public policies and precise financial incentives that take into account how deeply ingrained the fuel is in the region’s social and economic structure. Adopting the proper governmental policies is necessary for growth. The pricing in of externalities is one of them, as is the elimination of subsidies for the production of coal power. The deployment of renewable generating and its ability to replace coal are also supported by policies that are required, according to Mark Carney, co-chair of the Glasgow Financial Alliance for Net Zero (GFANZ).
“However, we acknowledge that substantial public and private capital is currently restrained in APAC into existing coal assets, many of which are relatively young and have long-term contracts in place.”
A public consultation was started earlier this week and will go through August 4 as part of GFANZ APAC Network’s efforts to publish a final report with recommendations for financial institutions to support the controlled phase-out of coal power facilities in the area ahead of COP28.
GFANZ had presented 10 suggestions for financial institutions as part of the consultation, including the need to evaluate the stability of energy transition plans in the nation where the coal power plant is located and availability to safe, dependable, and reasonably priced renewable energy substitutes.
“There is a danger that, in its own attempts to decarbonize, private finance may reduce or perhaps completely eliminate its exposure to coal-related vulnerabilities without recognized and reliable ways. Individually, this will make sense, but as a whole, it would be a grave error, said Carney, who also serves as the UN Special Envoy for Climate Action and Finance.
“We need funding to decarbonize where the emissions are,” said the speaker.
Asia’s conundrum
Even though coal production is the major contributor to global CO2 emissions, the usage of coal power has not decreased in emerging and developing nations since its 2007 high, according to Carney.
According to Tiza Mafira, director of the Climate Policy Initiative, “economic growth in Asia is immense and is projected to be continuously growing for the next decades, in contrast to Europe and the US, which have slowed down quite significantly.” She also noted that coal is still seen as the region’s most affordable source of energy.
Additionally, Mafira noted that the average age of coal-fired power plants in Asia is 13–14 years, which is far younger than the average age of coal plants in the US or Europe, which is 40–45 years. As a result, it is simpler for these areas to shut down such facilities than it is for Asia.
According to the head of the Asian Development Bank’s energy sector group, Priyantha Wijayatunga, financial incentives would be required to convince investors to shut down the region’s more recent coal facilities.
Investors would anticipate a certain rate of return throughout the course of the facility. Investors are naturally tempted to accept such a deal if you can provide the principle and the same sort of returns in a shorter amount of time. Of fact, that could be the only approach to draw them in, he said.
“Decommissioning active power plants is not a simple process. It’s difficult to provide comparable energy services using sustainable energy sources.
change in favor of renewable energy
Even while the International Energy Agency anticipates worldwide clean energy investments to top $1.7 trillion this year, exceeding coal, gas, and oil investments, industry leaders at the conference noted that Asia is seeing an uneven increase in renewable energy.
“Economics by itself cannot guarantee change at the rate that we need. Tim Gould, chief energy economist at the IEA, said that we need coordinated policy measures to provide way for the introduction of new technologies.
Despite the enormous rise in renewable energy in nations like China and India, China continues to be the world’s top coal-producing nation, and India does not wish to phase out coal, according to Mafira.
Given that it imports less coal than other nearby nations like Vietnam and the Philippines, Indonesia, one of the biggest coal exporters in the world, has “timid” regulations towards switching to renewable energy, she said.
S&P Global Commodity Insights earlier stated that the nation has received an initial $20 billion infusion through the Just Energy Transition Partnership, which is funded by the US, Japan, and numerous other nations, to retire coal facilities and expand renewable projects.
However, despite being the “right approach,” senior minister of Singapore Tharman Shanmugaratnam described such attempts as “slow” and “clunky” during the conference on June 8.
“We must move this forward quickly. And for that reason, when we discuss mixed finance, [phasing out coal] should be Exhibit A. As the head of Singapore’s central bank, Tharman said, “It does need concessional capital and it does demand various tiers of risk appetite, and we have to bring them together in order to manage this outcome and not keep kicking the can down the road.