Can Developing Economies Have High Growth Without Using Coal? A Debate.
Coal helped give the West its Industrial Revolution, its ironclad navies, its empires. It has also brought clouds of soot, black-lung disease, acid rain and now concerns about climate change.
The world’s biggest economies, in response, are turning to alternative, non-fossil-fuel energy sources in an effort to stem carbon emissions. That leaves many developing nations facing a difficult question: To sustain or increase our economic growth, do we continue to rely on coal? Or can we reach ambitious economic growth targets over the next decade while replacing coal with renewable and alternative energy sources?
In the debate that follows,
co-founding dean of the Columbia Climate School, argues that developing countries can eliminate coal and still reach economic growth targets. The opposing view, that coal will have to remain part of the energy mix for those nations to reach growth targets, is argued by Rahul Tongia, senior fellow at the Centre for Social and Economic Progress, a New Delhi-based nonprofit think tank, and senior fellow (nonresident) at the Brookings Institution.
YES: Renewable energy sources can be the most affordable option
By Jason Bordoff
Since the start of the industrial era, economic growth and energy consumption have gone hand in hand. In developing countries, which use relatively little energy today, rising prosperity will require much larger amounts of affordable energy in the years ahead. According to the International Energy Agency, around two-thirds of global energy demand growth will come from the developing world through 2050.
For decades, coal has been an important energy source for lower-income countries. Currently, there are roughly 9,000 coal-fired power plants around the world, three-quarters of which are located in developing economies.
But in a world facing a climate crisis, cleaner energy sources can meet the developing world’s energy needs without sacrificing significant levels of economic growth. According to the IEA, renewable energy sources are the most affordable option in most regions of the world, cheaper even than power from existing coal plants. And there is significant room to expand these renewable energy sources. Consider that almost 60% of the world’s best solar resources are in Africa, yet that continent’s current solar output is one-tenth that of the U.S.
Of course, solar and wind, unlike coal, are intermittent sources of energy. But the cost of energy storage has fallen sharply over the past decade, and developers are finding new, innovative ways to store energy. In a multidecade process of transitioning away from coal, other sources of energy—such as nuclear, natural gas (eventually with carbon capture) and low-carbon fuels such as hydrogen—may also play a role. For example, if countries meet their pledges under the Paris Agreement process, the IEA projects natural gas will account for almost 20% of the energy demand growth in developing economies from today to 2030, with coal losing steam in many parts of Asia.
To be clear, phasing out coal will be difficult. But developing countries can still achieve economic growth as they transition away from coal. In India, the world’s second-largest coal consumer, solar is likely to reach cost parity with coal in roughly a year, after which the cost of solar will continue to decline rapidly as coal’s levelized cost of energy—the average net cost of a unit of electricity over a power plant’s lifetime—increases somewhat. An accelerated development pathway would take advantage of the large solar and wind resources that India possesses. And while it is true that in China, the world’s largest consumer of coal, total use of coal hasn’t peaked, it is clearly possible to enjoy economic growth while phasing down coal use. In the 10 years leading up to 2019, the Beijing region reduced its coal use by 99%, even as its GDP more than doubled. This process may be difficult to replicate in locations outside the capital city, but it shows that such changes are possible, and China’s current five-year plan calls for moving away from coal.
For the developing world to move away from coal will require significant increases in investment—in total more than $500 billion by 2030 if countries are to meet their pledges to the Paris Agreement, and double that to be on track for net-zero emissions by 2050. The cost of capital in developing countries is three times as high as it is in developed countries. Developed nations must make good on promises to mobilize more capital for the energy transition in the developing world. And barriers to more private-sector investment need to be removed, such as currency-exchange risk.
Innovative financial mechanisms will be needed for the early retirement of coal power plants, from allowing for faster capital recovery to having governments fund the cost of closure. In the past year, a new model of public and private sector collaboration known as the Just Energy Transition Partnership, or JETP, has mobilized $28.5 billion to help South Africa and Indonesia move away from coal faster. While South Africa’s coal plants are, on average, 41 years old, Indonesia’s are on average only 12 years old, suggesting that the model is replicable even in locales where coal plants aren’t as aged. Agreements like JETP are an excellent example of how wealthier countries can enable developing countries to wind down coal generation while supporting economic development for those who might be hurt by it.
As costs fall rapidly, lower-income nations can tap greater investment from both the public and private sectors to make clean energy part of a growth strategy, enjoying both strong levels of economic growth and the reduced pollution and carbon emissions that come from using less coal.
Mr. Bordoff, an energy adviser in the Obama administration, is co-founding dean of the Columbia Climate School and founding director of the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. Lilly Yejin Lee, a master of public administration candidate at Columbia University’s School of International and Public Affairs, contributed to this article. They can be reached at email@example.com, and Mr. Bordoff on Twitter @JasonBordoff.
NO: Coal is the best option available
By Rahul Tongia
To meet economic-growth goals, some developing countries will still need and use coal in the coming decade, and likely longer. It isn’t because they don’t care about the environment. It is because coal is what they have available, and, for these countries, alternative-energy sources aren’t ready to displace coal entirely and be a secure energy supply.
China and India are the world’s largest coal consumers. China, for just over one-sixth of the world’s population, uses one-half of the world’s coal. India, with a similar size population, uses about one-tenth. The share of primary energy that coal represents for both, meanwhile, is about 50%. Ending coal thus means replacing it at large scale, and only with alternatives that are cost-effective.
However, given the current low levels of energy use per capita in many of these countries, to achieve desired economic growth in the near future will require parallel growth in energy supply—at a rate that even the most aggressive clean energy deployment in history hasn’t been able to meet in full. Thus, for some, shunning coal wouldn’t just be expensive, it would mean lack of energy for human development.
The International Energy Agency may state that wind and solar are the cheapest sources of electricity in most of the world. But power from such sources is intermittent. If we add the necessary power-storage systems to ensure reliable evening supply, it costs much more than fossil-fuel power for countries that have access to cheap coal (or cheap natural gas, available before the Ukraine crisis). Also, wind and solar only address electricity production, whereas industrial use of coal (and natural gas) is vital for manufacturing. For example, only about half of India’s emissions come from the electricity sector.
To slow down the growth of coal, developing nations can cost-effectively use large volumes of intermittent wind and solar. But to end the use of coal for electricity and still sustain economic growth, we need storage solutions (or alternative clean but firm supply). Batteries are falling in price, but most low prices have been for batteries used in electric vehicles. Data from research company BloombergNEF shows that grid-scale batteries will be measurably more expensive than coal-based power from domestic sources for the coming decade. In addition, being capital-intensive, they will be more expensive for poorer countries that have higher costs of capital than rich countries (and that may also be last in line to access critical minerals or advanced technology).
India and China have enormously ambitious plans for scaling renewable energy. China sometimes adds as much wind or solar in a year as the rest of the world adds put together. Its coal use, meanwhile, still hasn’t peaked. To stop using its 1,000-plus gigawatts of coal-based power capacity, roughly 3,000 gigawatts of renewable energy would be required (or roughly triple its existing renewable-energy capacity), plus more than 10,000 gigawatt-hours of storage. Clean-tech supply chains are already strained to meet rising global demand even before trying to displace China’s existing coal-power capacity.
For India, growth in energy demand is both inevitable and welcome given the low base from which it is starting, and the need for human development. India’s per capita consumption of electricity is less than one-third the world average. But even if the country meets its goals for renewable-energy growth by 2030, renewables won’t provide enough electricity to meet the country’s rising electricity demand. Coal remains the backstop.
For every study that calls for a phase-down in the use of coal in developing nations, meanwhile, it’s important to note that global CO2 emissions from oil and gas in 2019 were 25% more than those from coal. And for rich countries like the U.S. and Germany, not only is the per capita coal consumption multiple times that of India (especially when we correct for coal quality), they use tens of times more oil and gas per capita.
Access to cheap and plentiful natural gas helped the U.K. and the U.S. in their shifts from coal to natural gas. But where is the secure and inexpensive gas supply for many developing countries? Gas prices spiked following Russia’s invasion of Ukraine. But even shifting to gas isn’t carbon-emissions-free. Those same gas-price increases caused by the war in Ukraine led Britain to approve a new coal mine for the first time in 30 years, and Germany also to revive some coal mining. Britain also outsourced more than 40% of its 2020 emissions through imported goods, many of which were made in China and, to a lesser extent, India.
The Just Energy Transition Partnership signed between South Africa and the G-7 in 2021 is often cited as an example of how developing countries heavily reliant on coal can transition to renewable energy with the help of international finance. But this model won’t replicate easily. Every country will have a different experience when it comes to being weaned off coal. South Africa’s coal-power plants on average are nearing their end of life, and new coal plants may not be as cost-effective going forward. By contrast, India’s coal power plants have a median age of only about a decade, and it will take vastly more capital to prematurely shut them down and simultaneously fund green alternatives.
An arbitrary “end coal” deadline isn’t feasible for developing countries that hope to achieve strong economic growth but lack alternatives. A realistic initial goal should be a reduction of coal, first in relative, then in absolute terms. Global finance will accelerate this, ideally with grants and concessional finance. But it won’t happen quickly, or through pressure or posturing.
Dr. Tongia is a senior fellow at the Centre for Social and Economic Progress, a New Delhi-based nonprofit think tank, and a senior fellow (nonresident) at the Brookings Institution. He is also an adjunct professor at Carnegie Mellon University. He can be reached at firstname.lastname@example.org and @drtongia.
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