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IEA: $9.5 Trillion Required to Fund Coal Transition

Updated: Dec 21, 2022


According to a new analysis released by the International Energy Agency, about $10 trillion in energy sector investments would be required by 2050 to fund the transition away from coal-powered electricity, reach global net zero goals, and prevent severe climate change impacts (IEA).


In a statement announcing the release of the research, the International Energy Agency (IEA) called for quick policy action to mobilize the "huge financing" needed to enable the deployment of sustainable energy alternatives to coal and to promote "secure, equitable, and affordable transitions."


In its latest report, "Coal in Net Zero Transitions: Strategies for Rapid, Secure, and People-Centred Change," the International Energy Agency (IEA) analyses and outlines the reductions in coal-powered energy required to meet international climate goals, including the massive scale-up of cleaner energy alternatives, financing requirements, and options for affected sectors, industries, and workforces. The paper also presents crucial recommendations for governments to aid the transition away from coal.


The research emphasises the need to reduce coal emissions to achieve global climate targets and the magnitude of the task posed by replacing coal. Coal is the greatest source of energy generation globally, with over 9,000 units with a capacity of 2,185 gigawatts accounting for 36% of global electricity.


In 2021, coal will account for 15 gigatonnes of energy-related CO2 emissions, making it the world's top emitter.


Executive Director of the IEA Fatih Birol stated:


"Coal is the single largest source of CO2 emissions from energy and the single largest source of electricity generation worldwide, highlighting the damage it is causing to our climate and the enormous challenge of replacing it swiftly while providing energy security."


Regional characteristics of coal use also provide issues, according to the paper. China and other emerging and developing nations account for more than half of the world's coal demand, with China's power industry accounting for one-third of this total. While the average age of coal plants in the United States is greater than 40 years, the average age of coal plants in growing Asian economies is less than 15 years. According to the IEA, if the worldwide coal-fired fleet ran for its average lifetime, it would produce more carbon dioxide than all coal plants combined.


The paper details what would be necessary to accomplish the targets provided by various climate scenarios, as emphasized in the IEA's flagship World Energy Outlook (WEO) 2022 report, which was released last month. These include the Announced Pledges Scenario (APS), which assumes that the aspirational targets set by governments will be met, and the Net Zero Emissions by 2050 Scenario (NZE), which covers the required energy market transformation required to reach the global goal of achieving net zero emissions by 2050.


To facilitate the coal-fired power reductions necessary to reach the APS scenario, in which all net-zero commitments announced by governments to date are met, the report estimates that approximately $6 trillion in investment would be required through 2050, with coal demand from plants falling by approximately a third by 2030 – with 75% replaced by wind and solar – and by 50% by mid-century. The NZE scenario, deemed necessary to restrict warming to 1.5 °C and prevent the worst effects of climate change, would require approximately $9,500,000,000,000,000 in investments and a 90% decline in coal-fired power demand by 2050.


The remainder would go toward energy storage and the development and modernization of electricity infrastructure.


The research also emphasizes the need for investment and innovation in industrial sectors such as steel and cement, which account for a substantial share of coal use and for which alternatives to coal are less developed or available.


The report also emphasises the need for policies to facilitate "people-centered transitions" in the transition away from coal, noting that approximately 8.4 million people are currently employed in coal value chains around the world and that while the energy transition will likely create many new jobs, they may be located in different areas than the positions being lost.


Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies and chairman of Dr. Birol's High-Level Advisory Group, stated:


"Coal-fired power plants are declining, but not at the rate necessary to save lives and defeat climate change." We can achieve a complete phase-out of coal plants in advanced economies by 2030 and in the rest of the globe by 2040 by increasing investment in clean energy. On the other side of this shift are a stronger economy and healthier communities - and we cannot afford to squander any time getting there."


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