Group of 20 leaders may end coal-plant financing

The Group of 20 (G20) countries could strike a deal to end the financing of international coal projects this week in Rome. That would be the biggest step governments have taken collectively to phase out the dirtiest fossil fuel.

Such an agreement could reduce carbon dioxide emissions by 230-million tonnes a year, said Christine Shearer, programme director at the Global Energy Monitor. That is almost equivalent to the annual emissions of Belgium and Nigeria combined. The vast majority of the savings would come from China. In September, it was set to back 44 of the world’s 50 planned, state-financed international coal projects.

“An agreement to end overseas coal financing at a G20 level will be the beginning of the end of new coal plants throughout much of the world,” Shearer said. “These coal proposals were already struggling to attract financing given the poor economic outlook for new coal plants.” 

The pact falls short of the UK and Italy’s hope that the world’s major economies would agree to phase out domestic coal use before UN climate talks start in Glasgow, Scotland, immediately after the G20 meeting. But even the smaller goal of ending overseas financing was not a serious possibility until Chinese President Xi Jinping told the UN General Assembly in September that his country is to stop building plants abroad.

That moment was a turning point — though a lack of clarity hovers over Xi’s pledge — after months of challenging international negotiations about the future of coal. At the start of the year, the Italian government, which holds the rotating G20 presidency, said it wanted countries to agree to put an end to burning coal unabated — which means without capturing the emissions.

While European countries are ending the use of coal at home — the UK plans to shut down all domestic coal plants in the next couple of years —  big emitters such as the US and China are not prepared to take that step. In June, Group of Seven leaders were asked by the UK to end domestic coal use. But US President Joe Biden would not agree, so instead they settled on a smaller deal to stop financing new coal power plants outside their own countries. 

Now the wider G20, which includes coal-reliant China and India, potentially could reach a similar agreement. It is an important step, but  still leaves a huge task ahead when it comes to domestic coal use.

A record-tying 38GW of coal plants were shut in 2020, led by the US and Europe, but those retirements are eclipsed by the 39GW of new coal plants China plans to build. The nation commissioned more than three-quarters of the world’s new plants in 2020, compared with 64% in 2019.

Any agreement on coal, no matter how small, still is no given. The energy crisis rattling Europe and Asia has bolstered arguments from fossil-fuel proponents that the world is not ready to give up coal, oil and gas. It could be that the biggest polluters ultimately decide they just are not ready to say goodbye to the cheap and dirty fuels.

Speaking in London on Thursday morning, US special presidential climate envoy John Kerry said ending coal use remains a challenge and he hopes technologies such as carbon capture and storage will make the task easier.

“What we need is not a lot of finger pointing and screaming at countries but to ask what do we need to bring them aboard,” he said. 

Bloomberg News. More stories like this are available on bloomberg.com