The struggle to kill King Coal
coal to the ash heap of history. Governments promised to stop building coal-fired power plants, and financiers pledged to stop financing coal mines. Eighteen months on, however, the world’s dirtiest fuel is still smoking.
Russia’s invasion of Ukraine set off a scramble for fossil fuels, pushing coal consumption to record levels in 2022. Even though the energy shock has faded, global coal demand is still set to rise a little this year. If the increase in the world’s temperature is to be limited to 1.5°C, coal production must fall by more than two-thirds over the course of this decade.
Instead it is projected to fall by less than a fifth. One reason for the hopeful prediction of 2021 was the spate of commitments made by the world’s biggest banks and other lenders and investors. More than 200 mainly Western financiers have announced policies restricting investments in coal mining or coal-fired power plants.
Lenders representing fully two-fifths of global banking assets have signed up to the Net-Zero Banking Alliance, which pledges to align portfolios with achieving net-zero emissions by 2050. The hope was that reducing the finance available for fossil fuels would help the world decarbonise by raising the cost of capital for projects, deterring investment and ultimately choking off supply. But the coal boom is exposing the flaws in this approach.
What is going wrong? For a start, the banks’ promises come with small print. Many pledges do not come into force until later in the decade; others cover only new customers or new mines, or exclude miners deriving only a portion of their revenues from coal. As a result, 60 large banks helped channel $13bn towards the world’s largest coal producers last year.
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