A European Union climate agenda for COP26

The EU should bring a new climate agenda to Glasgow—including a roadmap for emerging nations to embrace a future beyond fossil fuels.

European Union members have adopted carbon taxes, averaging about €25 per tonne, which have rendered an estimated 80 per cent of domestic coal-fired power plants uneconomic. But their global adoption will be thwarted, at the COP26 environmental conference in November, by those responsible for more than half of global carbon emissions: China, India and the United States.

That places enterprises in the EU, Canada and elsewhere paying carbon taxes at a competitive disadvantage, sparking EU discussion of tariffs (endorsed by the Financial Times) to stem carbon dioxide dumping from abroad. This would encourage climate shirkers, such as Japan, to abandon plans for as many as 22 new coal-fired power plants over the next five years.

Threatened US retaliation however requires the EU to rethink its 2020 agenda. Carbon taxes are the most effective economic tool to reduce greenhouse-gas (GHG) emissions. EU advocacy must continue but it should be complemented with well-designed subsidies. At the climate summit in Glasgow, the EU should draw on its internal incentive programmes to help emerging nations end their reliance on fossil-fuel power plants.

Coal-fired plants

Global electricity demand is expected to surpass oil use by 2040, driven by aspirations for higher living standards and rising populations in emerging nations—Africa’s population alone is projected to increase by 500 million. But half of that electricity will be generated using fossil fuels, especially via a spate of new, polluting, coal-fired power plants.

Renewables’ economic edge in generating electricity is a major reason why hundreds of proposed coal-fired plants across the globe have been cancelled of late. Yet many others have made the cut, in Bangladesh, India, Vietnam and elsewhere, while 16 nations—including Egypt, Mozambique, Papua New Guinea, the United Arab Emirates and Nigeria—are planning their first such installations.

Replacing these coal plants with renewables is central to limiting global GHG emissions. And after nearly two centuries of runaway emissions, rich nations bear an ethical responsibility to match their domestic commitments to decarbonise electricity with similar support for emerging nations. This is a climate area where EU leadership can have a huge impact.

Customised profiles

Most emerging nations are in sunny latitudes conducive to renewables. The EU should craft national renewable electricity-generation profiles customised for each of them, reflective of their unique wind, topography, water, materials and security features and concerns.

Australia provides a profile model, thanks to elaborate analyses by the Australian National University (ANU), its elite research centre. ANU experts affirm that Australia could replace fossil fuels with 100 per cent renewable electricity generation, supported by pump-hydro storage and grid upgrades—lowering energy costs into the bargain.

These proposed customised profiles would reflect the fact that capital costs for utility-scale renewables are less than half those of new coal-fired power plants. The most relevant and meaningful cost variable is the lifecycle Levelised Cost of Electricity (LCOE) generated without GHG emissions—a comparison of fossil-fuel power plants fitted with state-of-the-art flue carbon-capture-and-sequestration (CCS) technology with 100 per cent renewable systems (including storage and upgraded grids obviating intermittency).

For Australia, eliminating intermittency, mostly with numerous pump-hydro storage sites, added 50 per cent to the cost of renewable electricity, predominantly from onshore wind farms. Even so, the LCOE generated by the optimised ANU renewables system was cheaper, a conclusion applicable elsewhere as well. Updated US Energy Information Agency projections affirm that the LCOE generated by onshore wind (including a hefty storage/grid cost factor) is lower than from coal-fired power plants fitted with CCS and is competitive with natural gas-fired plants with CCS.  

Extreme cases

That cost edge may exist even in extreme cases—in emerging nations with abysmal pollution standards where fossil-fuel plants incur little or no abatement cost.

For example, few if any Indian power plants capture emissions of any type. Even so, researchers at the Energy and Resources Institute in New Delhi have concluded that construction costs for utility-scale photovoltaics are just 53 per cent (and for onshore wind 68 per cent) of those for new supercritical coal-fired power plants. Other experts agree. And the LCOE generated by renewables there in 2022 would be lower than from either combined-cycle natural gas or supercritical coal-fired plants—even from polluting plants not equipped with CCS. That is, even including a 50 per cent cost bump for obviating intermittency with nationwide Indian storage buildout and grid upgrades, entirely replacing fossil-fuel electricity generation with zero-emission renewables will be cost competitive or cheaper for customers.

Scaling customised renewable profiles should include replacing existing power plants as well. The World Energy Outlook forecasts that coal use will not decline for decades because the typical Asian coal-fired plant is less than 15 years old (compared with 41 years in the US). Incentives should also address using renewable electricity during the inevitable episodes of surplus to produce hydrogen for cement and steel manufacturing (together responsible for 16 per cent of global carbon-dioxide emissions).

Political hurdles

Incentives would help renewables overcome political hurdles in emerging nations. As the incumbent, coal is familiar to politicians and bankers anxious about the risks and costs of retooling national energy systems and grids. Its use is promoted by influential domestic enterprises, such as Adani power in India—whose interests align with government concerns about mining employment and utilising government-owned coal reserves and coal-based engineering firms.

Moreover, giant Canadian, Chinese, Japanese, Indian and South Korean coal firms are aggressively fronting construction costs for plants in new markets such as Tanzania, Mozambique and Botswana. Chinese firms alone are financing at least 63 new coal-fired power plants under the Belt and Road initiative.

While incentives are a powerful counter to these trends, they cannot produce visionary leadership. Temperatures have hit a Miami-like 18C in Antarctica. Yet too many leaders—such as India’s Narendra Modi, China’s Xi Jinping and America’s Donald Trump—pay only lip-service to, or dismiss entirely, the externalities of GHG emissions, convinced their economic and social costs lie far in the future.

Tell that to the 50 million coastal inhabitants, in Bangladesh, China, Egypt, India, Indonesia, Japan, the Philippines, the US and Vietnam, who will be flooded out by rising seas by 2040.