Why Canada is complicit in allowing dirty coal to remain king

More than a decade ago, the world, and especially Western economies, gave the impression of wanting to abandon coal.

And so the nastiest of the fossil fuels driving climate change has long been thought to be in decline.

Not so.

Global coal consumption reached a record high in 2022 and is expected to increase again this year.

Climate scientists have said that if global temperatures are to avoid rising more than 1.5C above pre-industrial levels, coal production needs to fall by more than two-thirds by 2030.

Instead, it is expected to fall by less than 20 percent during that time.

Some Western jurisdictions have cut back on coal.

Ontario closed the last of its coal plants in 2014. And many North American electric companies have switched from coal to natural gas.

But coal remains in high demand in many of the world’s largest and fastest growing economies, including China, India and Indonesia.

While China has ambitions to build dozens of nuclear power plants, it currently relies on more than 1,100 coal plants. India has 285 and Indonesia has 87.

Canada, too, is complicit in the continued existence of the coal industry.

Canada is the world’s fourth largest exporter of metallurgical coal used in steel and cement production, and is itself one of the largest emitters of greenhouse gases.

Canadian coal production, more than 80 percent of which is in BC and Alberta, has fallen by just a third from its peak in 2014.

And coal producers have benefited from more than tripling the price of metallurgical coal from the pandemic low to $450 (U.S.) per ton by 2022.

The price of thermal coal, used in the production of electrical energy, has more than doubled to $175 per ton.

Alberta and Saskatchewan still rely on thermal coal for more than 40 percent of their electricity production. No other province is more than 10 percent dependent on coal.

Saskatchewan coal power plants

Scott Moe, the premier of Saskatchewan, vows to keep his province’s coal plants running for the rest of their natural life, until the middle of the century.

“Come get me” was Moe’s taunt last month when Steven Guilbeault, the federal secretary of the environment and climate change, said Saskatchewan would act illegally if it fails to comply with a federally mandated end to coal-fired power production by 2030.

Politicians are the same everywhere.

When G7 energy and environment ministers met in Japan in April, Guilbeault pushed for a strong commitment from Western economies to rapidly phase out coal.

Instead, he had to settle for a pale joint statement that the G7 countries will aim for a “predominantly low-carbon energy sector” by 2035. The G7 countries still operate more than 400 coal plants, led by the US, with 225.

At the 2021 Glasgow Climate Summit, governments and world banks pledged to significantly reduce their financing of fossil fuels.

But the UN calculates that coal, oil and natural gas operations were still receiving about $11 million in government subsidies every minute of the day in 2022.

Meanwhile, in the private sector alone, 60 of the world’s largest banks helped fund $13 billion worth of coal projects last year.

The banks exploited the many loopholes in the Glasgow Pledge which they signed and then exploited to attract ESG (environmental, social, governance) investors.

And while some energy and mining companies are divesting coal assets, Canada’s Teck Resources Ltd. for example, found no shortage of buyers for its coal mines in southeastern BC

Teck’s coal business is likely to bring in more than $8 billion. Such high valuations for coal assets prove that coal is far from the “end times” for the industry that environmentalists had predicted.

To be sure, ESG activists are pressuring the world’s major banks, including Canada’s Big Six, to help curb coal production by cutting off the industry’s source of capital – as the Glasgow summit suggested.

But aside from the banks, there are countless private equity firms, hedge funds, and state-owned banks and sovereign wealth funds in China, India, Indonesia, and the Middle East eager to buy existing coal operations and fund new mines.

The solution to the coal problem is to reduce the demand for coal, instead of trying to finance it, which doesn’t work.

That means renewable energy needs to be made even cheaper, with the cost of wind energy cut in half further over the past decade.

The cost of solar energy has fallen by about 85 percent in that time.

Countries like the US, France and Japan are rethinking the benefits of long-stigmatized clean nuclear energy.

More countries should follow Canada’s lead in correctly pricing carbon emissions with national carbon tax systems. Another option is “carbon border tariffs” or surcharges on imported goods not made with clean energy.

That’s not a wish list. Progress is being made on many of these fronts, although more urgency is needed.

Otherwise it will be a long time before we can stop bowing to King Coal.

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