The World Bank’s declaration this week that it would no longer fund coal projects may not be as bold as it seems.
The United Nations financial institution said it would only fund coal development initiatives in cases of “extreme” necessity after one of its reports found that emissions have locked the world into 1.5-Celsius degrees of warming above pre-industrial times –which means sea level rise, more extreme weather and, probably, decreased crop performance. If emissions aren’t drastically cut, the report says warming could even reach 4°C or more by the time today’s teens are in their 80s. The World Bank, which funds projects in developing countries, said it will now focus on funding renewable energy projects. Ultimately, the move may not be much more than symbolic, not only because it said something very similar last year, but because the WB doesn’t fund much coal anyway – the last loan it made in support of coal use was for a South African plant for $3 billion in 2010. In practice, the bank is focusing on natural gas and hydropower, which have lower greenhouse gas (GHG) emissions than coal, but environmental concerns of their own.
Still, there is a growing global consensus that coal has got to go. Those bucking the trend include the Australian junior mining companies that are investing hundreds of millions in coal mine development in British Columbia’s Peace River and Crowsnest regions. What gives? Simply stated, not all coal is created equal. The coal that is burned in power plants and creates GHG emissions is thermal coal. But higher-quality metallurgical coal, which has a higher carbon content, is critical to steel making, and BC has an abundance of this particular fossil fuel. The Australians’ investments may not be as unwise as they seem at first glance, even considering that BC coal mines have laid off workers by the hundreds this year. The long-term outlook is rosy for metallurgical coal because steel demand is expected to remain steady, and companies are drawn to BC’s stable politics, high quality coal and existing infrastructure. These factors stand in contrast to many other coal-bearing areas of the world, such as Mozambique. The layoffs in BC were a response to a coal glut after Australian production skyrocketed – but it seems that the investors are now looking beyond the current low prices. The volumes of coal burned for steelmaking are small compared to thermal coal. In 2006, Canada burned 58 million tonnes of coal, and 51 million were for energy generation. The remainder was burned in industrial processes such as concrete manufacture and steelmaking. Canadian emissions from steelmaking were almost 14 million tonnes in 2011, but that represents only about 2.5 per cent of the total CO2e emissions from the energy sector (566 megatonnes in 2012). It’s a similar story in the US: In 2013, thermal coal burned for energy generated just under 2 billion tonnes of GHG emissions overall in the US, while steelmaking creates about 117 million tonnes (or about 6 per cent) annually, according to a 2012 Environmental Protection Agency (EPA) report. So while metallurgical coal used in steelmaking is some distance from being environmentally benign, thermal coal presents a much bigger problem.
Energy economist Mark Jaccard helped design BC’s carbon tax, and he still supports it. But he questions just how politically viable a stringent tax—at the level needed to meet climate targets—can really be. So he also continues to explore how other policies that the public find more acceptable could work.