Perspective: How a short-term relapse to coal could put exporting countries and just transition processes at risk
Paola Yanguas-Parra, Nicolás Malz, Pao-Yu Oei, Andrea Furnaro, Christian Hauenstein, Grace Quiceno, Felipe Corral-Montoya, Thomas Mitterecker, Jonathan Hanto
Abstract
This article examines the potential impacts of the global energy crisis in 2022, following the invasion of Ukraine by Russia, on international coal markets and the risks and opportunities for coal exporting countries. Based on the short-term reaction and medium to long-term plans of the main coal consumers and producers, we claim that the temporary increase in demand and prices in mid 2020s will likely be followed by a rapid decrease in international coal demand that could lead to a “boom and bust” scenario. We highlight four risks of this “relapse to coal” for coal exporters, due to a fundamental mismatch between the short-term incentives resulting from the current coal “bonanza” and the long-term implications of investments and policies executed to take advantage of it: i) risk of alteration of the national political economy in favor of the coal sector, ii) risk of increased investments in the coal sector and ballooning stranded assets, iii) intensified social, ecological and economic risks for coal-producing regions, and iv) risk of macroeconomic vulnerability. Taken together, and in a global context of economic recession, those risks could become a vicious cycle that will slow down national and international efforts for just transitions beyond coal. In contrast, if managed wisely, the additional short-term earnings that governments and companies are receiving as a result of the crisis (high coalprices) can become an important financing source for kicking off just transition processes in coal-dependent regions and communities. We conclude with a discussion on a possible outlook for coal exporting countries that could help to reduce the risks identified.