Emission, not coal, is the problem: World Coal Association

Benjamin Sporton, Chief Executive, World Coal Association
The coal sector is facing new challenges globally, with prices going down and new markets opening up in emerging economies that are focused on cutting down carbon emissions. At the same time, financing is drying up as investors are preferring green energy. Benjamin Sporton, Chief Executive, World Coal Association tells Shreya Jai that South Asian countries, especially India, will continue to push demand for coal the coming decades. However, the emerging energy economies would now have to adopt clean coal technologies and efficient power production to remain sustainable investment destinations. Edited excerpts:

 

Global coal prices have lately faced lot of fluctuation, mostly downwards. Where are they headed and how would that shape the global coal industry?

Coal is a fuel in demand and will continue to be so, because economies in South East Asia, China and India would continue to source coal. It is a reliable fuel for affordable electricity. As a commodity, it is going through a down cycle and has recovered well from it. It might go down again and then recover. We will probably see current prices sustain for a little while yet -– couple of quarters next year. No one predicted where they are today and no one can predict where they will be next year.

 

What variables across the globe would help price correction for coal?

We have come off the period where prices have been low and hence there has been less investment in supply. There have been some comeback in supply in some cases and that has therefore supported increase in price as demand continues to tick along quite strongly. In the medium term, demand is likely to continue to support reasonable prices. The economies of South-East Asia, China and India would continue to have coal as an important part of their energy mix.

 

Globally there have been reports of investors being wary of coal. What kind of financing models would now work for coal when everyone is going green?

We need to focus on what kind of solution we are looking for. We are looking at an environmental solution and the problem is not coal but carbon emissions. So we should be looking at investment in reducing carbon emissions and there are many technologies which do that. So my view is we need to invest in technologies which help reduce emission instead of saying we need to get out of coal. Coal is going to be a very important fuel in the energy mix for many decades to come. Coal is also a key ingredient in making steel and cement, so it is key part of modern industrialising and urbanising world. So we need to invest in low-emission technology instead of thinking how to stay away from coal.

 

How cost-friendly/viable are these technologies for developing countries?

The most important thing we can do with coal is to modern build ‘high efficiency And low emission’ (HELE) power plants that reduce carbon dioxide emissions by as much as 35 per cent. It also significantly reduces non-CO2 emissions such SOx (Sulphur oxides), NOx (Nitrogen oxides). In the Paris Climate Summit, 19 countries representing 44 per cent of the world’s carbon emissions identified coal as part of their energy mix for decades to come. Therefore they want to use these modern technologies to reduce emissions. These technologies are commercially available today with major manufacturers of the world.

 

How would you address the apprehension around cost escalation?

The upfront cost of some of these plants is more than the older technologies. This is where the international communities have a role to play in developing economies, by helping them pay for the added cost of some of the capital cost. For instance, an old and inefficient plant might be 20 per cent cheaper than the high efficient plants, so government banks and climate financing institutions can pay for this gap in the cost. Then we should look at how we transfer that technology to developing countries such as India and South East Asia.

 

China could ratchet up its coal prices soon. How will that impact the global market?

China is a very big player in the coal market, being the largest producer, consumer and importer as well. Whatever it does, influences the coal price. In terms of what they are doing internally, we will have to wait and see.

 

How do you look at India as a market for coal? As we are we are yet to open up the coal market completely, what kind of business can the country expect?

With the new government coming to power, and at same time, Coal India pursuing ambitious targets in production, there have been positive developments in the coal sector. There is potential for international companies to be involved in the Indian coal sector in one way or the other. they could either work jointly with Coal India for improving efficiency, operational management etc., or operate when the market opens up. India is going to be a very significant player in the coal industry. It will remain a significant importer of coal as well. Coal India has done a great job by improving production performance, but there would always be bit of demand for imported coal coming in. Some of the power plants in India are designed for imported coal. Additonally India has greater reserves of better-quality coal than any of the other existing markets. So with work happening around coal washing and gasification, there is another option of coal blending.

 

India had a brief tryst with some global coal companies but didn’t fare well. Is the Indian market still attractive?

India would still require significant changes in policy for it. It needs to open up more mines to start with, and push more development in power sector. There is a need to improve the way the power sector works and make it an important market. That would free things up in the supply chain and other parts of economy. The bigger question is in terms of whether Coal India maintains its monopoly or mining needs to be opened up more. But that is a decision that the Indian government would take.

 

How much growth you expect to come from non-power sector for coal industry?

India is 30 per cent urbanised, by 2040 it would be 50 per cent urbanised. To move of those million people from villages to cities requires buildings, bridges, roads, tunnels, schools, hospitals etc and that requires lot of steel and concrete. Metallurgical coal is responsible for 70 per cent of the global steel production today And 90 oper cent of world’s cement. So when we include South East Asia where a lot of urbanisation is happening, infrastruture creation would require coal.

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