Pollution fears to drive Asia shift from coal to natural gas – IEA

LONDON (ICIS)–Asian economic development continues to be fuelled by coal, but unsustainable air pollution levels will force governments to take advantage of the new wave of natural gas available, the deputy head of the International Energy Agency (IEA) said this week.

Laura Cozzi, the IEA’s principal analyst, said coal will continue to be favoured over gas as the main source of energy in Asia, but by 2025, a shift that started in the west, will be increasingly adopted in the region. She would not, however, consider the implications of a policy shift in the US when Donald Trump is sworn into office.

Trump has promised to revive America’s coal industry – which, like that of Europe’s, is in decline following the implementation of climate change policies. The President-elect has also pledged to extract other fossil fuels to make the US self-sufficient in energy.

Following the narrative of this year’s World Energy Outlook presented in London by the IEA on 16 November, Cozzi said the new wave of liquefied natural gas (LNG) infrastructure – which is expected to come on stream within the next two years – will make the shift from coal to natural gas more viable and more cost-effective despite the higher prices involved.

“In a purely cost basis, it is still true that by 2025 coal will still beat gas in Asian economies. However, we are seeing more and more governments, China being a prime example, concerned about air pollution issues,” said Cozzi.

“China has put a cap on new coal overall capacity and the Indian government, with the recurrent news from [heavily polluted] New Delhi and its terrible air situation, is moving towards understanding what coal means in terms of the health impact. It is not really related to climate change, but to the huge burden [coal burning has] on health that tilts the balance [towards gas].”

Climate change policies subscribed to in Paris in 2015, and due to be ratified this week by nearly 200 countries in Marrakesh, Morocco, might run into a stumbling block in January when Trump arrives at the White House. During his campaign, Trump promised to withdraw from the Paris Accord.

As the world holds its breath, even the IEA recognises that the Paris Accord alone will not hit its target of keeping the rise in global temperatures to between 1.5 and 2 degrees Celsius by 2100. At the current rate, average temperatures will have risen 2.7 degrees by then, Cozzi said.

“The Paris Accord does something very clever, putting in place a mechanism through which countries come up with what they are ready to pledge [in terms of greenhouse gases (GHG) emissions], and every five years countries will be asked to revise – and upgrade – their pledges,” she said.

“The Paris Accord has embedded in it the mechanism to increase ambition and hopefully, over time, catch up with the gap [between the 2.7 degrees projected and the 1.5-2 degrees range targeted].

“However, as things stand now, we see this gap, and to fill it up, climate change policies will need to accelerate.”

Three main technologies which can help decrease GHG emissions are renewable energies, carbon capture and storage (CCS) technologies and electric vehicles. While Cozzi said a sharp decrease in costs is helping the electric vehicle, zero-carbon solar and wind energy industries take off, CCS is having a harder time.

By capturing and storing CO2 underground, CCS may be the solution to avoiding the damaging effects associated with burning coal – as well as natural gas or any other CO2-emitting fossil fuel.

Back in July, Cozzi’s fellow IEA executive, Fabian Kesicki, told ICIS that the extensive use of coal in Asian countries, without the applications of CCS, could hinder targets set out in the Paris Accord.

“While renewables and electric vehicles are developing greatly, CCS has been a big disappointment. The governments haven’t put in place interesting enough policies for industries to invest in CCS – you need a carbon price and you need clear direction about the policies,” said Cozzi.

On the other hand, she added that a lack of viable projects has resulted in high CCS prices, and provoked a vicious circle which has resulted in a lag in the relevant technologies.

“Having said that, last year Canada set up its first full integrated CSS project, and the US is starting to do something on this, while China is beginning to give it some attention. Even if we have revised down our projection for CCS, we still see it as an essential part of the transition [in Asia] if you don’t want to have a huge amount of stranded assets in the Asian energy sector.”

Cozzi reiterated what her colleague Tim Gould told ICIS in 2015 – that petrochemicals are unlikely to be made of greener alternatives than crude oil or gas for the time being, due to the persistent low oil price which discourages companies from using bio-based alternatives.

“Although something is happening in countries like Brazil, honestly, compared to last year, it has only become worse due to the continued long period of low crude and gas prices – gas has become more attractive than bio-based alternatives [to produce petrochemicals],” she said.

Interview article by Jonathan Lopez

(Image source: Imaginechina/REX/Shutterstock)