As Europe becomes increasingly divorced from Russian natural gas, Germany, Austria, Italy, Denmark, the UK, and the Netherlands recently announced plans to restart phased-out coal power plants for the coming winter if necessary. Ironically, European countries were reprimanding India and China last November for rewording a key goal of the Glasgow Climate Pact from the “phase-out” to the “phasedown” of “unabated coal power.” “China and India are going to have to explain themselves to the most climate vulnerable countries in the world,” said British MP and conference president Alok Sharma. And with an August 22 start to the EU’s ban on Russian coal nearing, the EU and UK are turning to South Africa and Botswana as their main coal supply alternatives, despite recently agreeing to help give South Africa $8.5 billion to decrease its dependence on coal through the 2021 Just Energy Transition Partnership (JETP). However temporary, Europe’s moves to bring back coal represent a step backwards from the UN Paris Climate Agreement goal of a coal-free EU by 2030 and the UK’s goal of being coal-free by October 1, 2024.
The loss of Russian natural gas is just one of many unforeseen obstacles delaying a global transition away from coal, which provides over one-third of the world’s electricity yet generates the most pollution and greenhouse gases. In India, the immediate task of preventing the country from becoming unlivably hot has been taking precedence over UN decarbonization goals for 2070. Amid a 120-degree heat wave this past May, coal shortages in 9 of 28 Indian states caused power outages of up to 14 hours per day. The lack of electricity for fans and air conditioners during the current heat wave has resulted in 90 deaths across India and Pakistan this year.
India has the world’s third-largest coal reserves in the ground, but its coal stockpiles have dwindled. This has hampered its efforts to close the gap between those with cooling systems and those without. Only 12% of Indians have air conditioning, and some 323 million (nearly equal to the entire US population) lack access to working fans and refrigerators, according to a May report by Sustainable Energy for All (SE4ALL). Many Indian farms are losing up to half of their produce as it rots in the heat in the absence of working fans.
Meanwhile, after mass blackouts last year, electricity demand in China has already set records this summer, due to heat waves and high factory activity amid its post-pandemic industrial rebound. In June, these strains on China’s grid prompted premier Li Keqiang to urge “tapping into advanced coal capacity” and to call for “efforts to ramp up efficient and clean coal power production… underpinning the push for renewables such as wind and solar power,” according to Chinese state media. In fact, over half of the new coal plants being built in the world today are in China, contrary to President Xi Xinping’s 2021 promise that China would reach peak coal use in 2025 and start phasing it down in 2026.
Xi’s current rhetoric has emphasized the need to balance lowering carbon emissions with maintaining social stability and productivity. In January, he said in a Politburo session that the goal of greenhouse gas reduction should not conflict with other priorities that “ensure the normal life of the masses,” like providing food, energy, and materials. “The gradual withdrawal of traditional energy must be based on the safe and reliable replacement by new energy,” said Xi.
But even as China produces and consumes half the world’s coal and continues to invest in new coal plants, its eventual transition away from coal could be sharp. China has rapidly developed alternative energy sources, such that now—despite being the world’s biggest polluter—it is a “clean energy powerhouse,” the world’s biggest investor in green energy and the world leader in solar, wind, and hydropower. In recent decades, China has dramatically reduced the cost of solar panels, wind turbines, and electric vehicles, to the world’s benefit. Shenzhen, the fourth-largest city in China, converted all of its over 16,000 buses and another 22,000 taxis to electric vehicles over a decade, with the help of national and local government mandates and subsidies. The province of Qinghai, population 6 million, has become a wind and solar showcase and ran on entirely renewable energy for a week. And China may soon become the world leader in nuclear energy as well: In November 2021, it announced plans to build 150 nuclear reactors (which emit no greenhouse gases or pollution) by 2035, more than the rest of the world has built in the past 35 years. In short, while China will continue to use coal as a bridge to the future, its success in developing alternative energy sources—along with its habit of building infrastructure, like coal plants, then tearing it down within a few decades—are signs that by China may be poised to make a dramatic shift away from coal by 2040, if not earlier.
China (57%) and India (51%) both get over half their electricity from coal today. They provide energy for 36% of the world’s population, much of which received electricity for the first time in the last decade or two. And in the ASEAN region, coal power has skyrocketed due to hyper-speed industrialization and plentiful available coal reserves, especially in Indonesia and Vietnam. Many ASEAN coal plants were built by China through the Belt and Road Initiative, and while many coal plants in the West are 40 or 50 years old, Southeast Asia’s are the youngest in the world, averaging under 12 years old. But the coal plant building spree in Southeast Asia may soon slow dramatically, as China, Japan, and South Korea, the region’s top three foreign funders of coal plants, have all recently announced that they are cutting funding for new coal projects overseas.
The West on the whole has managed to drastically reduce coal use, in the EU to roughly half 1990s levels and in the US to 1980s levels. But on closer inspection, the regions and countries within the West are heavily divided on coal. For example, France’s coal use is near zero, as 70% of its electricity comes from nuclear power. By contrast, coal provides nearly half the electricity in Poland, and it is still a significant power source in the Czech Republic, Germany, Bulgaria, and the UK. Only two EU countries still produce any coal at all, Poland (96%) and the Czech Republic (4%), making the region especially vulnerable to the upcoming EU ban on Russian coal.
US coal use peaked in the late 2000s, and since then, scores of coal plants across America have been retired or converted to natural gas plants, which are fed by the US fracking boom. But coal use varies widely across US states. For example, West Virginia still gets 88% of its electricity from coal and Indiana 47%, whereas Texas is at 20% and Vermont and Rhode Island are coal-free.
The coal divide also runs through Africa and Latin America. While both regions have largely avoided coal dependence, South Africa and Botswana are the exceptions. South Africa is world’s most coal-dependent nation, getting 90% of its electricity from coal. It has 19 of Africa’s 36 coal plants, while many African countries have none. Latin America enjoys plentiful hydropower as well as oil and gas reserves, and only 5% of its electricity comes from coal, with very few new coal plants planned. Under President Jair Bolsonaro, however, Brazil’s Mines and Energy Ministry last year published a nearly $4 billion plan to invest in “sustainable use of the national mineral coal.” And in January, Bolsonaro extended government subsidies for coal plants from 2027 to 2040 in Santa Catarina, one of Brazil’s coal-rich southern states. Bolsonaro’s initiatives are an attempt to boost the economies of southern Brazil, but they have drawn criticism domestically and abroad.
Australia is an energy paradox: a wealthy, modern country with massive natural resources and a population smaller than Texas, yet which relies on coal for around 75% of its electricity. There are many reasons for this. First, coal is abundant lucrative: Australia has the third-largest coal reserves in the world and is the world’s largest exporter of coal, mostly to Asia (although China banned Australian coal in 2020). Second, Australia is the driest inhabited continent, with very limited and unpredictable rivers to generate hydropower, which provides only about 5% of its electricity. And third, despite having one third of the world’s uranium stores, Australia has never had a nuclear power plant.
But the fate of coal power in Australia may shift dramatically in the next few years. The country is rapidly deploying wind and solar farms as the prices of turbines and solar panels drop, such that last December, the Australian Energy Market Operator (AEMO) announced that Australia is on track to cut its coal capacity by 60% by 2030. In February, Australia’s Origen Energy announced plans to shut down country’s biggest coal plant in 2025, seven years earlier than scheduled. In June, the state of Western Australia announced it will shut down its two remaining coal plants by 2030. And in July, The Australian Academy of Technical Sciences and Engineering projected that Australia could generate half its electricity from renewable sources by 2025—and 69% by 2030. If these predictions come true, Australia’s transition away from heavy coal dependence would be the fastest the world has ever seen.
The global transition away from coal has been anything but smooth. It is possible that more regions that have made great progress in phasing out coal will be considering bringing it back, amid new unforeseen obstacles to energy security. And it could be decades before China and India, the behemoth coal consumers, start to cut back on coal significantly—especially as China has been investing heavily in clean coal research. But as cases like Australia and even China show, every day that coal hangs on, renewables are expanding and becoming cheaper. And this is a sign that an eventual end to the coal era could be on the horizon.
Price Cap on Russian Oil: The Mechanism and Its Consequences
G7 countries are working hard to coordinate a sanctions regime to cap prices on Russian oil and oil products. The United States is already drafting a mechanism for applying these sanctions, which its allies and partners will use as a guideline. The new sanctions in the form of legal arrangements are expected to be formalised very soon. How will this mechanism work, and what consequences can this lead to?
An unprecedented range of economic sanctions has been used against Russia since the beginning of the special military operation in Ukraine in February 2022. Their primary aim was to deal the largest possible economic damage to force Moscow to revise its policy and to undermine its resources provision. Since energy exports are extremely important for funding the Russian economy, sanctions against its oil and gas sector were more than just predictable. However, the United States, the EU and other initiators had to act cautiously, because Russia is a major player on the global market. US restrictions on the export of Iranian oil had little impact on the global market, whereas blocking sanctions against Russian oil companies could lead to uncontrollable price hikes. This could accelerate inflation, which was growing fast on the back of COVID-19 and other factors.
Nevertheless, the sanctions noose on the oil sector was tightening. Some sectoral sanctions have been applied since 2014, such as restrictions on loans and on the supply of products, services, technologies and investment in the Arctic shelf oil projects. Blocking sanctions were adopted against a number of co-owners, owners and top managers in the fuel and energy sector. In March 2022, Washington prohibited the import of Russian energy resources to the United States. Canada acted likewise. The EU started with banning Russian coal imports and later spread the ban, with a few exceptions, to oil and oil products. The bans are to come into force on December 5, 2022, and February 5, 2023, respectively. The UK plans to stop the import of Russian oil this year. Overall, Western countries are working to gradually banish Russian oil and oil products from their markets.
However, Moscow has quickly redirected its deliveries to Asian markets, where Western countries cannot easily impose similar restrictions, especially since Russian companies are selling their products with large discounts. The idea of a price cap has been proposed to be able to influence Russian oil prices outside Western countries.
The essence of the proposed mechanism is very simple. The United States, G7 and any other countries that join the coalition will legally prohibit the provision of services which enable maritime transportation of Russian-origin crude oil and petroleum products that are purchased above the price cap. The US Treasury has issued a Preliminary Guidance to explain the essence of the forthcoming bans, to be formalised in a determination pursuant to Executive Order 14071 of April 6, 2022. Section 1 (ii) of the executive order empowers the US Treasury and the Department of State to prohibit the export or re-export of “any category of services” to Russia. The upcoming Determination will explain the ban for American parties to provide services which enable the transportation of Russian-origin crude oil and petroleum products above the price cap. The US administration plans to enforce the ban on oil on December 5, 2022, and the ban on oil products on February 5, 2023, simultaneously with the EU bans on Russian oil imports.
But what is the exact meaning of the phrase “services which enable maritime transportation”? The US will most likely offer an extended interpretation. In other words, such services will include transportation, related financial transactions, insurance, bunkering, port maintenance and the like. This would allow Washington to influence a broad range of service providers outside the United States. For example, the US administration might consider dollar-denominated transactions on oil transportation to fall under US jurisdiction, so that very many players outside the US will face fines or prosecution. Punishment for avoiding the price cap, as well as for using deceptive shipping practices, have been set out in the new Guidance.
It is another matter how strictly the other coalition countries will implement this guidance and how large this coalition can be. The level of coordination within the initiator countries will likely remain very high, which means that the allied countries will do this in accordance with their national legislations. The coalition will include the countries that have already adopted sanctions against Russia.
The biggest question is whether the countries that have not adopted such sanctions, including Russia-friendly countries, can be convinced to join the coalition. The answer is most probably negative, but this will not settle the problem. Despite the official position of the friendly countries, their businesses could surrender to the US demand to avoid the risk of persecution.
The G7 statement and the new Guidance of the US Treasury imply that the sanctions are being imposed out of concern for the international community rather than solely for the purpose of punishing Russia. They say that the price cap is designed to stop the growth of oil prices that have been artificially inflated by the conflict in Ukraine. However, this “concern” can lead to unpredictable consequences.
To begin with, the latest attempt at the political mandating of prices will increase uncertainty, which will further drive the prices up. Prices can grow on expectations of problems with signing deals on the delivery of Russian oil and oil products over excessive compliance, which will lead to temporary shortages. Another problem is that the other oil producers will have to lower prices as well. They will not like this.
In fact, the sellers’ market is being changed into the buyers’ market by artificial political methods rather than for economic reasons.
And lastly, Russia is being forced to become the leader of dumping. Demand for its oil could be higher than for the products of other suppliers, and Moscow can make up for its profit shortfall by increasing deliveries. If the Western countries that prohibit the import of Russian oil and oil products buy other suppliers’ oil at higher prices while Asian countries continue to buy Russian products, this will artificially increase the competitiveness of Asian economies.
It is time for Russia to start thinking about adjusting to the Western restrictions, including by developing its own tanker fleet and abandoning the US dollar in oil deals. The latter is the prevalent task of Russia’s foreign trade in the new political conditions.
From our partner RIAC
Absolute Proof that EU Leaders Are Responsible for Europe’s Soaring Fuel-Prices
A BusinissInsider news-report on the morning of September 7th headlined “Putin says Russia will restart Nord Stream 1 gas flows ‘tomorrow’ if it gets turbines, and blames sanctions for the shutdown” and opened with:
Russian President Vladimir Putin said Wednesday that Gazprom could restart gas flows to Europe via the key Nord Stream 1 pipeline tomorrow, if it gets the turbines needed. He blamed Germany and Western sanctions for the indefinite halt in operations for the pipeline, according to media reports from his speech at the Eastern Economic Forum. At the same time, he said pressure from the US was behind the holdup in launching another pipeline, Nord Stream 2.
Putin was telling the EU’s leaders that what has been forcing gas-prices in Europe up 300% since Russia’s February 24th invasion of Ukraine isn’t Russia’s invasion of Ukraine (such as they allege) but instead the U.S.-EU-UK economic sanctions against Russia which have caused all U.S.-and-allied — including all EU — nations to terminate imports of fuels from Russia. He was saying that Russia will turn on the pipelines into the EU as soon as EU leaders turn off their sanctions that prohibit their businesses and consumers from buying it.
The ball is now in their court. Let’s see what they do with it. Have they been lying to allege that Russia’s invasion of Ukraine caused this 300% gas-price rise? If so, then Putin has said that the moment they stop lying and start to allow the gas to flow again from Russia, that gas will flow again from Russia and those prices will consequently plunge back down again.
If, however, they have been telling the truth (though it’s hard to see how Russia’s invasion of Ukraine on February 24th could even possibly have forced up the prices in the EU of all fuels from Russia), then the ball will immediately be in Putin’s court, for him promptly to get the flows of Russian fuels into Europe restored to what they had been prior to the EU’s sanctions that were imposed in the wake of that invasion.
Because it’s hard to see how Russia’s invasion of Ukraine on February 24th could even possibly have forced up the prices in the EU of all fuels from Russia, the headline here is based upon the very reasonable expectation: that the result of Putin’s September 7th challenge to the EU’s leaders will be that they are proven to have been lying when they have blamed these price-rises on him, instead of on themselves.
In other words: On September 7th, Putin laid down the gauntlet to EU leaders, regarding whom is to blame for Europe’s now-soaring energy-prices, and for the consequences thereof. That challenge to them tests whom has been telling the truth about this matter, and whom has been lying about it. It is that test, regardless of whether news-reports about his statement (other than this one), report it as testing whom the liars, and whom the truth-tellers, about this matter, have been. This is a big tree that is falling in the news-forest, and that tree is falling, regardless of whether or not (or the extent to which) it is being reported to the public. The test is a fact — an important fact — even if it won’t be reported (other than here). However, something else will be even more important: what the result of this test will turn out to be. And then the test for the news-media will be: will they report that result? Will they report the finding? Because there certainly will be a finding, from this test. And it certainly will be an important one.
Coal Diplomacy: Could We Be Free from the Climate Crisis?
One of the things that is perplexing at the moment is that there is no clarity about how life will be lived in the coming year from an economic standpoint. In 2023, both the Indonesian finance minister and the Indonesian president said that “the world is dark.” Uncertainty regarding many topics, particularly economic concerns, is referred to be “dark.” Recession that affected several of the world’s major economies. The biggest issues now are energy shortage and food ingredient scarcity. Politics is no longer focused on how to achieve power, as well as the world’s attention and authority, but on how to sustain tomorrow’s life and escape the perils of hunger and cold.
Since the implementation of Western sanctions on Russia, not only has the political game grown more attractive in terms of military and economics, but it has also had an influence on the economy. Because of Russia’s high price for oil and gas, as well as the growing issue of energy shortages, various European nations have taken the initiative to generate electricity by burning coal. This has recently received a lot of attention in the media. The transfer of energy sources is plainly the polar opposite of the world’s current commitment to reduce emissions and environmental impacts. In the face of global uncertainty, the availability of coal as an energy source will assist emerging nations with coal reserves, such as Indonesia. However, when the time period and amount of coal burned are considered, this definitely accelerates the environmental impact. According to the BP Statistical Review of World Energy 2021 report, worldwide coal consumption in 2020 was 151.42 exajoules. This figure fell by 4.2% from the previous year, when it stood at 157.64 exajoules. China is the largest consumer, accounting for 54.3% of total worldwide spending, followed by the United States, India, and Japan.
How Coal affects the environment
According to the Encyclopedia Britannica (2015), coal is derived from animal and plant fossils that perished and were buried millions of years ago; coal is currently the world’s greatest fossil fuel when compared to oil. necessitates a number of operations and a rather wide space It generates a lot of pollution and environmental harm from coal mining to processing to consumption to the ultimate cycle of use. The following is an example of a coal processing line:
First, when coal is discovered, people and certain groups will plan to mine it. The plan is then carried out by constructing a mine. At this early stage Coal mines will have a negative influence on the ecosystem, beginning with changes in the terrain, which will reduce soil fertility. Biodiversity is under peril.
Second, a variety of chemical reactions occur in nature during coal processing procedures. When fossil fuels are burned to generate energy, the carbon in the fuel interacts with oxygen to make CO2 gas, the majority of which is emitted into the atmosphere. Not only does coal combustion emit CO2, but it also emits methane into the atmosphere. As a greenhouse gas, methane is twenty times more powerful than carbon dioxide. Not only does coal combustion emit CO2 and methane, but it also emits sulfur in the form of sulfur dioxide (SO2) gas. If these three chemical compounds are released into nature, they have a severe influence on the environment and humans, producing soil degradation, air pollution, and the sulfur content released is also particularly toxic for water. Although there is a new phrase and breakthrough “Clean coal,” according to Michael Economides, professor of chemical engineering at the University of Houston, Texas), it is highly improbable that clean coal can be created by “Carbon Capture and Storage (CCS).”
Third, following a series of procedures, the mining and burning of coal will also leave visible traces. Past mining locations’ created craters and changing landscapes, of course, damage the ecology, and former excavations frequently cost life.
Indonesia and coal
Indonesia is one of the countries that has profited from the present global energy constraint. The Center for Mineral, Coal, and Geothermal Resources reported that Indonesia’s coal reserves were at 31.7 billion tons as of January 19, 2022. Indonesia not only utilizes coal for internal purposes, but also exports it to other nations in order to gain foreign currency. When coal prices rise, it contributes to state income, but these gains are only transitory since the government gives additional relief to coal service employees through power subsidies and compensation.
According to investor.id data source Carbon Brief, the Indonesian government offers power subsidies and compensation with a budget of Rp. 127.9 trillion. This sum is higher than the previous year’s total of Rp. 74.4 trillion. The government provides subsidies and incentives so that PLN may continue to acquire coal from the firm while keeping power prices stable. Owners of coal mining enterprises will gain the most during this period of energy shortage. In January-March 2022, one of the coal mines had a 457.6% rise in net profit. Until June 2022, Indonesia’s coal output has achieved 283.57 million tons, or around 42.77% of the target for 2022, which was 633 million tons. Meanwhile, national coal sales through June 2022, which included both exports and domestic sales, were 175.15 million tons.
Climate Commitment Challenge
It is quite difficult to retain environmental commitment in these times. On the one hand, humans are attempting and committed to keeping the environment stable by reducing the greenhouse effect, which can harm the ozone layer, but the current situation has not provided an opportunity to obtain energy that is cleaner and environmentally friendly, and can be produced in large quantities quickly, other than rocks and coals. Coal processing and utilization as an energy source has been known for over a century, and its influence has been felt in recent decades. However, the usage of coal cannot be minimized or eliminated at this time. Europe’s Germany, Poland, and even India in Asia ordered coal from Indonesia to meet their national energy demands. This has occurred since Russia’s sanctions were implemented.
This circumstance demonstrates how the political system affects the food chain. With the increased usage of coal in many regions of the world, it is possible that the Paris Agreement and the G20 statement, as well as other environmental and climate-related pledges, will be revisited. However, increased worldwide coal usage will hasten the depletion of global coal stockpiles. Keep in mind that nature takes thousands of years to generate coal, but human progress in this century is so rapid.
The human task of sustaining the appropriateness of a place to live in the face of global instability will never diminish. These obstacles might arise from the environment in which humans live or from outside sources such as governmental policy, commerce, and conflict. The recent increase in the use of coal is a short-term effort for humans to survive and carry out their activities, but in the long run, human dependence on coal must be considered, given that humans’ ability to grow and reproduce faster than nature’s ability to produce coal for humans, and even if coal is still relied on, it will accelerate environmental pollution, which then affects weather and climate. It is vital to review how the commitment to environmental protection has been pursued in both local and international obligations.
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