The future of coal investment, trade, and stranded assets

•A high-resolution coal market model develops regional insights into investment risks•By 2040, one-third of the current mining capacity risks becoming stranded assets•China benefits most, whereas Indonesia and Australia lose most from phase-out•Over 2.2 million jobs would suffer early mine closures in sustainable scenario The world spends almost half a trillion dollars per year on coal. This could be profoundly disrupted by international efforts to decarbonize energy supplies. Existing global scenarios provide macro picture future demand for but do not consider how rapidly declining will affect levels national economies. We explore impacts following business-as-usual development IEA. A well-below-2°C pathway see exporting countries tens billions as both trade volumes prices fall. Reduced new mines retirement existing ones lead capital labor. There is limited window opportunity investors decision makers react before commodity cycle begins. Building resilience human financial transition now ease move away carbon-intensive fossil fuel. Coal at crossroads, with divestment phase-out West countered surging growth throughout Asia. Global suggest that consumption halve over next decade, business geopolitical implications this profound shift remain underexplored. investigate markets 2040 using perfect competition techno-economic model. In scenario, Europe, North America, over-capacity, today’s assets. New are needed offset retirements, 2030s can avoided. decline only competitive survive, fall give more insular markets. Regions stand gain or reducing import bills export revenues. Understanding preparing these changes 150 years dominance. Over 80% world’s resources must below ground if CO2 emissions 80%–95% limit warming 1.5°C.1IPCCGlobal 1.5°C: summary policymakers.https://report.ipcc.ch/sr15/pdf/sr15_spm_final.pdfDate: 2018Google Scholar,2McGlade C. 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These range falling 70% 2 (−5.2% annum) increasing 30% (+1.1% annum). contrasts comparable 15 ago, converged period 2005 2020 (annual rates +1.5% EIA,34IEAWorld outlook.https://www.oecd-ilibrary.org/energy/world-energy-outlook-2004_weo-2004-enDate: 2004Google +1.6% IEA,34IEAWorld +2% IEEJ,34IEAWorld +2.2% EC34IEAWorld Scholar); closely aligned realized outturn +1.9% annual growth.28IEACoal highly dependent ambition will, large extent, amount experienced century. Figure 1 summarizes relationship century temperatures near-term reduction consumption.35Huppmann Kriegler resource integrated research.Nat. 8: 1027-1030https://doi.org/10.1038/s41558-018-0317-4Crossref (85) Other areas system vary models (e.g., nuclear, capture, negative technologies), hence seen across scenarios. scenarios, strong trends them 2). Demand typically everywhere except Asia, due India countries. America Europe universally expected less renewables.36DNV GL outlook: forecast 2050.https://eto.dnvgl.com/2018/downloadDate: 37BP BP outlook.https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2019.pdfDate: 38ExxonMobil energy: view 2040.https://corporate.exxonmobil.com/en/∼/media/Global/Files/outlook-for-energy/2018-Outlook-for-Energy.pdfDate: Only two organizations separate out scenarios,12IEAWorld Scholar,39The Institute Economics JapanIEEJ Outlook.https://eneken.ieej.or.jp/data/8122.pdfDate: leaving area uncertainty attempts resolve. Limited information given fate major importing there trajectory prices.12IEAWorld Scholar,40Bloomberg N.E.F. Outlook.https://bnef.turtl.co/story/neo2019Date: Further discussion Note S1. from12IEAWorld representative spread necessary disaggregation region type. Policies Scenario (NPS) considers where government ambitions take central remaining flat, 1.6% 2017 2040. Sustainable Development (SDS) reflects Agreement’s target, 57.4% (−3.6% annum).12IEAWorld combined Deloitte Database, contains asset-level data cost, value, age potential plus transportation costs terminals hubs, ports. database methodology underlying stem from41Paulus Trüby lumps vs. electrons: Chinese bulk decisions market?.Energy Econ. 2011; 33: 1127-1137https://doi.org/10.1016/j.eneco.2011.02.006Crossref (23) 42Trüby Paulus Market structure trade.Energy 2012; 91-123https://www.jstor.org/stable/23268095Crossref (20) 43Trüby Strategic behaviour markets.Energy 2013; 36: 147-157https://doi.org/10.1016/j.eneco.2012.12.006Crossref (18) described experimental procedures. maintained, controlled Economic Advisory, who granted scope (see availability). model,41Paulus updated extended investments inter-temporal linear optimization least-cost export, each satisfy exogenous demand. brownfield starting held 2016, steps foresight. contemporary full details Experimental Methods, validation provided S2. Total coal-mining diverges considerably (BAU) SDS. Under BAU all renewed remains generally flat 1); SDS, replaced. 4,134 Mtce (million tons equivalent extracted year, tce equals 29.29 GJ). Cumulative up 4,070 Mtce, 56% lower SDS (1,790 Mtce). total 411 billion USD2016 BAU, dropping 189 3 diverging evolution time, against context historical additions. During 2020s, slightly 85 130 55 75 Investments ramp during 2030s, peaking 340 respectively. replacement 2000s reach age. S12 shows responsible difference faces policies generation, relatively unaffected fewer economically viable options replacement.37BP 39The 40Bloomberg Two peaks observed investment, one oil crises 1973 1979, incentives alternative commodities such coal.44Ekawan Duchêne Atlantic market.Energy 2006; 34: 1487-1498https://doi.org/10.1016/j.enpol.2004.11.008Crossref (17) second boom partly peak exhausted. Our modeled entering third 2035, underlining need though BAU. contrast, appears puts coal’s cycles, ushering phase managed decline. shown 4, China 45% total. Although decreases needs replaced Therefore, experiences below-average highest representing 22% total, its rising primary projected follow boom, profits 20 technical progress sources, makes diversified mix feasible.12IEAWorld For reason, India’s strongly impacted Developing Asia mines, expanding domestic Table S3) growing opportunities, principally neighboring Asian extraction. opportunities resilient drives replace retired Asia’s least scenario. US Australian industries decarbonization. 69% exports Europe. Its distance (and thus cost) disadvantage, along Latin Canada. Decreasing similarly reduces exports. scale stark. Many parts world, especially Australia, anticipate workers needing careers avoid unemployment regions.16Wilson 365-372https://doi.org/10.1038/s41560-