A proposal in Germany to phase out coal made headlines this month, but would barely make a dent in global coal consumption, according to the International Energy Agency.
If Europe’s largest economy goes ahead with plans to shutter its more than 46 gigawatts of coal-based generating capacity, global consumption would only drop by 2 percent, said Carlos Fernández Alvarez, a senior coal analyst at the agency.
“The impact of a phaseout will be limited,” he said. “Actually, consumption in the European Union is only around 6 percent of global coal demand. This percentage is declining and will decline over time.”
Earlier this month, plans to curtail coal-fired power generation emerged as part of a joint policy platform agreed on by Germany’s Christian Democratic Union (CDU) and Social Democratic Party (Sozialdemokratische Partei Deutschlands, or SPD in German) political groups.
The two parties have been locked in talks about forming a coalition government since the CDU, led by German Chancellor Angela Merkel, failed to secure a majority in national elections last September.
Whether or not the coal reduction program will come to pass is still in doubt, though. The SPD is planning to vote on the agreement with the CDU at the beginning of March. If the SPD’s 460,000 members don’t affirm the deal, Germany could face new elections.
And the SPD’s stance on coal is far from clear. Although the party backs Germany’s efforts to meet climate targets, it is also keen to be seen as a standard-bearer for employment in coal-mining communities and has refused to commit to an end date for coal-fired generation.
For now, said Fernández Alvarez, the proposal on the table “is for a commission on growth, structural change and employment to come up with, by the end of 2018, a plan for the gradual reduction and phaseout of coal-fired power generation, rather than an immediate coal ban.”
While Germany's decision will have a relatively small effect on global emissions, it will have a significant impact domestically.
Figures from Euracoal, the European Association for Coal and Lignite, show that more than 46,000 people were employed in Germany’s coal-related industries in 2015. The SPD wants to see these jobs redeployed in other sectors, such as renewable energy.
Policymakers in both parties are aware that Germany’s failure to curb coal consumption is a serious threat to the country’s credibility as a climate change leader.
As Bloomberg reported last November, “The country still gets 40 percent of its energy from coal, a bigger share than most other European countries. And much of it is lignite, the dirtiest kind of coal. As a result, Germany is set to fall well short of its 2020 [emissions reduction] goal.”
Energy policy in Germany has historically focused on axing nuclear and boosting wind and solar, with coal taking a back seat. Only this year is the country slashing state aid for mining.
The CDU and SPD have reaffirmed their commitment to phasing out nuclear power by 2022, which means any cuts in coal generation will have to be made up for by a mix of renewables and natural gas.
U.S. Energy Information Administration data shows switching from lignite to natural gas could reduce carbon emissions by more than 45 percent.
Boosting generation from renewables, meanwhile, is fraught because of the capacity factors for wind and solar.
Even assuming a highly optimistic capacity factor of around 50 percent for offshore wind, replacing Germany’s coal generation would require more than 92 gigawatts of renewable capacity. That is almost six times all the offshore wind installed to date in Europe.
How Germany resolves this conundrum, assuming it decides to go ahead with coal phaseout plans next month, will be instructive to other countries aiming to go down the same route.
But even if the rest of the European Union decides to follow suit, it will have a minimal impact on global coal demand, which is overwhelmingly dominated by China. “For better or worse, the relevance of Europe on coal markets is no longer great,” said Fernández Alvarez.
