Continued investment in coal mines and exports by countries like Australia and Indonesia could turn into stranded assets, costing them billions as the world transitions to cleaner energy sources.

This conclusion comes from a fresh analysis published in Joule, a collaboration between Imperial College London, Queen Mary University of London, and Deloitte.

Researchers looked at data on coal reserves and global demand, feeding it into an economic model that simulates trade and pricing. They used this model to assess the risk of coal investments becoming “stranded assets” under different scenarios for reducing carbon emissions. The scenarios included a “business as usual” approach where coal use continues unchanged, and a more sustainable path where coal consumption is drastically reduced to meet global climate goals.

If the world adopts a sustainable path to limit global warming, a significant portion of today’s coal mines could become useless much sooner than expected. These “stranded assets” would be mines shut down before their natural lifespan ends due to a lack of profitability. Major coal exporters like Australia and Indonesia would face major economic blows as international coal trade dwindles. Australia alone could lose $25 billion annually, and globally, millions of jobs (estimated at 2.2 million) could be lost in the coal sector.

The report’s authors offer a glimmer of hope. They believe these economic losses are preventable if governments and financial institutions take proactive steps. This could involve early divestment from coal projects to avoid further investment in a declining industry. Additionally, funding programs to retrain coal workers could ease the transition to a clean energy future.

Guiding the transition
Lead researcher Dr. Iain Staffell, from the Centre for Environmental Policy at Imperial, emphasized the importance of thoroughly evaluating the financial, reputational, and environmental risks associated with new coal mining projects, such as the proposed deep mine in Cumbria. This suggests that not all new coal investments will necessarily be unprofitable.

Many parts of the world can boost their economies by ditching coal. Countries like China, Europe, and India would see financial gains due to lower import costs. For instance, Europe could save $20 billion annually by phasing out coal.

According to the research, switching to a sustainable approach would lead to a global financial gain of $10 billion annually by 2040. This benefit comes not only from cleaner air and improved public health, but also from saving money on transporting coal.

The study warns of significant economic downsides with a “business-as-usual” approach. Delaying the coal phase-out will necessitate harsher carbon-cutting measures later. This, in turn, would lead to more “stranded assets” and job losses in the long run.

Dr. Staffell warns businesses that the coal industry is facing major changes, and there’s not much time to prepare. To make the transition to a world without coal smoother, businesses need to invest in both their employees’ skills and financial stability to avoid job losses.

While the impact on jobs and finances might seem small worldwide, the burden won’t be shared equally. Developing countries heavily reliant on coal mining, like Indonesia, will be hit much harder if the shift away from coal isn’t handled thoughtfully. By the time job losses and economic hardship become widespread, it’ll be too late to react.

Achievers and non-achievers

While Western countries are quickly ditching coal, global consumption is actually on the rise. This is driven by Asia, where most of new coal-fired power plants are being built.

A big chunk of China’s coal mines, opened in the early 2000s, are nearing the end of their operational life in about 30 years. According to the researchers, the choices that major coal consumers like China and India make in the next few years regarding coal use will significantly influence the future direction of global coal dependence.

India’s energy needs are rapidly growing. If they choose to build new coal plants instead of focusing on renewable energy sources, the world will be stuck with coal for decades to come. This continued reliance on coal would harm both the environment and the global economy.

This research, led by Thomas Auger during his Master’s in Environmental Technology at Imperial College London, is a unique collaboration between academia and industry. Auger, who analyzed global coal market data provided by Deloitte, says this partnership offered a never-before-seen chance to examine not only the future of global coal use over the next two decades, but also how individual countries will be impacted.

The study predicts both gains and losses during the shift to a greener future, but the outcome isn’t predetermined. Governments that proactively plan for this transition can significantly reduce the negative economic consequences and job market disruptions for their citizens.

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