IEEFA Global: The IEA Acknowledges the Public-Health Costs of Coal-Fired Electricity, but Still Comes Up Short

June 27, 2016

Tim Buckley

The International Energy Agency today published a report that’s been a long time coming in its acknowledgement of explicit public-health risks in pursuing outdated energy-development policies.

Here’s the headline on the agency’s very own press release this morning: “Small Increase in Energy Investment Could Cut Premature Deaths From Air Pollution in Half by 2040, Says New IEA Report”

The report estimates that fossil fuel use around the world results in three million premature deaths annually. It’s a nod to the fact that coal-fired electricity generation, for instance, often promoted as the lowest-cost way to produce power, comes with costs that—as the report spells out in detail—are so horrific as to be all but incalculable.

One takeaway: Anybody who parrots the mantra that “coal is the lowest cost source of electricity” is putting a low value indeed on human life.

Among the report’s additional conclusions:

“Around 6.5 million premature deaths each year can be attributed to air pollution.”
“Energy production and use are by far the largest man-made sources of air pollutants.”
“Technologies to tackle air pollution are well known.”

The report, part of the IEA’s World Energy Outlook series, includes these predictions:

That global energy demand will drop by 15 percent due to greater urgency in implementing efficiency initiatives relative to the IEA’s 2015 New Policies Scenario and that efficiency initiatives will drive a 2.9 percent annual reduction in energy intensity of global economic activity;
That renewable energy uptake will accelerate substantially, expanding (excluding hydro electricity) at a compound annual growth rate of 7.6 percent over 2013-2040, resulting in a doubling of electricity generation from renewables in the seven years to 2020, another doubling in the decade to 2030 and again doubling in the following decade; and
That global coal consumption, having peaked in 2013 at 3,909 million tonnes of oil equivalent (Mtoe), will decline to 3,849Mtoe by 2020 and to 3,253Mtoe by 2040, a compound annual growth rate decline of 0.7 percent for 2013-2040.

We continue to think the IEA is still seriously underestimating the combined impact on coal markets, specifically, of the global policy push to limit climate change; the acceleration of technology developments across energy efficiency, smart grids, renewables and battery storage; and the double-digit annual declines in the cost of solar.

Whereas the IEA says it expects global coal consumption to decline at an orderly 0.7% annual decrease, recent trends suggest this expectation is vastly disconnected from reality. There is nothing orderly about the 28.8 percent year-to-date year-on-year decline in U.S. coal production or the corresponding 8.4 percent decline in coal production in China.

The IEA report does highlight the dual impacts on China’s electricity sector of “the overarching structural economic transformation” to less energy intensive economic sectors and the “profound diversification of the power generation mix away from coal.”

Coal drops from over 75 percent of Chinese power-generation share today to less than a 50 percent share by 2040, by the IEA’s estimate. We see a similar percentage drop but would suggest this threshold will be achieved a decade earlier than that.

Tim Buckley is IEEFA’s director of energy finance studies, Australasia.

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Tim Buckley

Tim Buckley, Director, Climate Energy Finance (CEF) has 30 years of financial market experience covering the Australian, Asian and global equity markets from both a buy and sell side perspective.

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