2019-08-24 The Economist Latin America

8 Leaders The EconomistAugust 24th 2019

I

n the densegloom about climate change, news of coal’s de-

cline seems like a pinprick of hope. President Donald Trump

may adore “beautiful, clean coal”, but even he cannot save it. A

growing number of countries want to phase out coal entirely, a

transition eased by cheap natural gas and the plunging cost of

wind and solar power.

That is good news. Coal has been the largest engine of climate

change to date, accounting for nearly a third of the rise in average

temperatures since the Industrial Revolution. Any pressure on it

therefore counts as progress.

However, last year coal-fired electricity emitted more than

ten gigatonnes of carbon dioxide for the first time, 30% of the

world’s total. It may be in decline in the West, but many Asian

governments continue to promote coal-fired power generation.

They are making a dangerous bet.

Asia accounts for 75% of the world’s coal demand—China

alone consumes half of it. The Chinese govern-

ment has taken steps to limit pollution and sup-

port renewables. Yet coal consumption there

rose in 2018, as it did the year before. In India

coal demand grew by 9% last year. In Vietnam it

swelled by almost a quarter. To keep the rise in

global temperatures to no more than 1.5°C rela-

tive to pre-industrial times, climatologists in-

sist that almost all coal plants must shut by

2050, which means starting to act now. Today’s trends would

keep the last coal plant open until 2079, estimates ubs, a bank.

Asia’s coal-fired power regiment has a sprightly average age of 15,

compared with a creaky 40 years in America, close to retirement.

There are several reasons for this, but one stands out: govern-

ment support. In India state-owned companies invest more than

$6bn in coal mining and coal-fired power each year; state-

backed banks provide some $10.6bn in financing. Indonesia

doles out more than $2bn annually for consumption of coal-

fired power. China supports coal not just at home but abroad,

supplying about $9.5bn a year in foreign funding. Japan and

South Korea finance coal projects outside their borders, too.

Government support is hardly surprising. State-backed coal

firms make money and create jobs. Wind turbines and solar pan-

els provide power only intermittently; for now, dirtier power

plants are needed as back up. Gas is pummelling coal in America,

but remains a bit-player in India and much of South-East Asia,

since it has to be imported and is relatively expensive.

Disentangling coal from the region’s economies is difficult.

Indonesian coal companies are a powerful lobby; not coinciden-

tally, power tariffs favour coal over wind and solar projects. In In-

dia coal subsidises passenger fees on railways. And heavy lend-

ing by state-owned banks has tied the health of the financial

system to that of the coal industry.

Nevertheless, governments betting on coal face three big

risks. One is environmental. Emissions from coal plants that are

already built—let alone new ones—will ensure that the world ex-

ceeds the level of carbon-dioxide emissions likely to push global

temperatures up by more than 1.5°C.

There is an economic risk, too. Public-sector zeal for coal is

matched only by private-sector distaste (see Asia section).

Banks, including Asian ones, have increasingly said they will

stop funding new coal plants. Wind and solar

farms make coal look increasingly expensive. A

study has found that private banks provided

three-quarters of loans to Indian renewables

projects last year; state-backed banks doled out

two-thirds of those for coal.

And then there is politics. Voters do not like

breathing soot. More of them are concerned

about climate change, too, as they face unpre-

dictable growing seasons, floods and droughts.

Promisingly, more Asian politicians are voicing support for

clean power. In July Rodrigo Duterte, the Philippines’ president,

instructed his energy minister to reduce his country’s depen-

dence on coal. In June India’s government said it planned to have

500 gigawatts of renewable power by 2030. But to speed the tran-

sition, governments in Asia and elsewhere must do more.

Politicians should move faster to reduce state support for

coal. Rich countries should find ways to help. Middle-income

countries in Asia would be right to point out that wealthier coun-

terparts used coal to fuel their own growth and that America,

Britain, Germany and Japan are among those that continue to

support coal, for instance through tax breaks and budgetary

transfers (and imports from coal-powered Asia). Abandoning

coal in Asia may require diplomacy on a scale that few govern-

ments are ready to contemplate. But abandon coal they must. 7

Betting on black

Asian governments are the biggest supporters of the filthiest fuel

Coal and climate change

barons in the asset-management industry.

Accountability works only if there is competition. This low-

ers prices, boosts productivity and ensures that firms cannot

long sustain abnormally high profits. Moreover it encourages

companies to anticipate the changing preferences of customers,

workers and regulators—for fear that a rival will get there first.

Unfortunately, since the 1990s, consolidation has left two-

thirds of industries in America more concentrated. The digital

economy, meanwhile, seems to tend towards monopoly. Were

profits at historically normal levels, and private-sector workers

to get the benefit, wages would be 6% higher. If you cast your eye

down the list of the 180 American signatories this week, many

are in industries that are oligopolies, including credit cards, ca-

ble tv, drug retailing and airlines, which overcharge consumers

and have abysmal reputations for customer service. Unsurpris-

ingly, none is keen on lowering barriers to entry.

Of course a healthy, competitive economy requires an effec-

tive government—to enforce antitrust rules, to stamp out today’s

excessive lobbying and cronyism, to tackle climate change. That

well-functioning polity does not exist today, but empowering

the bosses of big businesses to act as an expedient substitute is

not the answer. The Western world needs innovation, widely

spread ownership and diverse firms that adapt fast to society’s

needs. That is the really enlightened kind of capitalism. 7

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