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Coal projects still lure funding for Asia demand: industry body

World Coal Association CEO says 'many have been silent in public'

Coal's global demand dropped by 1.8% in 2019 after growing by about 1% in both 2017 and 2018.   © Reuters

TOKYO -- The chief executive of the World Coal Association said the industry will not lack for investors willing to fund new coal projects, including mines and power plants, despite moves around the world to divest from such projects.

Coal emits more greenhouse gases when burned for electricity generation than other fossil fuels such as natural gas, and more governments and companies are moving away from it.

The Japanese government last year said it will, in principle, stop supporting exports of coal-fired power plant infrastructure. Japanese trading house Mitsubishi Corp. recently decided to withdraw from a coal power plant project in Vietnam. The U.K.'s Standard Chartered and HSBC have pulled financing.

Some European governments and companies have imposed stricter measures. Germany plans to end the use of coal by 2038, and French bank BNP Paribas plans a complete exit from financing the thermal coal supply chain by 2040.

Coal's global demand has been stagnating in recent years amid such headwinds. It dropped by 1.8% in 2019 after growing by about 1% in both 2017 and 2018, according to the International Energy Agency. It was squeezed by growth in renewable energy, though China and Southeast Asia still increased consumption.

"Where you see the departure of some traditional players [for investing in coal projects], you see the introduction of new players as well," Michelle Manook, chief executive of the WCA, told Nikkei Asia in an interview.

She added that divestment policies often come from institutions based in Europe and the U.S., but "in Asia, we see a lot of new and different private equity, or even funders who got an interest in setting up funds that are specific to Asian economic development" and are willing to support coal projects.

Even among well-known investors, "there are also many who have made public statements or have been silent in public who still support coal," said Manook, though she did not give any specific names.

She explained that divestments by banks like BNP were not a problem for a recent fundraising for a coal project in Southeast Asia, which was actually oversubscribed.

Michelle Manook, CEO of the World Coal Association, emphasized that coal should not be ruled out in government policies.

According to Manook, "much of the dismissal of coal is just based on ... knowledge of old coal-fired power stations." She stressed that coal can be "clean," through technologies that emit less carbon dioxide by improving efficiency, such as ultra-supercritical coal-fired power plants, or by mixing coal with emission-free resources, including ammonia.

She also suggested that carbon capture, utilization and storage (CCUS), which captures emitted carbon dioxide for industrial utilization or to lock it underground, would be important for the fossil fuel industry in general.

Some banks have been providing what is criticized by environmentalists as "loopholes" for coal financing, providing room for investing in new technologies. Japan's Sumitomo Mitsui Financial Group says it will reach zero loans for coal-fired thermal power generation by fiscal 2040, except for projects "that contribute to the realization of a low-carbon society."

HSBC currently gives exceptions "in the event that carbon capture and storage or equivalent technology becomes commercially viable and utilized on a new plant."

"Coal's future contribution will really be reliant on how it will be able to deploy the clean technologies, said Manook. The U.K.-based WCA represents global coal miners and users, with members including India's Adani, China Energy Investment, Swiss miner Glencore and industry body Japan Coal Energy Center.

The organization started focusing on pushing for emission reduction technologies for coal amid the world's clean energy shift around 2019. "We also had to fully understand that there were countries that were experiencing energy poverty, but there are also countries whose economies relied on coal," Manook added.

CCUS could make emissions from coal net-zero, but the cost remains high. Costs for renewable energy, on the other hand, are continuously falling. According to the International Renewable Energy Agency, more than half of the renewable capacity added in 2019 achieved lower power costs than new coal plants.

For technologies such as CCUS to be widely implemented and become cheaper, coal should not be ruled out by government strategies to reduce emissions, Manook insisted. She said the WCA is trying to facilitate collaboration with governments and financial institutions as well as players within the coal industry.

As part of such collaborations, the association signed a memorandum of understanding with the intergovernmental organization ASEAN Center for Energy for the "promotion of setting up the right policy frameworks that include coal and clean coal technologies," according to Manook.

Manook added that Japan and China are among the key leaders, as they are "always improving those technologies, looking at the way that those technologies can become more efficient, more cost-effective, and how the production of those technologies can be exported" to emerging countries.

Manook, who was at the Australian mining explosives maker Orica before taking her role at the WCA, also said that the fate of the coal industry does not rely on just power generators. The entire value chain needs to "recognize how it can support new global aspirations around the environment," she said. 

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