The cost of phasing out coal: Identifying and overcoming socio-political barriers

Licentiate thesis, 2023

IPCC climate mitigation scenarios project rapid coal phase-out as an integral part of climate change mitigation. Despite the diffusion of cost competitive low-carbon alternatives to coal power, some argue that current decline is not in line with climate mitigation targets, and that rapid coal phase-out depicted in climate scenarios is not socio-politically feasible. This dissertation conceptualizes rapid coal power phase-out as one of three interconnected policy problems, as it affects the survival of coal power companies and related jobs, and the development of regions which heavily rely on coal power generation. In addition to coal phase-out policies, governments implement just transition strategies to address these policy problems: domestically, these policies financially compensate coal companies, regions and workers, and on international level, recent Just Energy Transition Partnerships support emerging economies with large coal fleets. However, while some argue that such policies are essential to enable rapid coal phase-out, others question the effectiveness and fairness of financial compensation for coal incumbents.

This dissertation contributes to the debates around feasibility and fairness of coal phase-out through two major avenues. First, it identifies that coal phase-out affects three interconnected systems: the technological system of coal power generation to be phased out, the industrial system comprised of coal companies that needs to adapt to coal phase-out, and regions heavily reliant on the coal industry that need to reorient. This dissertation develops a framework that allows researchers to diagnose the key socio-political mechanisms depending on the phase of decline each system is in and proposes policy sequencing of different strategies over time to decouple the decline of industry and regions from the decline of the technology. Second, inspired by the recent application of Daniel Kahnemann’s “inside” and “outside view” to climate science, this dissertation studies existing coal phase-out commitments and just transition strategies as reference cases to better understand the socio-political feasibility of coal phase-out in climate mitigation scenarios. It finds that while coal phase-out commitments have diffused to countries with larger shares of coal in their electricity mix, accelerated policy-driven coal phase-out commitments tend to be accompanied by just transition strategies. Implementing similar just transition strategies in the two countries with the largest coal fleets globally, China and India, in line with 1.5°C -2°C IPCC scenarios might require most, if not all, of the $100 billion annual climate finance pledged by Global North countries.

This dissertation contributes to better understanding key socio-political mechanisms affecting coal phase-out and proposes a quantitative approach to measure what it takes to overcome them, thus enabling a more informed debate on the effectiveness and fairness of compensation schemes as well as an opportunity to incorporate socio-political feasibility into climate mitigation models. Future research on the cost and management of just transition strategies is required as these strategies are at very early stages of implementation, and more reference cases added as new strategies emerge. Additionally, similar strategies and financial compensation accompanying past decline episodes may shed further light on the cost of accelerated coal phase-out.