OECD chief warns governments on use of coal

Published 15:20 on July 3, 2015  /  Last updated at 17:16 on July 3, 2015  /  Climate Talks, International  /  No Comments

Governments should rethink the role of coal in energy supply as the scale of new investments being made in unabated coal-fired electricity generation poses the most urgent threat to our climate, OECD Secretary-General Angel Gurria said on Friday.

Governments should rethink the role of coal in energy supply as the scale of new investments being made in unabated coal-fired electricity generation poses the most urgent threat to our climate, OECD Secretary-General Angel Gurria said on Friday.

“Coal is not cheap … Governments need to be seriously sceptical about whether coal provides a good deal for their citizens,” he told investors in a speech at a London event hosted by the Grantham Research Institute and insurance group Aviva.

He said countries should conduct a more rigorous evaluation of the true costs of coal, with market prices failing to fully account for its environmental, health and financial costs.

The OECD, a think-tank funded by its membership of mainly, rich industrialised nations, has been chairing talks among its membership to end export credit subsidies for coal technology. They have yet to reach a breakthough with Japan in particular asking for more time.

Gurria said a recent call by six major European oil and gas companies for widespread and effective carbon pricing was “something of a tectonic shift”, while at the same time recognising their motives were not driven by idealism but to promote their gas as a cleaner alternative to coal.

“If we muster the political will to set ourselves on a 2C trajectory today, not all coal assets will be able to run for their full economic lifetime. Unsurprisingly, if we delay action, we will have to strand much more capacity overall, as steeper reductions will be required.”

He said new investments for unabated coal power must be “really exceptional” worldwide and if low-carbon alternatives prove not to be affordable relative to coal generation for some developing countries, donor countries should mobilise finance to close the financial cost gap.

  • Gurria on competitiveness fears of energy intensive industries:

While such worries cannot be ignored, the scale of most proposed carbon pricing policies pales alongside the “normal” price volatility to which resource users are exposed.”

“In fact, the OECD has not found evidence of significant competitiveness impacts as a result of climate policies to date. We need policies that progressively ramp-up to redirect investment and catalyse innovations. And the geographical spread of these policies needs to broaden if we want to remove carbon “leakage” as an excuse that is currently inhibiting climate policy ambition.”

Gurria said governments must impose carbon pricing and eliminate fossil fuel subsidies, while also ensuring their climate actions aren’t undermined by other policies.

The OECD, IEA, Nuclear Energy Agency and International Transport Forum today published a 200-page report on how governments can ensure their policies are correctly aligned for a low-carbon economy, across all sectors from regulating power markets to land use.

The report found two thirds of global energy investments still go into fossil fuels, 50% of agricultural subsidies in OECD countries harm the climate, and various tax provisions encourage fossil fuel production and use.

“We have wired our economies around fossil fuels for well over a century. Leaving that wiring untouched will mean that climate policies will under-deliver,” he said.

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