Reducing unabated coal consumption for electric power generation and heavy manufacturing was intended as a central outcome of COP26 in Glasgow in 2021, where world leaders pledged to accelerate coal phase-outs.
However, in the aftermath of COP29 in Baku four years later, the reality around the coal phaseout remains short of expectations. One of the notable exceptions in the ongoing struggle to phase out coal is the United Kingdom, which, as the first G7 member to successfully phase out coal, achieved this milestone in October 2024.
The UK’s experience offers an uncommon success story in the global coal phaseout, driven by aggressive decarbonization strategies, including carbon pricing, a robust renewable energy infrastructure, and a commitment to a just transition for coal workers and communities. However, even in the UK, the transition was far from easy.
Other countries like the US and Canada have been able to leverage low-cost natural gas to displace coal, alongside renewables deployment at a massive scale. Yet for most large coal-consuming states, the transition remains far more daunting.
Developing nations and the complexity of transition – Financing, socio-economic, and energy access challenges
China and India are among the largest coal consumers, with China relying on coal for 65% of its electricity generation in 2023, according to Ember, while the share of coal in India’s electricity generation is 70% according to the IEEFA. More broadly, Asia has been adding over 40GW of new coal capacity annually, and this trend is expected to continue until 2027, according to Rystad Energy.
Despite the growth of renewables, coal remains essential for base-load power for its reliability and affordability. Higher installed coal-fired generation does not automatically lead to increased coal consumption, particularly in China where renewables are eating into the capacity factor for both old and new coal-fired plants. However, less clear is how quickly consumption will decline even once Chinese coal demand peaks
Although India aims for 50% renewable capacity by 2030, coal remains essential to support rapid growth in intermittent solar power capacity. India’s electricity demand is expected to grow at 7.18% annually over the next five years. To meet this, coal-fired capacity is projected to rise from 211GW to 259.6GW by 2032. This is driven by high prices limiting gas imports and delays in renewable infrastructure development, including transmission and long duration battery storage.
In South Africa, coal powers 83% of electricity, according to Ember. Despite a US$8.5B pledge from the G7-backed Just Energy Transition Partnership (JTEP), full transition costs are estimated at US$250B to replace coal, upgrade grids, and securing social safety nets and creation of new jobs, according to IRENA.
Poland presents a unique challenge as a coal dependent economy within the European Union, with 70% of its electricity from coal. The Silesian region relies heavily on coal for jobs and economic stability, leading to resistance against EU policies aimed at a quick phase-out The EU’s Just Transition Fund supports economic diversification and retraining, but Poland’s goal of reducing coal to 11% by 2040 requires at the minimum €25B in investment, according to Euractiv.
Lack of transition finance commitments
The challenges faced by developing nations and coal-dependent economies like Poland highlight the need for transition finance solutions. Pledges like the US$100B climate finance goal and the Glasgow Climate Pact from COP21 remain underfunded according to the The Organisation for Economic Co-operation and Development (OECD) due to several factors including unequal contributions and unclear definition of climate finance. COP29 produced an agreement to increase climate finance assistance to US$300B per year by 2035. While promising, details on how this will materialize generally, and how it will support coal phaseout specifically remain less than fully formed.
COP29 also highlighted the importance of private-sector investments which are necessary to filling this financing gap. However, green financing remains insufficient to scale renewable energy technologies, as well as more capital-intensive alternatives like nuclear and carbon capture to the level required to replace coal in many regions.
The role of technological innovation in coal phase out
Renewable energy technologies are becoming more cost-competitive, however, integrating them into existing energy grids remains a significant challenge in key coal-intensive markets like India and Indonesia. Addressing intermittency through improved grid management and mass deployment of battery energy storage systems is emerging quickly, but has not yet displaced the role of coal as a peaking fuel to back up solar and wind. Moreover, the potential of carbon capture and storage (CCS) to allow for a slower, more transitional phase out of coal remains unproven at large scale due to high costs, technical complexity, long term storage concerns, and public perception.
Incumbency advantage for coal linked to political and economic factors
One of the biggest challenges facing coal phase out efforts, however, is the potential for job losses in coal industries. The concept of a “Just Transition” would ensure that workers and communities dependent on coal are supported through retraining, economic diversification, and social safety nets. While some countries, such as Germany, have made strides in implementing such policies, many others have failed to provide the necessary infrastructure and support systems, stoking fear and resistance to phase-out policies among affected workers and communities.
The role of US policy and long-term global leadership
With the return of a climate-sceptic leadership of Donald Trump’s administration, climate finance and transition support for coal-intensive economies will be at risk. However, the Trump administration would argue that the best path to phase out coal is through increased natural gas consumption, a strategy that was a central part of his first term. Trump, along with the gas industry, is likely to argue that increased US LNG exports to coal-intensive economies will be the fastest path to decarbonizing those markets, while supporting US economic growth and geopolitical influence. This argument in turn faces scepticism from environmental groups that worry about the methane leakage problem in the US LNG value chain and the potentially locking in of fossil fuel over renewable energy.
Striking a balance between climate urgency and economic realities
COP29 did deliver an increase in measurable financial commitments to support clean energy infrastructure in coal-intensive economies but lacks specifics on more meaningful action to address the just transition and coal incumbency. Past experiences with climate summits have shown, unless governments act decisively and deliver on their promises, the transition away from coal may remain a “smoke and mirrors” exercise, offering hope but delivering limited results.
