Technological development is optimal for Russian coal industry

20 september 2016

“For the Russian coal industry to go green and opt for intensive technological development may be the best strategy we can choose,” Analytical Center’s expert Irina Pominova said speaking at a round table organized by the Izvestia newspaper and entitled “Greening of the Russian Coal Industry in the Context of the Paris Agreement on Climate Change.”

Irina Pominova dwelt on the potential consequences of implementing the Paris Agreement to the coal industry, which is more intensive in terms of carbon emissions that any other energy sources. However, coal remains the second largest energy source in the world accounting for up to 30% of primary energy consumption.

In the past few years, with the exception of 2015, Russian coal industry’s development was leaning heavily on exports, the share of exports in production growing from 33% to 41% since 2011. The prospects for further development and expansion are also mainly associated with export potential, specifically in the direction of the East: Russian coal exports to the West will at best remain the same.

“Even the preparation process to the last year’s climate change conference started putting pressure on the coal industry,” Ms. Pominova noted. - “This had to do first and foremost with the largest global donors refusing to support coal mining projects. This decision was made, among others, by the US, the Nordic countries, Britain, the Netherlands, Germany, and France, as well as development banks - the World Bank, the European Investment Bank, and the EBRD. Refusals continue to come even now, this time on the part of the largest private banks.”

How will this affect Russian export potential given the fact that these decisions were made by western countries where the tendency to reduce coal consumption is evident and taken into account? The first option here is to use the support channels for coal projects in the developing world - western countries’ financial assistance accounts for approximately 7% of investments there. However, the Paris Agreement does affect the energy policy of the developing countries as well. At the global market, this is especially noticeable when we look at China’s decision to optimize its coal industry, China being the largest coal consumer in the world accounting for almost a half of the global demand.

“A reduction of the global demand for coal may be quite significant, especially in the long term,” the expert believes. - ‘‘Which means that despite the current partial recovery in the coal industry with the prices regaining some strength, large export oriented coal projects can only be realized with a very thorough and convincing due diligence and rationale.”