The Kyoto implications for coal: the new challenges

The millennium debate for coal is focussing on the most complex of environmental and political issues, the greenhouse effect. The public – and political – concern is that the greenhouse effect is being altered or enhanced due to increased concentrations of greenhouse gases (GHGs) resulting from human activities.

The science of climate change is not absolute and may never be. The World Coal Institute encourages the continuation of scientific research. However, it is now an issue that has political implications for industry and trade.

Global GHG emission concerns must be addressed by the coal industry – we must show that the objectives and goals of the international community can be achieved in ways that are least-cost and less detrimental to coal, preserving energy diversity and supporting sustainable development for developing countries

The Rio Earth Summit in 1992 saw the negotiation of an international agreement drawing a link between greenhouse gas emissions and possible climate change. It received strong international support for its (non-binding) commitments to "stabilize greenhouse gas (GHG) concentrations in the atmosphere at a level that would prevent dangerous anthropogenic [man-made] interference with the climate system".

The Kyoto Protocol (1997) establishing a legally binding obligation on ratifying Annex B Parties to reduce emissions of GHGs by an average of 5.2% below 1990 levels in the five year period 2008-2012.

There will be substantial economic impacts and differences across the fossil fuel sectors from the Kyoto Protocol if it is ratified and enters into force. It is also clear that there will be very significant differences for an individual sector, such as coal, across differing countries – and within regions of the same country. These variations are not just a simple split between Annex B and non-Annex B countries, but also depend on the market structure of the coal industry within a particular country.

Kyoto GHG targets will impact on economic growth. How much effect this will have on the global economy and the coal sector will depend on the mix of policies chosen by Parties to achieve their Kyoto target.

Kyoto is neither trade-neutral nor sector-neutral. Kyoto will have a significant – but variable – impact on coal exporting countries.

Within the Kyoto Protocol there are a number of mechanisms that provide for flexibility in how individual ratifying parties may achieve their targets. If a country ratifies the Protocol, we believe they should have these mechanisms available to them to select an optimal set of policies that minimise the cost of implementation.

While no single model should be taken as the mandatory blueprint, future negotiations should not exclude access to emissions trading, the clean development mechanism (CDM), joint implementation (JI) and sinks.

These policy mechanisms would facilitate achieving the UNFCCC objective that "policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost".

ABARE analysis shows the Kyoto Protocol to have significant negative impacts on the APEC coal market. Independent country abatement would see a 12% reduction in coal consumption by 2010. However, this impact is halved with efficient, effective international emissions trading.