The Kyoto implications for coal: the new challenges

In the context of Kyoto, a GHG target at the country level creates the conditions for a national emissions trading scheme and would replace the need for quotas or government subsidy as the means to encourage market change.

All subsidies and guaranteed market shares (quotas) for renewables within the energy market should be phased-out. This will provide a more equitable policy framework to allow the development and introduction of cost-effective technological change and innovation. The outcome would be based on the real costs within a competitive market, delivering the most appropriate solution for the policy objective (ie the reduction of GHGs).

It is important to identify the real goal of the Kyoto Protocol: not to reduce carbon intensity but to reduce GHG emissions. Reducing carbon is only one solution to achieving this goal – and not always the most appropriate or least-cost option for all countries, now or in the future, given the dynamic nature of technological change.

The debate must also acknowledge/reflect the full life cycle in determining GHG emissions and not just a simple comparison between energy sources at the point of transformation into useable energy. For example, GHG emissions from coal are dominated by the end-use (combustion), whereas natural gas and LNG have a significantly higher level of GHG emissions at other stages of the overall life cycle such as the extraction, production and transmission segments.

There should be no discrimination between fuels – we should not try to judge or pick winners in isolation from the forces of the market in this policy area any more than in other policy areas.

Other market impediments should also be addressed as a priority as these could make a substantial – and in some cases a greater – contribution to solving the issue of reducing GHG emissions. Removal of rail transport subsidies and broader adoption of market-based pricing policies in some countries could see a significant reduction in energy demand.

Coal’s objective should be to encourage the maximum use of voluntary measures, Kyoto mechanisms and effective market solutions. We must maintain the price competitiveness of coal, promote clean coal technology for combustion efficiency and environmental improvements – and encourage cost-effective market solutions if Kyoto targets apply, ensuring access to emissions trading, CDM, JI and sinks is not restricted.