The Political Economy of Coal: Obstacles to Clean Energy Transitions

Jakob, Michael (Ed.); Steckel, Jan Christoph (Ed.) Book The Political Economy of Coal: Obstacles to Clean Energy Transitions Environment for Development Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Jakob, Michael (Ed.); Steckel, Jan Christoph (Ed.) (2022) : The Political Economy of Coal: Obstacles to Clean Energy Transitions, Environment for Development, ISBN 978-1-003-04454-3, Routledge, Abingdon, Oxon, https://doi.org/10.4324/9781003044543 This Version is available at: https://hdl.handle.net/10419/279841 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/ The Political Economy of Coal This volume provides an overview of the political economy of coal in diverse country contexts. Coal is the largest source of greenhouse gas emissions globally, accounting for about 40 percent of energyrelated CO2 emissions. Continued construction of coalfired power plants could make the climate targets of the Paris Agreement infeasible to achieve. In spite of sharply declining costs for renewable energy sources, many countries still heavily rely on coal to meet their energy demand. The predominance of coal can only be adequately understood in light of the political factors that determine energy policy formulation. To this end, this edited volume assembles a wide variety of case studies exploring the political economy of coal for across the globe. These includes industrial and developing nations, coal importers and exporters as well as countries that are either substantial coal users, are just beginning to ramp up their capacities, or have already initiated a coal phaseout. Importantly, all case studies are structured along a unifying framework that focuses on the central actors driving energy policy formulation, their main objectives as well as the context that determines to what extent they can influence policy making. This large set of comparable studies will permit drawing conclusions regarding key similarities as well as differences driving coal use in different countries. This book will be of great interest to students and scholars of energy, climate change, resource management, and sustainable development. It will also appeal to practitioners and policymakers involved in sustainable development. Michael Jakob is a senior fellow at the Ecologic Institute and a fellow at the Mercator Research Institute on Global Commons and Climate Change, Germany. Jan C. Steckel is head of the Working Group “Climate and Development” at the Mercator Research Institute on Global Commons and Climate Change, Germany, and Chair of Climate- and Development Economics at the Brandenburg University of Technology (BTU) in Cottbus. Environment for Development Series Editors: Thomas Sterner and Gunnar Köhlin The Environment for Development (EfD) initiative (www.environment fordevelopment.org) supports poverty alleviation and sustainable development through the increased use of environmental economics in the policymaking process. EfD identifies the environment as an important resource for development rather than a constraint. The EfD initiative is a capacitybuilding program in environmental economics focusing on research, policy advice, and teaching in Central America, Chile, China, Ethiopia, Kenya, South Africa Tanzania, USA and Sweden. The nine EfD centers are hosted by leading universities or academic institutions in respective country/ region. The EfD is initiated and managed by the Environmental Economics Unit, University of Gothenburg, Sweden. The core funding for the EfD initiative is provided by Sida, Swedish International Development Cooperation Agency. Institutions interested in partnering with the EfD initiative, please contact the EfD secretariat at [email protected] Environmental Regulation and Public Disclosure The Case of PROPER in Indonesia Shakeb Afsah, Allen Blackman, Jorge H. Garcia and Thomas Sterner Forest Tenure Reform in Asia and Africa Local Control for Improved Livelihoods, Forest Management, and Carbon Sequestration Edited by Randall Bluffstone and Elizabeth J.Z. Robinson Agricultural Adaptation to Climate Change in Africa Food Security in a Changing Environment Edited by Cyndi Spindell Berck, Peter Berck and Salvatore Di Falco The Political Economy of Coal Obstacles to Clean Energy Transitions Edited by Michael Jakob and Jan C. Steckel For more information about this series, please visit: www.routledge.com/ Environmentfor- Development/ bookseries/ ECEFD The Political Economy of Coal Obstacles to Clean Energy Transitions Edited by Michael Jakob and Jan C. Steckel First published 2022 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2022 selection and editorial matter, Michael Jakob and Jan C. Steckel; individual chapters, the contributors The right of Michael Jakob and Jan C. Steckel to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. The Open Access version of this book, available at www.taylorfrancis.com, has been made available under a Creative Commons Attribution- Non Commercial- No Derivatives 4.0 license. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguingin- Publication Data A catalogue record for this book is available from the British Library Library of Congress Catalogingin- Publication Data Names: Jakob, Michael, 1970– editor. | Steckel, Jan C., editor. Title: The political economy of coal: obstacles to clean energy transitions/edited by Michael Jakob and Jan C. Steckel. Description: New York, NY : Routledge, 2022. | Series: Environment for development | Includes bibliographical references and index. Subjects: LCSH: Coal trade. | Coal mines and mining–Political aspects–Case studies. | Power resources. | Renewable energy sources. Classification: LCC HD9540.5 .P65 2022 (print) | LCC HD9540.5 (ebook) | DDC 338.2/724–dc23/eng/20211116 LC record available at https://lccn.loc.gov/2021047169 LC ebook record available at https://lccn.loc.gov/2021047170 ISBN: 978- 0- 367- 49102- 4 (hbk) ISBN: 978- 0- 367- 49104- 8 (pbk) ISBN: 978- 1- 003- 04454- 3 (ebk) DOI: 10.4324/ 9781003044543 Typeset in Bembo by Newgen Publishing UK To Laia and Milo Contents List of figures x List of tables xii Notes on contributors xiii Preface xix Acknowledgments xxii 1 Introduction: the political economy of coal 1 MICHAEL JAKOB AND JAN C. STECKEL PART I Countries phasing out coal 19 2 Late and expensive: the political economy of coal phaseout in Germany 21 LUKAS HERMWILLE AND DAGMAR KIYAR 3 The political economy of coal in Bulgaria: the silent phaseout 40 TOMA PAVLOV 4 Positioned for consensus: marketbased approaches, civil society and the role of the state in Chile’s coal phaseout 60 PAELINA DESTEPHANO, BEATRIZ HERNANDEZ PEREZ, CLAUDIO HUEPE MINOLETTI, THOMAS KLUG, AND VICTORIA PLUTSHACK 5 Political economy of climate and energy policies in the United Kingdom 78 NORA STOGNIEF, PAULA WALK, AND PAOYU OEI xiv Notes on contributors Paelina DeStephano graduated with her Masters of Public Policy from Duke University’s Sanford School. Her work focuses on clean energy transitions, climate policy, and decisionmaking under deep uncertainty. Ira Irina Dorband is a research fellow at the Mercator Research Institute on Global Commons and Climate Change (MCC), and a Junior Professional Officer in the World Bank Chief Economist Office for Equitable Growth, Finance and Institutions. She is a Ph.D. candidate in economics at the Technical University of Berlin. Her research focuses on the political economy and distributional effects of climate change mitigation, with a particular interest in environmental fiscal reforms toward inclusive sustainable development. Anna Fünfgeld is a researcher at the University of Potsdam and a doctoral candidate at the German Institute for Global and Area Studies (GIGA) in Hamburg and at the University of Freiburg. She works on energy, climate, and infrastructure politics in Indonesia/ Southeast Asia and Brazil/ Latin America. Jonathan Hanto is a master student at the Technical University (TU) Berlin where he studies industrial engineering with a focus on energy and resource management. In his studies, he deals with technical, social, and economic aspects of energy transitions. He currently works on research projects analyzing the energy transition in South Africa through energy system modeling and qualitative research methods. Lukas Hermwille is Senior Researcher at the Wuppertal Institute for Climate, Environment and Energy. He coordinates research projects on structural change in carbonintensive regions and global climate governance and how it can support the transition of unsustainable sociotechnical systems. He holds a Ph.D. from Vrije Universiteit Amsterdam. Beatriz Hernandez Perez is Director of the Programme in Social Sciences and Humanities and Associate Professor at Universidad Diego Portales, Chile; Ph.D. in European Studies from the IUIOG; M.A. in Latin American Studies from Georgetown University; Magister in Political Science; and International Relations from the Catholic University of Chile. Since 2009, she is Jean Monnet Professor researching on Europe/ Latin American relations on migration, cooperation, environment, and energy. Thabit Jacob is currently a Postdoctoral Researcher at the University of Gothenburg. He was a Postdoctoral Researcher at the Danish Institute for International Studies before that. His research focuses broadly on the political economy of development, politics, and geopolitics of minerals, politics of energy, and the role of state actors in shaping nationalist interventions in the extractive and energy sectors. He completed his PhD at Roskilde University, where his doctoral thesis examined the political economy of resource nationalism in the Tanzanian coal sector. Notes on contributors xv Michael Jakob is a senior fellow at the Ecologic Institute and a fellow at the Mercator Research Institute on Global Commons and Climate Change (MCC) in Berlin. He holds a Ph.D. in economics from the Technical University of Berlin and has obtained degrees in physics, economics, and international relations from universities in Munich, St. Gallen, and Geneva. His research interests include climate change mitigation in developing countries, the political economy of climate policy as well as the interlinkages between environmental policy and human wellbeing. Michael has advised governments, international organizations as well as NGOs and served as contributing author to the IPCC’s Fifth Assessment Report. Dagmar Kiyar studied Political Science, Sociology, and Economic Policy. She joined the Wuppertal Institute in 2005 and works as a Senior Researcher at the Energy, Transport and Climate Policy Division. In 2014, she obtained her Ph.D. with her thesis on “Environmental (Re)Orientation of large Utility Companies? Germany’s ‘Big Four’ Energy Providers and their Relation to Climate Policy”. Thomas Klug is a research associate at the Sanford School of Public Policy at Duke University. His work focuses on clean energy transitions and energy policy. He holds a B.A. in Public Policy and B.S. in Environmental Science from Duke University. Lukas Krawielicki is a student research assistant at the Workgroup for Infrastructure Policy (WIP) at the Technical University (TU) Berlin. He holds a bachelor’s degree from the TU Berlin in Sustainable Management, in which he focused on energy. He is currently studying International Affairs at the Hertie School in Berlin with a concentration area in security and sustainability. Aaditee Kudrimoti is a recent graduate of the University of California, Berkeley. She studies the political determinants of planning capacity, and the politics of social and economic planning. She is currently a researcher with the Stimson Center’s Southeast Asia Program as well as a Fulbright research fellow in Laos. Jiaqi Lu is a Ph.D. candidate in the Department of Political Science and Nelson Institute for Environmental Studies at the University of Wisconsin – Madison. His research interests include the political economy of energy transitions and climate change, as well as the intersection of governance and technology development. Niccolò Manych is a Ph.D. candidate at the TU Berlin and researcher at the MCC Berlin. He works on the political economy of energy transitions with a focus on the Philippines and international financing for coal plants. Claudio Huepe Minoletti is Director of the Centre for Energy and Sustainable Development, Universidad Diego Portales, Chile; M.Sc. in Environmental and Natural Resource Economics, UCL, London; Magister xvi Notes on contributors in Economics and B.Sc. in Business and Economics, Catholic University of Chile; specialized in sustainable development policies and the regulation and economics of energy and natural resources; also researching on energy transition and sustainability of natural resource extraction. Lorenzo Montrone is a Ph.D. candidate and researcher in the MCC Working Group “Climate and Development”. His research focuses on the political economy of energy transitions in developing countries, Distributional impacts of carbon pricing, structural change, and poverty. Lorenzo studied at the Roma Tre University and Humboldt University of Berlin. He holds a Master of Environmental and Development Economics. Gregory Nemet is a professor at the University of Wisconsin – Madison in the La Follette School of Public Affairs. He teaches courses in policy analysis, energy systems, and international environmental policy. Nemet’s research focuses on understanding the process of technological change and the ways in which public policy can affect it. Pao- Yu Oei is full Professor for “Economics of Sustainable Energy System Transition” at Europa Universität Flensburg (EUF) and head of the 20- member research group “CoalExit” at EUF, TU Berlin and DIW Berlin. Part of his work is reflected in his coordination of the independent research hub Coal Transitions, representing more than 60 researchers based on 5 continents. Nils Ohlendorf is a researcher at the MCC in Berlin focusing on the political economy of energy transitions. He holds degrees in Public Economics and Industrial Engineering from the University of Kassel and the Freie Universität Berlin. Previously, he worked at the German Institute for Economic Research (DIW), the German Corporation for International Cooperation (GIZ), and Green Budget Germany (FÖS). Jose Antonio Ordonez is a researcher at the Competence Center Energy Policy and Energy Markets of the Fraunhofer Institute for Systems and Innovation Research (ISI) and guest researcher at the Mercator Research Institute on Global Commons and Climate Change (MCC Berlin), as part of the Working Group “Climate and Development”. His work focuses on political economy, distributional impacts and energy and economic modelling of the energy transition in developing countries and emerging economies. Toma Pavlov is an energy researcher with a strong background in the energy transition of Bulgaria and interest in the South- Eastern Europe region. He is a graduate in Public Policy from the Hertie School of Governance and has a Bachelor in Political Science from the New York University Abu Dhabi. Victoria Plutshack is a policy associate at the Duke University Energy Access Project at the Nicholas Institute for Environmental Policy Solutions. Her work focuses on energy access, gender, and sustainable transitions. She holds Notes on contributors xvii a Ph.D. in Land Economy and an M.Phil. in Technology Policy from the University of Cambridge, and a B.A. in History from the University of Chicago. Lina María Puerto- Chaves is a research assistant in the Climate and Development Working Group at the MCC in Berlin. She holds a Master of Environment (Climate Change stream) from the University of Melbourne and is currently finishing an M.Sc. in Environmental Planning at TU Berlin. Her work focuses on the political economy of energy transitions in developing countries. Akira Schroth is enrolled as a graduate student of Human Geography at Humboldt University Berlin. He is employed as a student assistant in the Workgroup for Infrastructure Policy at the Technical University Berlin and at the Leibniz Institute for Research on Society and Space in Erkner. His interests lie in social and economic implications of climate action on different scales. Dinah Shi is pursuing a Master of Chinese Economic and Political Affairs at UCSD, where she specializes in Chinese environment. Her research examines the role stateowned enterprises play in China’s energy transition. Previously, she was a software engineer in private industry. She holds a Bachelor of Software Engineering from the University of Waterloo. Cecilia Springer is a senior researcher with the Global China Initiative at the Global Development Policy Center. Her interdisciplinary research focuses on the environmental impacts of China’s overseas investment, policymaking processes within China, and industrial decarbonization. Previously, she was a Postdoctoral Fellow at the Harvard Kennedy School. She earned a M.S. and Ph.D. from the Energy and Resources Group at the University of California, Berkeley, and a B.S. in Environmental Science from Brown University. Jan C. Steckel heads the Working Group “Climate and Development” at the Mercator Research Institute on Global Commons and Climate Change (MCC) in Berlin and Chair of Climate and Development Economics at the Brandenburg University of Technology (BTU) in Cottbus. His research focuses on climate change mitigation in low- and middleincome countries, related distributional effects and how they can be alleviated. Jan received a Ph.D. in economics from TU Berlin and a Master’s degree in industrial engineering from the University of Flensburg and the University of Southern Denmark. From 2007 to 2013, he worked at the Potsdam Institute for Climate Impact research. Jan has authored multiple academic articles and has been an author of the IPCC’s Special Report on Renewables as well as its Fifth Assessment Report. He led the chapter on phasing out coal for the UNEP emissions gap report 2017. Nora Stognief is a research assistant at the German Institute for Economic Research (DIW Berlin), where she is part of the CoalExit junior research group. She holds a B.Sc. in Environmental and Resource Management and xviii Notes on contributors is currently finishing her M.Sc. in Environmental Planning at TU Berlin. Her research focuses on sustainable coal transitions in Germany and Europe. Paula Walk studied economics and social science in Erfurt, Potsdam, and Nottingham. In her Ph.D., she is working on the coal phaseout in Germany and United Kingdom. She analyzes how a successful transformation in former coal regions can look like. A special focus of her work lies on the interaction of sustainability transitions with social power asymmetries (e.g. gender). John Wiseman is a Senior Research Fellow with Melbourne Climate Futures and Melbourne Sustainable Society Institute and an Adjunct Professor at the Melbourne School of Population and Global Health at the University of Melbourne. His current research focuses on actions needed to accelerate the transition to a just and resilient post-carbon society. His most recent book is Hope and Courage in the Climate Crisis: Wisdom and Action in the Long Emergency. Preface Coal has been on top of our research agenda for more than a decade now. As it constitutes the most important source of global greenhouse gas emissions, phasing out coal is a prerequisite for achieving ambitious climate targets. At the same time, most coal is burnt to generate electricity, for which increasingly affordable substitutes exist in the form of renewable energy sources. These clean energies not only mitigate climate change, but also yield substantial cobenefits, such as reduced air pollution when replacing coal. Hence, a transition from coal to renewables seems like an obvious starting point for climate policy, a fact that is frequently emphasized by modeling efforts and the IPCC. The question of why coal plays such an important role in energy production was closely linked to our investigation of the relationship between economic development and energy use patterns, which we both undertook as part of our Ph.D.s at the Potsdam Institute for Climate Impact Research (PIK). Much of this research has been driven by our desire to identify ways how poor countries can achieve progress in the fight against hunger and poverty without repeating the carbonintensive development patterns of industrialized countries. From this perspective, widely available and relatively cheap coal seemed like an obvious choice for countries for which shortterm economic development objectives are more pressing than longterm climate goals. With rapidly declining costs of renewable energy technologies, we realized that pure economic explanations cannot fully explain countries’ energy policies, and in particular their stance toward coal. We fully agreed, and still do, to the prescription of economics that markets should be designed in a way that ensures that emissions from fossil fuel use reflect the associated social costs, for instance by means of carbon pricing. Yet, we were also aware that this prescription misses a crucial point: how should such measures be implemented if policymakers think that they delay industrialization, have adverse consequences for energy security, and might result in concentrated job losses in vulnerable regions? How can the political resistance of powerful interest groups, such as utilities, owners of coal mines, energyintensive industries, and trade unions, who might bear the brunt of the costs of an energy transition, be overcome? This is how we got involved in the study of political economy. Being new to this field, we had to spend quite some effort to catch up to a vast field to which xx Preface a plethora of authors have made seminal contributions over many decades. The approach we intended to take was first and foremost applied, resulting in analyses that are accessible to a broad readership without requiring extensive training in political science. Hence, we decided – in collaboration with Christian Flachsland from the Hertie School of Governance and Johannes Urpelainen from Johns Hopkins School of Advanced International Studies – to develop an analytical framework, which allows a straightforward identification of key elements of the political economy of coal. This approach aims at spelling out the objectives of key actors and how they can influence policy making. The resulting AOC (actors, objectives, context) framework constitutes the basis for all 15 case studies assembled in this book. Breathing life into this abstract concept requires applying it to specific realworld cases. For this reason, we traveled to different countries and – following the framework – interviewed key stakeholders about their perception of recent developments in coal politics. Our first two case studies brought us to Vietnam and Indonesia. Both studies, which are reprinted in this volume in modified versions, raised our awareness for the importance of vested interests and the crucial role of stateowned enterprises in the power sector. We soon realized that it would be worthwhile to have a broad range of studies of this kind to eventually be able to carry out crosscountry comparisons, very much in the spirit of the case studies undertaken by Elinor Ostrom and coworkers regarding governance system for commons. We also realized that we – even with the great support from our colleagues at the Mercator Research Institute for Global Commons and Climate Change (MCC), who were engaged in further studies on Colombia, India, Kenya, and the Philippines (all included in this volume) – would not be able to produce the amount of studies needed to get a comprehensive picture of the political economy of coal in different contexts. This was the start of this project. To make sure that studies in the end will be comparable, we invited interested authors to Berlin with whom we first conducted a workshop on the theoretical framework. We established regular meetings with all authors over the course of three years, tracking progress and providing room for detailed feedback and discussions. Hence, a small community has emerged, which finally delivered the excellent studies compiled in this book. The team of authors includes highly renowned specialists in their fields with often many years of experience with the country under study. We are grateful for all the time and effort each of them dedicated to this book. All authors gained or completed their insights through stakeholder interviews, for instance with representatives of key ministries, political parties, civil society, industry, and academia. The 15 case studies included in this integrated volume stem from a large variety of countries differing, inter alia, in their levels of economic development, political systems, endowments with fossil fuel reserves and potentials to generate renewable power. In this manner, we were able to produce a substantial amount of empirical evidence for the factors that promote or slow down coal use. Preface xxi We have deliberately chosen a mainly descriptive approach that clearly highlights the underlying political economy mechanisms that determine the formulation, implementation, and enforcement of energy and climate policies. That is, readers should not expect comprehensive proposals on how to phase out coal in the countries under study. Yet, by shedding light on the driving forces behind coal use, each analysis is highly policy relevant by providing a solid understanding of the complex interplay of different actors and their interests. We firmly believe that this understanding must be the foundation of developing further solutions, not only to phase out coal, but to enable effective climate policy. We thus hope that this book is not the end, but rather the beginning, of a journey toward an everexpanding understanding of the political economy of coal and more generally climate policy – and thus will eventually result in policies that ensure that international climate targets can be met. For this reason, all interested researchers are invited to produce their own country case studies or build on the studies in this volume to develop policy recommendations. Acknowledgments This book has been a journey that started sometime in 2017. It is time to thank all of those who helped to pave the way from first vague ideas how to conceptualize and analyze the political economy of coal to a book that now comprises 15 integrated cases study chapters. We would like to thank our colleagues at the Mercator Research Institute on Global Commons and Climate Change for commenting on first ideas and earlier drafts, including Ottmar Edenhofer, Christian Flachsland, William Lamb, and Jan Minx. We would also like to thank Susann Reinsch, Annelie- Saskia Wal, Franziska Faber, and Elisabeth Nierhoff who supported us in managing this project administratively. We would like to express our gratitude to Antonella Bosio and Lina María Puerto- Chaves for outstanding research assistance and support with editing the book, and Lorenzo Montrone and Niccolò Manych for helping with figures and maps in the introduction. A broad range of colleagues has helped us to shape our ideas, facilitated seminars and engaged in seminar as well as bilateral discussions. We are particular grateful for Klaus Eisenack, Roman Mendelevitch, Pao- Yu Oei, Andreas Goldthau, Frank Jotzo, Johannes Urpelainen, Jessica Jewell, Sandeep Pai, Rohit Chandra, and Rainer Quitzow. We also thank Thomas Sterner and Gunnar Köhlin who encouraged us to edit this book. We would like to thank all authors who have worked hard to realize this integrated volume, participated in long seminars and trainings, partly – given time zone difficulties – in the middle of the night. Next to the ones whose chapters are printed here, we also would like to thank those that had to withdraw from the project out of various reasons, including Hina Aslam, Niraj Joshi, Noah Kittner, Kashif Salik, and Gregory Trencher. We are extremely grateful to all colleagues who took time to peerreview the various chapters and hence contributed to improving this volume: Michael Boulle, Paul Burke, Aron Buzogany, Stephan Cetkovic, Florian Egli, Jessica Jewell, Noah Kittner, Anna Leipprand, Jose Manuel, Sandoval Pedroza, Aleksander Sniekocgi, Frauke Urban, Harro van Asselt, and Adrien Vogt- Schilb. We thank Acknowledgments xxiii Robert Keohane and Ben Sovacool for providing very useful comments on the introduction and synthesis chapters. We thank the German Federal Ministry of Research for providing funding for this book through the PEGASOS project. Finally, we are extremely grateful to our interview partners for their willingness to share their knowledge with us. newgenprepdf 6 Michael Jakob and Jan C. Steckel Another recent line of research, which is closely related, synthesizes theoretical and empirical insights on the political economy of climate and energy policy. Biber et al. (2016) review the literature and discuss a long list of political economy factors influencing energy and climate policy. In a similar vein, Karapin (2016) identifies a range of structural and process factors in the literature and applies these in a comprehensive comparative case study on California, New York and the US federal level. However, neither proposes a generalized framework suited for organizing political economy analysis of climate and energy policy, which is the aim of this chapter. Finally, a metatheoretical framework to analyze the interplay between technoeconomic, sociotechnical and political factors in energy system transitions is provided by Cherp et al. (2018). The AOC framework The AOC framework provides a flexible, generally applicable framework for comparative case analysis that simultaneously considers actors, objectives and context as potential drivers of policy outcomes. It follows the approach for building analytical frameworks outlined by Ostrom (2007) to allow for a flexible combination of different theories that consider individual subsystems and more specific causal effects that are relevant for the understanding of political processes. This framework could in principle be applied to describe a broad range of political economy issues and incorporate a range of disciplinary approaches, including political science, social choice and neoclassical welfare economics. Due to its focus on structural variables and the interplay between different actors, it is particularly well suited for the analysis of energy and climate policy. It adopts the perspective that energy and climate policies emerge from a complex interplay of a diverse set of actors, such as influential individuals, key ministries, industry groups, unions or voters, that all have different objectives as well as different means for influencing policymaking. It builds on the central assumption that policies reflect the objectives of those actors that have the greatest influence in the decisionmaking process. This general structure is especially valuable to conduct comparative case study work. The framework to analyze the political economy of energy and climate policy builds on three central elements, (i) the relevant actors, (ii) their objectives and (iii) the context determining how a certain objective matters for each actor and how these actors can influence policy formulation. Actors, objectives and context First, the AOC framework aims at identifying the most important actors that influence the formulation of climate and energy policies. We divide this category into societal actors and political actors. Societal actors include unions, industry associations, civil society organizations and voters as well as international organizations and bi- and multilateral development banks. Political actors include, among others, political parties, the parliament, key ministries, Introduction 7 regulatory agencies and the president. While the behavior of political and societal actors is embedded within a set of formal and informal institutions constituting a society’s polity, we suggest a strong focus on actors as a core unit of analysis because these are the driving forces of policy change or continuity. Choosing actors as a key unit of analysis is also helpful to facilitate empirical access to the field (e.g. via interviews, stakeholder analysis), and to consider strategies available to different actor groups in policy advice. Second, the AOC framework entails establishing a list of objectives which matter for these actors. This perspective acknowledges that energy and climate policies are usually implemented with multiple policy objectives in mind (Edenhofer & Kowarsch, 2015; Jakob & Steckel, 2016), and that objectives and their prioritization differ across groups (Joas et al., 2016). The scientific literature has identified numerous tradeoffs and synergies of energy and climate policies with other policy objectives, including economic costs and their distribution, industrial development, job creation, energy security considerations and ambient air quality. Hence, we assume that in general, each actor’s stance toward energy and climate policy may depend on their relative weighting of several (but not necessarily all) of these policy objectives. For instance, environmental civil society organizations may be most concerned about environmental issues, unions about employment and wages and the private sector about profits. Yet, each of these groups may also care about other aspects more directly concerning other groups, such as distributional implications. We assume that for societal actors, these objectives matter directly (societal objectives) and that political actors are concerned about the interests of the societal actors they represent but may also have additional idiosyncratic objectives, such as being reelected or increasing their standing or power (political objectives). As an example, the ministry of the economy might be most responsive to the demands of key industries, while the ministry of the environment might be more amenable to lobbying by environmental NGOs. Which policies eventually are implemented will be determined by the complex interplay of the interests of these political actors mediated by political process dynamics. For the analysis, it is helpful to distinguish between objectives that are directly affected by energy and climate policy, such as low energy prices or security of supply, and those that relate in a more indirect fashion, such as employment and structural economic change. Third, the AOC framework examines the general context in which policymaking takes place. In our formulation, context is a broad category, including economic, environmental, institutional and discursive aspects. Economic factors include, for example, the level of development, the economic structure (e.g. share of energyintensive industries) or the energy resource endowments (e.g. fossil or renewable energy resourcebase) of a country. Formal and informal domestic institutions structure both how societal groups interact with policy actors, and how formal policy decisions are being taken (e.g. electoral system, constraints on lobbying) and implemented. Beyond domestic institutions, the international embeddedness of a country may also matter for domestic climate and energy policy formation in varying forms and degrees (e.g. Paris 8 Michael Jakob and Jan C. Steckel Agreement, access to international financial markets). Discursive factors include public opinion (e.g. the share of the population believing in global anthropogenic climate change, political polarization, or the level of government support) or the governance and behavior of media actors. Environmental factors include affectedness of a country or more specific regions by local (e.g. air pollution) and global (e.g. climate change) environmental problems. Context matters in four ways. First, it specifies how specific policy objectives matter for individual societal actors (Oye & Maxwell, 1994). For example, the way in which profits matter for utilities likely depends on whether electricity generation is mainly carried out by private or stateowned companies (i.e. organization of the power sector). Second, context determines the form and degree in which societal actors have an influence on political actors (Gilens & Page, 2014). For example, the extent to which organized lobby groups can influence policy decisions can be expected to depend on the formal and informal forms of interest group representation, the prevailing level of corruption, political ideologies and trust in government. Third, context matters for how political objectives matter for individual political actors (Alesina, 2013). For instance, decision makers might be able to place higher importance on their personal influence in authoritarian regimes compared to more democratic settings. Fourth, context structures the form and degree of how these political actors can influence policymaking, implementation and enforcement (Cremer et al., 2008). For example, parliament chambers and ministries likely have different powers in presidential and parliamentary systems, and the power of political parties can be expected to differ between proportional and majoritarian electoral systems. In applying the AOC framework, carefully characterizing the dynamic relationships and power structures determining political actors’ objectives is important. These are shaped, first, by the objectives of societal actors that can influence political actors inhabiting formal positions of power in various ways (e.g. campaign financing, voting behavior). Second, distinct objectives of political actors such as ministries aiming at increasing their political power need to be accounted for as well. These also interact with the objective functions of other political actors (such as the president) via bargaining and power struggles in the policy process. The AOC framework is based on the idea that decision makers can choose from a given set of policy packages. We presume that those policies will be implemented that best meet the objectives of those actors that have the most pronounced influence on policy formulation, implementation and enforcement, either directly in their role as political actors or indirectly, in the role of societal actors that can influence political actors. National as well as international context variables shape both the formation of objectives of actor groups, as well as the broader economic, institutional and discursive context in which they aim to advance them. In this sense, the AOC framework is based on the view that policies are supplied by decision makers to fulfill a demand by certain interest groups. Introduction 9 It does not presuppose a particular mechanism of how actors’ interests are aggregated into policy outcomes in the policy process, as these will vary by context and are to be determined in empiricaldescriptive studies. Due to its general structure, the AOC framework can accommodate a large variety of empirical settings and theoretical perspectives. These range from developing to developed countries, and from wellgoverned cases that achieve outcomes which in the welfare economic perspective can be considered to be close to the social optimum, to clientilistic regimes and interest group– based explanations of public policy in which policies are adopted to serve a narrow political and economic elite. The AOC framework does not assume rational policy design in the sense of an optimization procedure. It is applicable both in contexts where policies are implemented to predominantly serve the interests of those actors that have disproportional influence on policymaking, or in settings where the interests of majority (and minority) voter groups are shaping policy adoption. Table 1.1 provides some examples of potential societal and political actors, as well as potential environmental, socioeconomic and strategic objectives relevant for climate and energy policy formulation. It also displays a number of factors that might matter for the technoeconomic, institutional, discursive and environmental context. This list is far from being comprehensive. Instead, each individual country and policy package will require carefully examining which actors, objectives and context factors are relevant in a particular case. Table 1.1 Examples of actors, objectives and context factors relevant for the political economy of climate and energy policy Societal objectives Societal actors Environmental Climate change mitigation Local air quality Socioeconomic Economic costs and efficiency Employment and wages Diversifying the economy, structural change Poverty alleviation Social inclusion Health Distribution Public revenues and investments Profits Strategic Technology transfer Energy security, energy sovereignty Voter groups Unions Energyintensive industries Utilities Resource owners Financial institutions Industry associations Researchers, academia Multinational corporations, investors Civil society (e.g. NGOs, religious groups, local citizens) International NGOs (continued) 10 Michael Jakob and Jan C. Steckel Combining the elements of the AOC framework The interactions between actors, objectives and context are depicted in Figure 1.3. Let there be a number of a relevant policy objectives that matter for societal and political actors, denoted by OS 1 to Oa S and OP 1 to Ob P , respectively. The context factors are labeled C1 to Cc. The weights α ik state the importance of policy objective k for societal actor i. In a similar vein, we regard each political actor to have two sets of objectives: first, idiosyncratic objectives, such as ensuring reelection or increasing influence, where the weight political actor i puts on objective k is given by β ik . Second, we regard societal actors as influencing political actors, such that the importance societal actor k has for political actor i is Political objectives Political actors Reelection Increasing influence and political power International standing Influential individuals (e.g. president) Key ministries and agencies (across different governance levels) Political parties (e.g. via parliament) Regulators, implementing agencies Context Technoeconomic Economic situation (GDP, business cycle, fiscal deficit, population density, inequality,…) Fossil fuel endowments, dependence on fossil imports/ exports (Global) market developments for fossil fuels and renewable technologies RE potential Grid infrastructure and existing generation capacities Industrial structure (e.g. share of manufacturing and energyintensive industries) Institutional Organization of the power sector Representation of interest groups Political and judicial system (e.g. democracy, parliamentary vs. presidential, electoral system) Government capacity International agreements (climate, trade, investment, technology) Discursive Political events (champions for green policies, media attention, framing, socioenvironmental conflicts, COP or similar event in country under consideration) Ideational factors (climate change knowledge, rightleft polarization, international diffusion of ideas) Trust in government Environmental Vulnerability to climate change Focusing events (climaterelated impacts, Smog episodes, power cuts) Table 1.1 Cont. Introduction 11 Figure 1.3 Graphical representation of the AOC framework. newgenrtpdf 12 Michael Jakob and Jan C. Steckel given by weight γ ik (if an objective or societal actor is not relevant for a certain political actor, the respective weight is zero). Finally, let us denote the degree to which political actor k, via the policy process, influences policy outcomes, implementation and enforcement by δ k . We assume that all weights α ik , β ik , γ ik and δ k are determined by the context factors C1 to Cc. We denote the set of f possible policies (in the sense of policy packages that combine different instruments, such as taxes, subsidies, performance standards, transfer payments) that can be implemented by P1 to Pf. Each policy will result in a specific outcome vector, over time, for each of the objectives of societal and political actors, i.e. OS and OP. Then, the policy package that yields the maximum political support at a given point in time will be chosen, implemented and enforced because it best meets the objectives of those actors that have the most influence on policy formulation. The key aspects of this approach are summarized in Table 1.2. This approach can be regarded as an analogy to the comparative static approach in economic theory that describes how an equilibrium between supply and demand (in our case for policies) arises and allows an assessment of how this equilibrium would dynamically change as a result of changes in certain parameters of the system. This approach can also be conceptualized to study the dynamic aspects of policy change and inertia due to resistance of powerful interest groups to change, creating path dependence and lockin of fossil infrastructures. This can be achieved by including future outcomes in the list of societal and political actors’ objectives in conjunction with how they form expectations on future developments. For instance, certain actors might strive for shortterm objectives (such as influencing public opinion or changing the institutional environment), which do not directly meet their immediate priority objectives (such as profits or political power), but facilitate their achievement in the future. Structure and purpose of this book This integrated volume assembles 15 country case studies analyzing the political economy of coal. It is divided into four main parts, each of which includes case studies for a particular country category. Table 1.2 Key elements of the AOC framework Framework element Notation Societal actors’ objectives OS1 … OSa Political actors’ objectives OP1 … OPa Context factors C1 … Cc Importance of objective k for societal actors i α ik Influence of societal actor i on political actor k β ik Weight of political objectives for political actors γ ik Power of political actor k δ k Policy packages P1 … Pe Introduction 13 Part I discusses the political economy of coal in countries phasing out coal. Hermwille and Kyar explain how concerns about jobs, local economic activity and discontent in vulnerable regions as well as political power of trade unions have contributed to the late date and high public costs of Germany’s coal phaseout. Pavlov illustrates that in Bulgaria alignment with EU policies constitutes one of the most important policy objectives. For this reason, the government is prepared to implicitly accept a coal phaseout that can be expected to result from EU climate policies, in particular rising carbon prices in the EU Emission Trading Scheme. As shown by DeStephano et al., in Chile climate change mitigation is seen important to advance international climate policy and local environmental movements have mobilized against coal. Nevertheless, affordable and secure electricity supply constitutes the government’s prime objectives. Due to the country’s substantial potential to produce lowcost renewable electricity, these objectives are wellaligned with climate change mitigation, making a coalphase politically feasible. Walk et al. demonstrate how past efforts to reduce the power of unions have reduced employment in coal mining, and hence political support for coal use in the United Kingdom. The liberal power market, in which costefficient power generation is prioritized and renewable energy sources are supported by a carbon price signal, has led to rapid declines in coal use in recent years. Liu and Nemet provide a description of how in a liberalized power market increasingly costcompetitive renewable energy sources as well as natural gas are driving out coal in the United States despite the lobbying of vested coal interests. Part II includes case studies on established coal users that struggle to phase out coal and even continue to invest in new capacities. For China, Han- Springer et al. point out how the political pressure for regional governments to fulfill economic growth targets incentivizes overinvestment in coalfired power generation. These excess capacities are not only harmful from a climate perspective, but also economically wasteful. Montrone et al. highlight that in India, phasing out coal would entail substantial economic as well as health benefits. However, concerns about job losses concentrated in economically disadvantaged regions, revenue losses from coal transport by the Indian Railway, as well as the prospect of bad loans granted to coalfired power plants jeopardizing the stability of the financial system make policy makers hesitant to curb coal use. Ayaz and Wiseman demonstrate how in Turkey energy policymaking is first and foremost conducted under the perspective of maintaining political control and the legitimacy of current regime. Thus, in exchange for political support, the government actively promotes coal mining and uses by means of financial incentives as well as provision of crucial infrastructure. Part III features studies dealing with countries in which coal so far has played a (relatively) minor role, but which are planning to expand coal use in the future. Ayhan and Jacobs elaborate how in Kenya the ruling elites’ vision of modernization and industrialization promote coal use. Yet, resistance by civil society against local environmental impacts has thus far successfully prevented the implementation of the government’s plans. For the Philippines, Manych and 14 Michael Jakob and Jan C. Steckel Jakob emphasize the key role of oligarchs dominating all aspects of economic life. These powerful vested interests have influenced energy policy in favor of relatively expensive coal, in spite of a liberalized power market. Dorband et al. analyze how in Vietnam a statecontrolled electricity sector allows vested coal interests to exercise substantial influence on energy policy. This creates regulatory conditions that are highly disadvantageous for alternative energy sources, allowing the incumbent coal industry to fend off competition from increasingly costcompetitive clean energy sources. Part IV assembles analyses of countries with a strong focus on coal exports. For the case of Australia, Christoff shows that there is a strong support for exported coal, whereas domestic coal use is increasingly challenged by lowcost renewables and environmental concerns. Puerto- Chaves and Corral- Montoya show that even though to date Colombia uses little coal domestically, its wellestablished export industry in combination with an economic structure geared toward extractive industries provide an impetus to expand domestic coalfired capacities. These developments stand in stark contrasts to the country’s declared interest to contribute to global climate change mitigation efforts. Indonesia is a further coal exporting country aiming to ramp up domestic capacities considerably. The chapter by Ordonez et al. argues that these plans are to a large extent driven by vested interests, such as politically wellconnected owners of coal mines and regional governments dependent on royalties from coal extraction. In addition, expansion of coal capacities plays a key role in the president’s plans to boost the country’s economic development by means of infrastructure provision. For South Africa, Hanto et al. point out emerging support for renewable energies from liberal parts of the government, international investors and the civil society. Nevertheless, employment and revenues from coal extraction, combined with a powerful stateowned utility adverse to alternative energy sources as well as coal’s close relation to black economic empowerment policies, provide powerful incentives for policy makers to delay a transition to clean energies. In the final chapter, we offer some tentative conclusions that can be derived from these studies and discuss possible policy implications. Each case study on its own can provide important countryspecific insights. We hope that – in addition to spurring research in countries that are not included in this volume – this rather unique compilation of case studies can also prepare the ground for future comparative work. Such a research effort might help to distill characteristic patterns of how specific constellations of actors, objectives and context factors influence policy outcomes in a systematic manner. The results would not only provide insights that are valuable from an academic point of view but might also be highly relevant to assist the design of coal phaseout policies. Note 1 Sections “Different approaches to understanding political economy” and “The AOC framework” draw on the article Jakob et al. (2020). We gratefully acknowledge permission to reproduce parts of the content from Elsevier. Introduction 15 References Aklin, M., & Urpelainen, J. (2013). Political Competition, Path Dependence, and the Strategy of Sustainable Energy Transitions: Sustainable Energy Transitions. 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Perspectives on Politics, 12(03), 564– 581. https:// doi. org/ 10.1017/ S15375 9271 4001 595. Grossman, G. M., & Helpman, E. (2001). Special Interest Politics. MIT Press. Helm, D. (2010). Government Failure, Rent- Seeking, and Capture: The Design of Climate Change Policy. Oxford Review of Economic Policy, 26(2), 182– 196. https:// doi.org/ 10.1093/ oxrep/ grq 006. 22 Lukas Hermwille and Dagmar Kiyar groups discussed key aspects of the phaseout schedule, particularly in the final phase of the commission when they met two times a week [san4, pean2]. The coal commission finally adopted its recommendations on 26 January 2019 (Kommission Wohlstand and Strukturwandel und Beschäftigung 2019; see also Litz et al. 2019). The hardfought compromise was adopted by near consensus (only one member voted against it). Key recommendations include: • a moratorium on new coal infrastructure and to phase out coal no later than 2038 with an option to bring forward the phaseout to 2035; • closing 12 GW out of 43 GW of coal capacity by 2022; • a continuous decline of coal capacity to 17 GW by 2030 with a substantial intermediate step in 2025; • negotiated compensation for operators of coalfired power plants; and • financial support for structural adjustments in coal regions to the amount of € bn 40 over a 20- year period. In the German political discourse, the coal phaseout decision was viewed favorably by most commentators (see e.g. Spiegel Online 2019; Handelsblatt 2019). But from an international perspective, observers were puzzled by the late final phaseout date. Clearly, the coal phaseout schedule is too slow to meet Germany’s mitigation obligations (Höhne et al. 2019; Yanguas- Parra et al. 2019). A Paris Agreement compatible coal phaseout would have translated to a phaseout by 2030 at the latest (Climate Analytics 2018). According to Moore (2020), Germany is one of the seven countries blocking the European energy transition, which are responsible for 80% of the European Union’s (EU’s) power sector emissions. Besides Poland and Czechia, Germany will be one of the three countries that will contribute to a total amount of 90% of EU coal generation in 2030. Also, the recommendations of the coal commission come with a hefty price tag. Litz et al. (2019) estimate that public policy cost may add up to € bn 69– 93 over a 20- year period (€ bn 40 for structural support, € bn 16– 32 for compensating the increase in electricity prices, € bn 5– 10 for compensation for utilities, € bn 5– 7 early retirement compensation for workers, € bn 3– 4 to buy up excess emission permits in the EU Emission Trading System). While these figures are impressive in absolute terms, they also need to be seen in context. Not all of the funding for structural adjustments is altogether new. As it is an economically weak region, Lusatia would have received funds for structural adjustments in any case. Furthermore, the financial implications of the coal phaseout need to be seen in the historical context of massive fossil fuel subsidies. Oei et al. (2020) highlight that between 1950 and 2008 subsidies for hard coal production amounted to € bn 289– 331, that is, € bn 5– 5.7 per year over that extensive period. Still, the recommendations reflected a carefully balanced compromise. The members of the commission and many observers, including the prime ministers of the affected federal states, were adamant that the federal government needed to implement the exact recommendations promptly and without deviation, but that is not what happened. Germany 23 The recommendations regarding structural policy were implemented relatively quickly. The federal government adopted the draft of the law on supporting structural change in coal regions already in August 2019. Formal parliamentary adoption was supposed to coincide with the adoption of the coal phaseout law covering the energy policy aspects of the recommendations. This, however, was significantly delayed. Both the law for supporting structural change in coal regions and the coal phaseout law were adopted in July 2020, more than one year after the conclusion of the coal commission. These delays already rendered some of the shortterm measures proposed to close the gap for the 2020 target obsolete. Also, in May 2020 the newly built Datteln 4 power plant began regular operations (Handelsblatt 2020) thus violating the recommendation for a moratorium on new coal infrastructure. The actual phaseout law also no longer foresees a linear and continuous reduction pathway with a substantial intermediate step in 2025. These deviations led 8 out of 28 members of the coal commission to issue a statement in which they harshly criticize the implementation of the coal phaseout law. Climate protection was already taken into account insufficiently in the coal commission. It is irresponsible to extend this agreement further and damage climate protection. The social peace achieved by the compromise is a valuable asset that must not be given up lightly. (Praetorius et al. 2020, 4; see also Grothus and Setton 2020) This chapter employs a political economy analysis based on the framework developed by Jakob et al. (2020) explained in Chapter 1 to uncover the role of key actors, their interest and the ecological, socioeconomic and politicalinstitutional context in which the political struggle for phasing out coal played out. This political economy lens will help us to answer the questions, why the German coal phaseout was scheduled so late and why it was so expensive. The analysis builds on a total of 18 semistructured interviews with 19 individuals covering a wide range of stakeholders, most of them being part of the coal commission (see Table 2.1).1 Table 2.1 Overview of interviews held between March and August 2020 Code No. of interviews Description pmn 2 Policy maker national: Ministry of Environment, Ministry of Economy pmr 3 Policy maker regional: statelevel ministries (2), municipality in the region (1) pean 4 Private economic actors (national): utilities (2), industry associations (2) san 10 Societal actors (national): environmental NGOs (2), local initiatives (2), trade unions (5), research organizations (1) 24 Lukas Hermwille and Dagmar Kiyar National context Historical legacies Germany has a long history of hard coal and lignite utilization. At its peak in 1955, the hard coal industry employed almost 600,000 people in mining; the last remaining mine was closed at the end of 2018. For lignite, it was more than 160,000 at the peak in 1985 and around 20,000 in 2019 (including employees in power plants) (Brauers et al. 2020). The share of coal in the gross power production has gone down over the last decades to 91.7 TWh or 16.3% from lignite and 42.5 TWh or 7.5% from hard coal in 2020 (Appunn et al. 2020). Although renewable energy share in gross power consumption is at 46.2% in 2020 (Hein et al. 2021), lignite is sometimes still referred to as the only remaining domestic energy source in Germany (Kiyar and Wittneben 2015). The German electricity market was opened up for market liberalization with the German Energy Industry Act in 1998. After several mergers, four dominant utility companies (“the Big Four”) emerged: E.ON AG, RWE AG, EnBW AG and Vattenfall GmbH (later LEAG).2 The portfolio of the Big Four continues to be dominated by fossilfuelled and nuclear power plants. Especially in the first years after the liberalization, those four companies only very reluctantly invested in renewable energies (Hirschl et al. 2011) despite generous incentives provided according to the Renewable Energy Sources Act (EEG) introduced in 2000. The Fukushima Daiichi nuclear disaster in March 2011 meant another decisive shift for German energy policy (Kiyar 2014; Hermwille 2016). Only half a year prior to the accident the German government had produced an Energy Concept which formulated mid- and longterm emission reduction targets for 2030 (– 55%), 2040 (– 70%) and 2050 (between – 80% and – 95%) (BMWi and BMU 2010) and extended the lifetime of nuclear power stations. This latter decision was rolled back quickly after the Fukushima accident, but the climate targets were maintained. Besides these national policies, Germany is also a member of the EU and hence subject to the framework of EU energy and climate policies. Specifically, large combustion facilities in the power and industry sectors are part of the EU Emissions Trading System (ETS). With the adoption of the “2030 Climate Action Target Plan” in December 2020, the EU has further raised the ambition of its climate target to – 55% compared to 1990 levels by 2030 (EC 2020). According to several respondents, the increased ambition of the EU and consequently higher carbon prices in the EU ETS may well render the phaseout schedule obsolete and significantly accelerate the end of coal in Germany [e.g. pmn1, pmn2, pean3]. Ecological context Germany has traditionally had a strong environmental movement. It first came to prominence in the 1970s and 1980s in the form of an early ant-inuclear Germany 25 movement and has continued to hold significant political power not least through the foundation and subsequent electoral success of the Green party in Germany (Schreurs 2012; Uekötter 2014). This influence of the environmental movement has contributed to the perception, both internally and externally, of Germany being a global climate leader even when over the last decade or so, this leadership was more rhetorical than founded in actual progress (Handelsblatt 2018). Consequently, the discussion of coal phaseout was clearly framed in the context of the Paris Agreement. In fact, the call for a commission to determine the coal phaseout was first anchored politically in Germany’s longterm low greenhouse gas development strategy that was submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2016. This is also reflected in the mandate of the coal commission, which clearly determines the attainment of the German emission reduction targets for 2030 as a key objective. But nuance is important here: the mandate of the coal commission referred to the German domestic climate targets, which date back as far as 2010 (BMWi and BMU 2010), and consequently were not aligned with the increased ambition of the Paris Agreement. Another important ecological context, especially during the negotiations in the coal commission, was the iconic battle for the Hambach Forest at the fringe of the Hambach lignite mine in the Rhineland. Local activists managed to mobilize some 50,000 participants demonstrating against the clearing of the forest (Aachener Nachrichten 2018) positioning the issue on the top of the political and public agenda. Still, our respondents disagreed about the effect this had on the immediate negotiations in the coal commission. One respondent opined that at some point the protests threatened the continuation of the negotiations [pmn1], another characterized it as “accompaniment” [san1] while another stated that the protest did not play a significant role for the outcome of the negotiations [san4]. Several interviewees were annoyed by the topic of the forest [san7, pmr3, pmr1], as it was too much in the center of the discussion, “a very cleverly staged campaign” [san7]. Socioeconomic context Generally, the political discussion on the phaseout of coal occurred during a phase of economic stability and growth which facilitated the discussions because there was a sense of resources being available for compensation [san4– 6, pean3]. However, the circumstances differ significantly between the different mining areas. The Rhenish mining area is located between three economically strong urban centers (Cologne, Düsseldorf and Aachen) each with a diverse industrial base. Meanwhile, Lusatia, the other major German lignite mining area is a peripheral and rural region with only limited industrial activity not directly related to coal (Stognief et al. 2019; Oei et al. 2019). This much more dire prospect of the Eastern German mining regions has been highlighted by almost all respondents. 26 Lukas Hermwille and Dagmar Kiyar This is further compounded by the Eastern German legacy of transformation after the German unification in the early 1990s. In 1990, then German Chancellor Helmut Kohl famously promised “blooming landscapes” in Eastern Germany in an attempt to soothe the concerns of citizens of the late German Democratic Republic over the future of their jobs and social security (Bundesregierung der Bundesrepublik Deutschland 1990). What followed was a massive transformation and in many places outright collapse of Eastern German industries. In many instances, this transformation was managed or in the eyes of many Eastern Germans forced through by Western German experts. And the Eastern German lignite industry was no exception. Within five years after the unification, the coal industry imploded from 140,000 employees to below 40,000 and production fell by 200 million tons per year (Herpich et al. 2018). “In Lusatia, the wolf came, but not blooming landscapes” [san8]. Coal mining is the last industrial core in Lusatia, after 5,000 jobs were lost in the textile combine from one day to another and 25,000 jobs in the glass industry. The ruins of the glass industry are still standing; it reminds people of what happened [pmr3]. Consequently, the Eastern German discourse on coal transitions is marked by what can be summarized as “transformation fatigue”. People in these regions have already been through 30 years of transformation. Some of them have had to do different jobs in their professional careers, have retrained, have reoriented, have moved, have changed their lives and do not want to have to go through another transformation now. [san1] For some stakeholders, the very terminology of transformation seemed to be political scorched earth [san8]. Political and institutional context The political debate on coal was overshadowed by the rise of rightwing populism particularly in Eastern Germany [all respondents]. The farright Alternative für Deutschland (AfD) gained strong support at the expense of established parties, particularly of the CDU, and even became the strongest party in some areas of Eastern Germany. Among other things, this upturn is also linked to the historical experience of the transformation of the Eastern German economy after 1990 (Weisskircher 2020). Populism is marked by a strong separation of “the ordinary people” vs. the outside elite (Mudde 2004). The coal phaseout being imposed on the region from Berlin, Brussels or Paris clearly resonates well with this foundation of populist attitudes. While the AfD was not involved directly in the negotiations, the fear of further strengthening the AfD was always present and had a lasting effect (see also Rosa- Luxemburg- Stiftung 2019). Perhaps the most important institutional context for understanding the German coal phaseout is German federalism. Although the German federal Germany 27 states had no formal role in the coal commission, they exerted tremendous power and were clearly a major political force in shaping both the phaseout schedule as well as the compensations for structural adjustments in the mining regions (see discussion below). Key actors and objectives Societal actors Environmental groups A key driver of the political debate on coal phaseout was the strong environmental movement. However, the environmental movement is not a uniform block, but a rather heterogeneous alliance [san3, san4, pmr1, san7]. It includes organizations such as Greenpeace with a focus on broad ecological issues and climate change as a systemic issue, as well as organizations with a much narrower focus on the conservation of particular ecosystems. Part of the wider environmental coalition were also local groups such as “Alle Dörfer bleiben” fighting to save those villages falling victim to the expansion of the open cast mines [san1, san10]. The main objectives of the environmental movement are to accelerate the phaseout of coal in line with the Paris Agreement’s 1.5°C goal and to safeguard local habitats (most saliently the Hambach Forest, see above) and villages. Some of the more radical actors also called for a more fundamental “system change” calling capitalism itself in question [san2, san3, san8, san9]. Closely associated with the environmental groups were several environmentally oriented research organizations that have conducted a host of studies covering nearly all aspects of the energy transition in general and coal phaseout in particular (Leipprand et al. 2017). This knowledge was the foundation for an objective and factbased debate [san1, pean1, pean4]. Trade unions Organized labor played a major role, in part in collaboration with environmental groups, in part in opposition to them. As one respondent put it: “the trade unions need to manage a balancing act between social responsibility for climate protection, and on the other hand responsibility for the employees, not only in the coal industry itself but also in the energyintensive industry” [pmr2]. But not all jobs are created equal: jobs in the coal industry are particularly wellpaid – a shift manager’s wage in the German lignite sector can be comparable to a university professor’s pay [san4, pean1, pmr3]. Also, they have many other benefits and many workers are unionized [san5, san6]. Yet, unions also recognize that the fight cannot be about salvaging the same jobs, but to create adequate alternative employment [san8]. Moreover, the unions were concerned about jobs in other energyintensive industries that may be threatened by increased power prices as a result of coal phaseout. 28 Lukas Hermwille and Dagmar Kiyar Three labor organizations were represented in the coal commission: the mining, chemical and energy industry trade union (IGBCE) representing the workers in the mines and heavy industry (except steel). For IGBCE, coal phaseout may be an existential question, at least on the level of some of its local groups. Also represented was Verdi, the union of the service industry and Germany’s largest trade union. Verdi’s constituents will also be affected indirectly, if coal phaseout leads to significant economic downturn in the mining regions. On the other hand, Verdi represents many of the potential alternative jobs mentioned above. Finally, Deutscher Gewerkschaftsbund (DGB), the umbrella organization of German trade unions, was also represented. Due to the diverse interests represented in the labor movement, many environmental NGOs had hoped to form a coalition with more progressive labor unions and isolate those interests that wanted to slow down the phaseout (especially in the IGBCE) [e.g. pmn1, san4]. However, organized labor invested heavily in coordination between the different unions as well as between their respective local, regional and national organizations and successfully managed to speak with one voice [san1, san5, san6, pmn2], and that voice was dominated by the IGBCE’s position “that no one [of the employees in the coal industry] should fall into the void” [san7, pean4, pmr1]. Particularly, the IGBCE’s representative Michael Vassiliadis with his longterm negotiation experience was characterized as “as a power in his own right” [pean1]. Industry Several industry associations were involved in the discussions, most notably the Federation of German Industries (BDI) who previously also participated in German energy policy debates inter alia by commissioning studies outlining ambitious pathways (BCG and Prognos 2018). Concerning the coal phaseout their main objective was about maintaining affordable electricity prices potentially impinging on industrial competitiveness and particularly about secure electricity supply [san2– 6, pean3] and the future of the employees in the coal industry [san7, pean4, pmr1]. However, industry representatives overall seem to have embraced or at least accepted the longterm need to decarbonize and achieve climate neutrality [pean3], a surprising deviation from previous analyses that saw German industry associations as strong defenders of the status quo (Leipprand and Flachsland 2018). Utilities Utilities are an obvious group of actors relevant for coal phaseout. But again, the group of actors is more diverse than it might seem. Being directly affected, RWE and LEAG, the two major utilities running the lignite mines and power plants, were not directly represented in the coal commission [pean1]. The two utilities were only represented indirectly by the German Association of Energy and Water Industries (BDEW) which also represents many smaller energy Germany 29 companies, many of which are heavily invested in renewable energy and natural gas [pean1]. The same holds for the German Association of Local Public Utilities (VKU). Notably, the operators of hard coal power plants were not particularly vocal in the phaseout negotiations and hence were considered as one of the losers of the phaseout [e.g. pean3]. Again, the objectives of the utilities were diverse. RWE and LEAG were obviously interested in extending the coal production, not necessarily because they opposed the phaseout per se, but because they wanted to maximize compensation payments [san10]. RWE has been characterized as a company with strong foothold but also strong responsibility in the region. One respondent has described it as a social contract: RWE will mine lignite and the region endures the side effects, including ecological damage and relocation. On the other hand, RWE invests in, for example, cultural activities and allows for a degree of participation [san2]. Moreover, RWE is closely linked to several municipalities in the Rhineland and in the Ruhr area (16% of RWE still being in the hands of municipal shareholders), and with these shares in the company they relied on dividends for part of the regular budgets in the past [pmr2, pmn1, san2, san3, pean4]. But most importantly, perhaps, RWE has started to develop alternative business models, has invested in renewable energies internationally [pean4] and intends to stay in the energy business and continue to operate also in the region [pmr2]. Meanwhile, LEAG is owned by a Czech financial investor and to date has developed much less of a proactive vision for its future beyond coal. According to one respondent, the investors of LEAG never intended to make money out of the coal business but from withdrawing capital and extorting financial support from the state [san3] (see also Greenpeace 2018). Even if this is true for the investors, it does not necessarily hold for all of LEAG’s employees, many of whom have deep roots in the region and are genuinely concerned about the economic and social outlook of the region [pean4]. Like RWE, LEAG maintains close ties with regional governments. A case in point is the appointment of Stanislaw Tillich, former Prime Minister of Saxony and cochair of the coal commission, as LEAG’s chairman of the board only months after the conclusion of the coal commission [san3, san4]. Political actors Political parties A striking result of our interviews is the fact that none of our respondents highlighted the role of the political parties. Political parties did not play a very overt and strategic role, because the conflict lines did not seem to fall between but within the major political parties, at least the SPD and CDU. This conflict made it impossible for the government to resolve the issue on its own and hence made the coal commission necessary in the first place [san4]. While the major political parties did not engage openly in the conflict, that does not mean that party politics did not play an important role in the process. 30 Lukas Hermwille and Dagmar Kiyar However, these politics played out mostly behind closed doors within the various federal and statelevel ministries involved. Perhaps an exemption from the rule is the farright populist AfD. While the AfD played hardly an active role in the political debate, it cast a long shadow over the negotiations. Their political opponents feared that a too ambitious phaseout schedule would drive some voters toward the AfD [pmn1]. The AfD was also perceived as a threat to the trade unions labeling them as traitors of the working class [san8, san3]. Federal government The political economy of coal in Germany can only be considered in the multilevel governance system. Germany’s climate targets must be seen in the context of the EU Nationally Determined Contributions (NDC) and the EU ETS is the key governance instrument in the energy sector. In fact, as one respondent put it: “The whole idea started in a situation where many people realized that the languishing ETS with its low carbon price won’t turn the tide for coal” [san1]. However, within the coal commission and also in the public discourse around it, the European dimension played hardly any role [e.g. san3, pmr2, pean3]. The recent uptake of carbon prices only set in during the final phase of the coal commission. After the commission concluded, it became clear that some of the hardfought phaseout schedules may actually be obsolete [pean2, pmn1, pmn2] (see also Popp and Reitzenstein 2020) and the coal phaseout law became a guarantee or bailout for power plant operators [san1, pean3, san9]. Despite this backdrop, the battle for coal phaseout was fought on the national level. For the German government, the issue was at the intersection of competencies of two ministries. The Ministry of the Environment (BMU; led by the Social Democratic Party – SPD) is in charge of climate policy and has developed the German longterm low emissions development strategy (Klimaschutzplan 2050) for the first time specifying sectoral mitigation targets and recommending the coal commission. Their objective was first and foremost to safeguard that Germany achieves both its domestic targets as well as international commitments. Meanwhile, the Ministry of the Economy (BMWi; led by the CDU) is in charge of energy issues, energyintensive industries and matters related to structural change and hence was also in charge of the coal commission. While formally, the BMWi also heeded the German domestic climate targets, there were also other more subtle interests at play within the CDU. The two ministries cooperated well in the initial phase when designing the mandate for the coal commission and selecting its members [pmn1]. But toward the end of the commission and especially in the process of the implementation of its recommendations, nearly all respondents expressed their frustration with delays in the BMWi, “intolerable” [pean3] public consultation procedures for the draft laws with a deadline of just 24 hours, and the significant deviations from the original recommendations [e.g. pean3, san1, san8, san9]. According to respondents from all constituents, these delays and deviations were the result of Germany 31 a conflict within the CDU where many Eastern German legislators were afraid of a populist backlash [e.g. pmn1, pmn2, san1, san8]. On the other hand, some members of the federal government might have speculated that political resistance against coal phaseout from the Eastern German state governments might wane with new political constellations after the state elections in September 2019 [pean2]. Notable is also that during the negotiations of the commission, the Ministry of Finance (BMF) was involved only on the margins. While there was some degree of coordination between the leading federal ministries BMWi and BMU on the one hand and the BMF on the other [san1], it did not participate actively in the negotiations. This is particularly striking because the mandate of the coal commission did not include a budget restriction [san1, pmn2, pean3]. Consequently, the bargaining space between the diverse interests was unrestricted at one particular point. And apparently, not all financial aspects were consulted with BMF ex ante. For example, the issue of buying up excess emission permits in the EU ETS that result from the early phaseout of coal was supposedly not discussed in detail with the BMF before the conclusion of the coal commission, according to one insider [san1]. Statelevel governments Below the national level, the Federal States (Bundesländer) played a powerful role in the coal phaseout decisions. Not only were their interests represented by two of the four coleads of the commission by two former statelevel ministerpresidents [san4] (alongside a researcher and a former federal minister and current executive of Deutsche Bahn). But despite having no official role in the coal commission, senior political personnel of all relevant states (North Rhine- Westphalia, Saxony, Saxony- Anhalt and Brandenburg) actively participated in all meetings of the commission [san1, san4, pean2] to the extent that one statelevel representative stated “I definitely see myself as part of the commission and I stand by all of its results” [pmr2]. This strategic and highlevel engagement contrasts starkly with the involvement of the federal government who was not as engaged in the commission and criticized for weak leadership by some respondents [san5, san6, san8, pean2]. The main objective of the statelevel governments was to make sure that their respective territories would not be deindustrialized and receive adequate compensation and funding to adapt to the imminent structural changes. However, they differed particularly in the way they opposed or embraced changes. Perhaps also due to better starting conditions, respondents observed relatively little hesitation but willingness to engage in shaping the fate of the mining region beyond coal in North Rhine- Westphalia [san1, san4]. Meanwhile, the state governments in the East of Germany were looking to delay the phaseout, to portray it in the grimmest shades of color [san1, pean2] and marked by an “unwillingness to shape the change” [san4, also san1, san3], at least initially. As Haas and Gürtler (2019) point out, despite different party affiliations, the 38 Lukas Hermwille and Dagmar Kiyar Oei, P., Brauers, H., & Herpich, P. (2020). Lessons from Germany’s hard coal mining phaseout: policies and transition from 1950 to 2018. Climate Policy, 20(8), 963– 979. doi:10.1080/ 14693062.2019.1688636. Oei, P.- Y., Brauers, H., Herpich, P., von Hirschhausen, C., Prahl, A., Wehnert, T. et al. (2019). Phasing out coal in the German energy sector: Interdependencies, challenges and potential solutions. 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Sustainability, 11(21), 5991. doi:10.3390/ su11215991. Uekötter, F. (2014). The Greenest Nation?: A New History of German Environmentalism. Cambridge, MA: MIT Press. Weisskircher, M. (2020). The strength of Far- Right AfD in Eastern Germany: the east– west divide and the multiple causes behind “populism”. Political Quarterly, 91(3), 614– 622. doi:10.1111/ 1467- 923X.12859. Wohlstand, K., & Und Beschäftigung, S. (2019). Abschlussbericht. Retrieved from www.bmwi.de/ Redaktion/ DE/ Downloads/ A/ abschlussberichtkommission- wachstumstr ukturwandel- und- beschaeftigung.pdf?_ _ blob= publicationFile. Berlin: Bundesministerium für Wirtschaft und Energie (BMWi). Yanguas- Parra, P. A., Ganti, G., Brecha, R., Hare, B., Schaeffer, M., & Fuentes, U. (2019). Global and Regional Coal Phase- Out Requirements of the Paris Agreement: Insights Germany 39 from the IPCC Special Report on 1.5°C. Retrieved from https:// clima tean alyt ics. org/ publi cati ons/ 2019/ coalphase- outinsig htsfrom- theipcc- spec ialrep or ton- 15c- andglo baltre ndssince- 2015/ . Berlin: Climate Analytics. ZEIT Online. (2018). Energiewende: Ostländer wehren sich Gegen Pläne der Kohlekommission. Die Zeit, 21 November 2018, sec. Wirtschaft. Retrieved from www.zeit.de/ wir tschaft/ 2018- 11/ energ iewendekohlekommission- kohleausstiegergebnis- januarstrukturwandel- ostdeutschland. DOI: 10.4324/9781003044543-4 3 The political economy of coal in Bulgaria The silent phaseout Toma Pavlov Introduction To achieve the European Union’s (EU) ambitious goal of carbon neutrality by 2050, Bulgaria will have to replace over a third of its power generation capacities. Coalfired power plants provide on average 40% of the electricity generation (up to 60% during cold winter months) and have been essential providers of baseload energy for over five decades (EWRC 2019). With over 15 000 jobs in mining and power plants and approximately twice as many indirect jobs, Bulgaria is expected to be one of the most impacted EU Member States by a phaseout of coal (Vladimirov, Galev, and Primova 2020). Bulgaria’s National Energy and Climate Plan (NECP) for 2021– 2030 envisions the “full use of the existing potential of indigenous coal, which is sufficient to generate electricity for the next 60 years” (MoE and MoEW 2020, p. 25). At the same time, the increase in the price of allowances under the EU’s emissions trading scheme (ETS), coupled with the underlying indebtedness and inefficiency of the coal industry, has resulted in soaring financial losses for power plants and mines. Domestic political decision makers have nonetheless demonstrated a willingness to go to extraordinary lengths in order to keep the industry afloat, even if some of its support is likely to be deemed a form of illegal state aid by the European Commission (Peeva 2020). To better understand the continuous resistance to a shift away from coal, the present study investigates the political economy drivers of the coal regime in Bulgaria. Notwithstanding the lack of political willingness, the country has fully subscribed to the EU’s carbonneutrality goal (European Council 2019). Despite the favorable geographical conditions and the falling technological costs, Bulgaria has been reluctant in the introduction of renewables and has previously imposed numerous regulatory and administrative barriers after a rapid “boom and bust” deployment period (Couture, Pavlov, and Stoyanova 2021). The contradictory policy stances make Bulgaria a particularly interesting case study that requires looking beyond the technoeconomic and innovation perspectives of energy transitions and analysing the role of sociopolitical factors. The survey of literature shows that Bulgaria’s coal regime has remained largely understudied. While there have been a few case studies on the Bulgaria 41 Bulgarian energy sector, their focus has mainly been the mismanaged policy on renewables during the 2009– 2012 period (Hiteva and Maltby 2017; Andreas, Burns, and Touza 2018; Ivanov 2019). For example, Ivanov (2019) stresses the negative role of state capture in the energy sector during the rapid introduction of renewables, where support schemes went to politically connected entrepreneurs. Outside the academic literature, various policy reports by the Center for the Study of Democracy in Bulgaria have shed light on key governance issues in the energy sector throughout the years (CSD 2017, 2018; Stefanov et al. 2014), including providing an assessment of the draft version of Bulgaria’s NECP (Vladimirov, Galev, and Stefanov 2019). In a country report on lowcarbon transition, Heilmann, Reitzenstein, and Ámon (2019) analyze three categories of Bulgaria’s political economy – national conditions, political system, and external projection. Based on a mapping of threats and opportunities, the authors argue that most political economy factors stand in opposition to a transition to a lowcarbon economy. The present study contributes to the developing literature on political economy drivers in energy transitions (Brauers and Oei 2019; Leipprand and Flachsland 2018; Lockwood, Mitchell, and Hoggett 2019). While other European countries, including Germany, Poland, Spain, and the United Kingdom, have already been studied (Brauers, Herpich, and Oei 2018; Rentier, Lelieveldt, and Kramer 2019), this is the first case study to provide an indepth analysis on the political economy of coal in Bulgaria. Methodology The study adopts the political economy framework by Jakob et al. (2020) covered in Chapter 1 that comprises a threestep approach: (1) identifying key actors with stakes in the policymaking process, (2) mapping of the actors’ underlying objectives, and (3) assessing relevant contextual factors that influence policymaking. The framework is operationalized in two steps. First, a design of an interview guideline used in 20 semistructured expert interviews with actors from government, business, civil society, and the EU, who shape the climate and energy policies of Bulgaria; and second, an extensive review of government documents, financial reports, media coverage, and relevant databases to verify the information from the interviews as much as possible and substantiate the analysis. Following the interviewing approach of Bogner, Littig, and Menz (2009), the research questions were first translated into an interview guideline, divided into five parts: (1) objectives and priorities, (2) actors, (3) policy content, (4) policy formulation, and (5) contextual issues. Contextspecific questions were included based on ongoing debates concerning the energy sector and were varied by the type of actor interviewed (see online Appendix A.1 for interview guideline translated into English). Any information that can be linked to the subjects’ identity was anonymized. 42 Toma Pavlov Relevant interview partners were identified based on a detailed desk research and a preinterview with a local energy expert, which was also used to refine the interview guideline. The majority of the interviews, 13 out of 20 in total, were conducted inperson in Sofia over the course of January 2020 and had an average duration of 60 minutes.1 The remaining interviews were conducted in the months of February and April 2020 over the phone, due to limited availability (online Appendix A.2 provides a list of actors by type, organization, and date of the interview). Country context To better understand the underlying contextual factors influencing the coal regime in Bulgaria, this section provides a concise overview of the power sector and electricity sector in a historical perspective. Power sector overview Bulgaria has a welldeveloped power sector with a diverse energy mix consisting mainly of lignitefired thermal power generation, nuclear and renewable energy. Lignitefired thermal power plants (TPPs) provide, on average, nearly 40% of the electricity annually, while the country’s only nuclear power plant (NPP Kozloduy) contributes another 36% (Figure 3.1b). In addition to the strong baseload component comprising coal and nuclear, the country relies historically on a system of hydropower plants (HPPs), including three pumpedstorage plants, that work in tandem with the baseload plants and cover peak demand. Under a preferential feedin- tariff scheme, a rapid expansion of renewable energy sources (RES), including smaller hydro, wind, and solar power plants, took place between 2010 and 2012. This led Bulgaria to reach and exceed its 2020 RES target already in 2013 when the RES share in gross final energy consumption was 19% – three percentage points higher than the 2020 target (Eurostat 2020b). Coal is Bulgaria’s only significant proven reserve of primary energy. Large deposits of lowgrade lignite coal are found in the Maritsa East basin, located in the southeast of the country, along with smaller deposits in the southwest. Compared to the lignite coal mined in the rest of the EU, Bulgaria’s is ranked among the lowest in terms of calorific values (Alves Dias et al. 2018). With the exception of lignite coal, Bulgaria imports almost all other energy carriers (crude oil, natural gas, and nuclear fuel) from a single trading partner – the Russian Federation (EC 2017). Despite having reduced its greenhouse gas emissions (GHG) already in the 1990s, as a result of the structural change of the postcommunist economy, Bulgaria is the most resource, energy, and GHG emissionintensive economy in the EU. The national economy needs 3.8 times more energy and produces 4.4 times more carbon emissions per unit of GDP than the EU average (EC 2020b). Nearly half of the national GHG emissions in 2017 came from the Bulgaria 43 Figure 3.1 Key power sector statistics. Note: (a) Gross electricity generation by fuel over time. (b) Gross electricity generation by power plant type in 2018. (c) GHG emissions by sector (excl. LULUCF) over time. (d) GHG Emissions Trends (excl. LULUCF; Index 1990 = 100). Source: Author’s representation based on data for (a), (c), (d) from DG Energy (2020) and for (b) from EWRC (2019). newgenrtpdf 44 Toma Pavlov energy sector with the production of electricity and heat from coal accounting for more than 90% of the emissions (MoE and MoEW 2020). Bulgaria has a network of thermalbased power plants throughout its territory (Figure 3.2), including in most major cities where they supply district heating. Built mostly in the 1950s and 1960s, the majority of the plants are coalfired with some having switched to natural gas later on. There are 38 power generation units in 11 coalfired power plants with an average age of 39 years (EC 2020b). The Maritsa East Energy Complex hosts the largest lignite mining and lignitefired power plant area in southeast Europe. The Complex features three of Bulgaria’s biggest TPPs, as well as a fourth, smaller, one. The mines and the power plants are interdependent, as the output from the mines is almost entirely sold to the power plants. All mines are part of the stateowned Mini Maritsa East, along with TPP Maritsa East 2, which is the biggest power plant in the Complex in terms of capacity. The rest of the plants are majority privatelyowned with two being foreignowned. In terms of employment, the Complex concentrates approximately 85% of all jobs in the Bulgarian coal sector. Notably, the stateowned TPP Maritsa East 2 employs close to 2 400 people, while the second biggest privatelyowned TPP ContourGlobal employs only around 400 people (AOBE 2020). Most of the employees in the Complex come from the nearby city of Stara Zagora, which is the sixth biggest city in Bulgaria and its economy is heavily reliant on the activities of the Complex. Electricity market structure and governance The electricity market in Bulgaria is the only one in the EU to consist of both a regulated segment and a free market one, where prices are defined along the entire chain (see Figure 3.3). Since Bulgaria’s accession to the EU, prices have been gradually liberalized for industrial and business consumers, while prices for households continue to be set by the formally independent Energy and Water Regulatory Commission (EWRC). In the regulated segment, electricity prices are defined along the entire production chain to final consumption, with the stateowned National Electricity Company (NEC) acting as a public supplier. NEC procures electricity at prices determined by the EWRC (hereinafter the regulator), from generators it owns or through longterm power purchase agreements (PPAs) with privatelyowned generators and then sells the electricity to the end suppliers at fixed regulated prices. While the transmission network is owned and operated by a stateowned company, the distribution and supply of electricity is divided among three privatelyowned companies, which have a regional monopoly. Bulgaria’s household electricity prices have persistently been the lowest in the EU (Eurostat 2020c). Stateowned enterprises (SOEs) dominate the electricity market in Bulgaria. Collectively, they produce around 60% of the electricity in the country through a coalfired, a nuclear, and a network of hydropower plants Bulgaria 45 Figure 3.2 Map of thermalbased power plants. Note: Fuel type (color) and installed capacity in MW (size of bubble). Map excludes autoproducer power plants. Source: Author’s representation based on data from Electricity System Operator, ESO (2020) and EEA (2019). newgenrtpdf 46 Toma Pavlov Table 3.1 Number of jobs in the Maritsa East Energy Complex Mines 11 300 Power plants 3 200 Total direct jobs 14 500 Total indirect jobs (e.g. transport, maintenance, supply chain, etc.) 29 120 Source: Own calculations based on Vladimirov, Galev, and Primova (2020); AOBE (2020); TPP Maritsa East 2 (2019). Figure 3.3 Highlevel structure of the Bulgarian electricity market. Note: Amounts in MWs denote approximate installed capacity. Source: Adapted from Ivanov (2019). Bulgaria 47 (OECD 2019). All of the SOEs in the energy sector are part of the Bulgarian Energy Holding (BEH), which is entirely owned by the state through the Ministry of Energy (MoE). With its subsidiaries, BEH engages in electricity generation, supply, and transmission, coal mining, as well as natural gas transmission, supply and storage. Among the few large private electricity (and district heating) producers, two names stand out prominently – Hristo Kovachki and Ahmed Dogan. Formally a consultant, Kovachki is linked to some of the mafia figures from the 1990s and today his name is associated with 10 power and district heating plants across the country (U.S. Embassy Sofia 2006; Greenpeace 2018). Ahmed Dogan, is the former chairman of Bulgaria’s thirdlargest party, Movement for Rights and Freedoms, and while no longer in active politics remains an influential political figure in the country. In 2018, Dogan became a majorityowner of TPP Varna. The sale of the TPP has been under an investigation by the Czech authorities because of potential underselling by the energy utility CEZ Electro Bulgaria AD (CEZ), which is majorityowned by the Czech state (ACF 2021). Political economy determinants of coal use Based on the analysis of the interviews and the extensive secondary research, this section outlines the political economy determinants of the coal regime in Bulgaria. The analysis is organized along the four general objectives for the energy sector identified through the interviews: (1) security of supply, (2) affordability of electricity prices, (3) promotion of domestic energy industry and local actors, and (4) alignment with EU policies. The coal regime has an influence on all four objectives, as it facilitates some, such as the security of supply, while it impedes others, such as alignment with EU policies. Security of supply Almost all actors identified the security of supply as the single most important objective for the energy sector [s1, p6, p7, s8, p9, s11, p12, b13, p14, s18, b19, s20].2 This is mostly driven by the lack of other proven significant reserves of primary energy, except lignite coal, and the pathdependence in policymaking that relies on established sources of energy. Historically, lignite coal has played a significant role in Bulgaria’s electricity mix and is thus perceived by most governmental actors as the bestknown, most reliable, and locally available energy source that can guarantee the security of supply. Several actors singled out the January 2009 Russia– Ukraine gas dispute as the external event that strengthened the importance of coal the most. Due to Bulgaria’s near full dependence on Russian gas supplies via a single route, Bulgaria was one of the worst affected countries when Russia cut off its supplies over the Soyuz pipeline. The government had to ask industrial facilities to stop production, while several gasfired district heating plants were forced to switch to lowquality oil in order to maintain the heating supply (Kovacevic 2009). 54 Toma Pavlov only reliable and locally available primary source of energy, coal plays a critical role in guaranteeing the security of the energy supply. In addition, the regulated segment has been an enabler for the stateowned TPP Maritsa East 2 to secure a market for at least some of its output. Furthermore, the synergy between the affordability and security of supply dimensions has been used as justification for the subsidies schemes that have given rise to clientelism in the stateowned plant and mining company. Behind the coal regime stands a strong core alliance of incumbent players which includes the state, political decision makers from both the opposition and ruling parties, trade unions, and influential private actors. Contextually, the double function of the MoE as a government institution in charge of energy sector governance, but also one exercising ownership rights over BEH and its coal assets are leading to extremely high degree of politicization of energy policy decisions. Government policies become guided by favoritism for the SOEs, which help maintain the strong role of the coal regime and impede the energy transition. The findings suggest that the only viable way for a policy change to occur is through external pressures. As other cases have shown, regime destabilization takes place when more and more external pressures align (Brauers, Herpich, and Oei 2018; Leipprand and Flachsland 2018). The biggest external pressure comes from the EU’s decarbonization policies. While domestic decision makers have been shielding the coal industry from the negative impacts of more stringent EU standards by obtaining derogations or channeling subsidies, these are only shortterm measures. The increasing price of emission allowances and the lack of staff optimization have already led to soaring economic losses and low utilization of the stateowned TPP Maritsa East 2, making it harder to justify the everincreasing subsides without any reforms. Furthermore, the EU regulation on the internal market for electricity would make coalfired power plants no longer eligible to receive payments for being on standby in case of peak demand after 2025. By the same year, plants would also become fully exposed to the free market competition, as the regulated segment gives way to the full market liberalization. For domestic decision makers, the EU’s carbon neutrality goal presents a difficult balancing act. On the one hand, adopting and implementing relevant EU policies is a highlevel political priority. On the other hand, catering to the demands of the electorate for secure employment and affordable electricity prices translate to continuous delay and partial policy implementation. However, the delay of structural reforms could have high social costs, jeopardizing the “just” aspect of the impending transition. A viable way out for domestic decision makers is to have access to more EU funds that can be used as a reassurance to the electorate, but also likely as rents for firms close to the incumbent government. The high allocation of funds to Bulgaria under the EU’s 2021– 2027 budget, combined with the market pressure on coal, has led to a notable change and Bulgaria has started preparing for the coal phaseout albeit without a defined Bulgaria 55 timeline. While the government still has not announced any coal phaseout plans, territorial just transition plans on the regional level have been in preparation since the beginning of 2021. The plans are required by the European Commission to unlock funding from the EU’s dedicated Just Transition Fund. In that process, even trade unions have started suggesting ideas, including the construction of an industrial solar photovoltaic plant on the premises of decommissioned mines with the participation and share ownership by former coal workers. Thus, despite all odds, Bulgarian coal regions have received a chance to plan more adequately their postcoal future. Acknowledgments I would like to thank all interviewees, who remain anonymous in this study, for taking the time to share their knowledge and opinions on the energy sector and the coal regime in Bulgaria. I am very grateful to Prof. Dr. Christian Flachsland for his constructive feedback since the very inception of this study. I would also like to thank those who agreed to review the manuscript for their helpful comments and suggestions, including Dr. Michael Jakob, Dr. Jan Steckel, and Lorenzo Montrone from the Mercator Research Institute on Global Commons and Climate Change, Alexander Reitzenstein (E3G), Aron Buzogány (University of Natural Resources and Life Sciences), and Aleksander Sniegocki (WiseEuropa). Appendix This chapter contains supplementary online material at www.mcc-berlin.net/ pecoal/ch03. Notes 1 A representative of one of the biggest foreignowned coalfired power plants in Bulgaria provided a written response instead. 2 To anonymize the identities of the interviewees, each interview session was assigned a number from 1 to 20 using Google’s random number generator. The letter preceding the number refers to the actor type (s – social; p – political; b – business). The cited numbers for the interviews do not correspond to the order in which the interviews are listed in online Appendix A.2, so that statements cannot be linked back to a specific interviewee. 3 As part of Directive 2019/ 944 on the internal market for electricity, the Bulgarian authorities have indicated that a mechanism for the protection of vulnerable electricity customers will be put in place by 2025 when the full market electricity liberalization should be completed (EC 2020b). 4 The figure includes only reoccurring transfers and not onetime- only transfers, such as capital injections and ministerial decrees. 5 The plan is required by the EC from all Member States to ensure the EU meets its energy and climate 2030 targets (EC 2020a). 56 Toma Pavlov 6 Throughout the years, protests and threats for such by coal miners and workers have been a way to keep the government in check and ensure its continued financial support for the SOEs (Nova, 2020). 7 As of May 2021, Bulgaria is still in discussions with the EC over the new capacity mechanism. 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In 2019, Chile’s President Sebastian Piñera announced a plan to close all coalfired power plants by 2040, beginning with the early retirement of eight plants by 2024. This is an ambitious coal phaseout target, given that coal accounts for 35% of the country’s electricity generation (CNE, 2020). Although this coal retirement scheme only applies to the four companies that currently own coalfired generation assets in Chile, pending legislation in Congress aims to expand its reach to all energy companies and expedite the timeline for phaseout to 2025 (Bnamericas, 2020a). As a nation with minimal fossil fuel reserves and high renewable energy potential, Chile appears to be wellpositioned for a quick and uncomplicated transition away from coal. However, our research finds that this agreement is far from a foregone conclusion and required decades of regulatory refinement, pressure from civil society and an expansion in the role of the state. Our case study draws on 26 semistructured interviews conducted in Santiago or virtually between January and December 2020. Interviewees were selected to achieve a balance of policymakers, societal actors and private economic actors. We analyzed qualitative information from interviews using the AOC (actors, objectives, context) framework by Jakob et al. (2020) covered in Chapter 1. The framework serves as a flexible means of examining the political economy underpinning policy formulation. It contends that policy formation is driven by various actors who have unique objectives and different levels of influence on the policy formation process. Policy outcomes reflect actors’ objectives based on relative influence and contextual factors. After coding these interviews for relevant objectives and context, we triangulated the narratives that emerged along with secondary data and followup interviews to confirm the narratives we present below. Chile 61 To the best of our knowledge, there is no existing systematic understanding of how domestic and international interests and stakeholders influenced the development of coal phaseout in Chile. Our research adds nuance to the work of Florez- Fernández (2020), who finds Chile’s energy transition to be a passive revolution reflecting the maintenance of technocratic power relations. Rather, our research aligns with the findings of Allain and Madariaga (2020), who document how traditional energy objectives have been reenvisioned by typically subordinated actors to garner broad support in favor of decarbonization. Our work also leans on the analysis of Alvial- Palavicino and Opazo- Bunsterac (2018), who chronicled the development of Energy 2050, Chile’s longterm energy plan, and found an emphasis on building legitimacy and consensus between government, industry, academia and NGOs. This chapter largely confirms these findings on the alignment of actors, while focusing specifically within the context of Chile’s coal retirement scheme. This chapter is structured as follows: the “Background” section provides an overview of the historical and political underpinnings of the current energy policy regime. The “Findings/ explanatory narratives” section presents the results of the analysis, outlining the actors’ objectives that have defined Chile’s transition to coal and its coal phaseout: affordability, energy security, improved air quality and decarbonization. Finally, the “Discussion and conclusions” section discusses crosscutting factors that have enabled Chile’s transition and draw final conclusions. Background Historical and policy context In the 1970s and 1980s, economists educated at the University of Chicago under Milton Friedman laid the foundation for Chile’s economic policy during the authoritarian Pinochet regime (Tecklin et al., 2011). Marketoriented ideology is reflected in the Chilean constitution, which describes the primary role of government as supporting competition in the market (Constitution of the Republic of Chile, 1980). Some credit this ideology for the “Chilean Miracle,” a period of economic growth from 1987 to 1998 during which per capita income grew by 88% (Friedman, 1992). Alongside this economic growth, energy demand grew by over 200% in the same 11- year period, while it had grown only slightly more than 60% in the previous 13 years. This economic growth relied on energyintensive, extractive industries such as mining, which in 2015 accounted for 20% of Chile’s GDP and 37% of the nation’s electricity use (IEA, 2018; MoE, 2016). Chile was the first country to enact comprehensive electric sector reform in 1982, unbundling and later privatizing state energy companies and creating separate markets for generation, transmission and distribution. In the 1990s with the reestablishment of democratic rule, the new democratic governments avoided radical economic reforms that could upset Chile’s economic stability 62 Paelina DeStephano et al. or the elite who had mostly supported Pinochet’s military regime (Barandiaran, 2016). Although government intervention increased, privatization and free market reforms were upheld (Solimano, 2012). Policymaking processes have largely remained stable, characterized by centralization, technocratic rule and strong executive authority. Key electricity policies are listed in Table 4.1. Energy generation landscape In the late 1990s, the traditionally hydropowerreliant nation expanded its fossil fuel generation (Furnaro, 2019). A severe drought, regulatory missteps and an incomplete energy market spurred an energy crisis in 1998– 1999 (Madariaga & Allain, 2018; Murillo & Foulon, 2006). The energy deficit reached 7.6% at the height of the crisis and customers faced rationing and blackouts. In the aftermath of the drought, natural gas imports from Argentina became increasingly important to Chile’s energy mix. However, Argentina restricted natural gas exports to Chile in the early 2000s, prompting another crisis and once again revealing the fragility of Chile’s energy sector. When the crisis began, Argentinian natural gas was slated to fuel 35% of Chile’s installed power generation capacity (Chávez- Rodríguez et al., 2017). While the sudden curtailment of gas did not lead to blackouts, the crisis raised energy prices and sent generators scrambling for new energy sources. Chile’s share of coalfired power Table 4.1 Key policies in Chile’s electricity sector Electricity market policy Year enacted Description Long- Term Contract Auction Regulations 2005 Ended electricity price setting by National Commission of Energy and move to contracts that provide more price certainty for generators Non- Conventional Renewable Energy Law No. 20.257 2008 Renewable portfolio standard of 5% between 2010 and 2014, increasing annually to reach 10% by 2014. Noncompliance was fined 42$/ MWh Non- Conventional Renewable Energy Law No. 20.698 2013 Renewable portfolio standard of 12% by 2020, 18% by 2024 and 20% by 2025 Auction Reform Regulation 2015 Created three time blocks, improving competition for variable energy resources Transmission Law No. 20.936 2016 Created National Electricity Coordinator (CEN) to serve as independent system operator. Charged government with longterm energy planning. Shifts distribution costs from generators to consumers. Unified the grid Source: Bustos- Salvagno (2019), Bustamante et al. (2016), Bersalli (2019). Chile 63 more than doubled over a decade, rising from 18% in 2006 to 41% in 2016 (Nasirov et al., 2020). Despite significant coal reserves in the south, high exploitation costs and poorquality coal limit Chile’s domestic coal production. In 2019, Chile’s domestic production of coal accounted for 12% of its coal supply, and its natural gas production accounted for less than onequarter (EIA, 2021). Imported coal from Colombia, Australia and the United States has been instrumental in securing Chile’s energy supply over the past decade (IEA, 2018). Findings/ explanatory narratives Chile’s decision to phase out coalfired power generation is undergirded by decades of context that has helped to shape the objectives of key actors and bring them into alignment. Each of the following narratives describes an objective held by key political and societal actors and how it has contributed to the rise of renewable energy and the subsequent decision to phase out coal. Affordable electricity and a competitive market While cheap electricity is important for Chile’s extractive economy, affordability among residential consumers is a key issue. Chile has one of the highest electricity prices in Latin America for residential users. Prices are an important “kitchen table” issue that the government is pressured to address, especially given the nation’s energy poverty rate of 15%, defined both as perceptions of poverty or as energy expenditure as a percentage of income (Villalobos et al., 2021). Affordability has become critical in the wake of the social upheaval in 2019 that focused on economic inequality; in the immediate aftermath of the protests, the government canceled a planned 9.2% rate hike [bn1, bn2, bn3, bn5, pn1, pn8, pn9, si1, sn4] (Bnamericas, 2019; Global Petrol Prices, 2021). Affordable electricity is a key priority for both residential and commercial consumers, but residential consumers pay more at USD $0.195/ kWh as opposed to the commercial rate of $0.147/ kWh (Global Petrol Prices, 2021). In the pursuit of electricity affordability, the Ministry of Energy and Government of Chile (GoC) has supported the introduction of electricity auction reforms to enable greater competition from cheap wind and solar. The role of competition Because the GoC is committed to market nonintervention, originating from constitutional limitations to state activity, competition emerges as an objective of its own. This is reflected in the role of the government in the electricity sector, where it serves to “develop a model to promote the energy transition based on the market” without the use of subsidies [sn4]. The government sees competitive markets as the means to securing lowering prices and attracting international investment [bn3, bn4, bn5, pn5, pn7, pn8, pn9 sn4]. Hence, the 70 Paelina DeStephano et al. organizations working to advance the transition from unabated coal power generation to clean energy” [sn3] (PPCA, n.d.). Minister Mena wanted Chile to join the alliance, but the group Business Leaders for Climate Action (CLG- Chile) told Mena that Chile was “not in a position to sign this as a country” [sn3]. Although Minister Mena relented and did not join the PPCA, Mena and the Minister of Energy, Andres Rebolledo, maintained pressure on the “Big Four” energy companies with coal assets to negotiate an alternative [bn4, sn3, sn5]. Eventually, the Big Four reached an agreement with the GoC, and to quote a representative from the Generadoras de Chile (Association of Chilean Power Generators): When the possibility of working with the government on the issue arose because it was an emerging issue at the global level, there was the Powering Past Coal Alliance. We were not going to be able to do this adequately, so what we did as an association was facilitate an agreement between the Ministry of Energy and [the Ministry of the] Environment and us and the four companies to constitute a working table. [bn4] The plan for voluntary coal closures represented the bold action that the GoC was looking for, while accommodating a slower transition to placate generator’s concerns. Voluntary Coal Retirement Scheme The plan required energy companies to agree that (1) there would be no new development of coalfired power plants, (2) there would be a retirement of all coalfired power plants, given necessary conditions and (3) there would be a working group “to define the social, economic and environmental conditions so that later the companies, bilaterally with the government, would establish the withdrawal order, with the condition that by 2040 at the latest all the coal in Chile would be withdrawn” [bn4]. There was a distinct perception during our interviews that this plan involved no subsidies for the Big Four, distinguishing it from Germany’s coal policy. However, the plan does allow plants to enter a “Strategic Reserve State” (ERE) in which they receive capacity payments, for up to 60% of the value of their full capacity, for up to five years after retirement to remain operational in case of emergency [bn4, si1] (Bernal, 2020; Bnamericas, 2020a, 2020b; Gomez Agurto, 2019; Aprueba Acuerdos De Retiro De Centrales Termoelectricas a Carbon, 2020; Morawski, 2020). Electricity generation companies in Chile were willing to quickly shift their position to coal generation for three reasons: first, they do not exclusively own coal assets; second, as multinational corporations, they have their own international climate goals; third, the Voluntary Coal Retirement Scheme may have mitigated risk in the sector. Regarding coal assets, after the passage of NCRE law, No. 20.257, the Big Four increased the percentage of renewable technologies in Chile 71 their portfolio. Currently, coal represents 15% of Enel’s generation capacity, 21% of Colbún S.A.’s, 89% of AES Gener’s and 58% of Engie’s assets in Chile. This demonstrates generators’ lack of commitment to maintaining coal generation facilities that are no longer profitable or competitive with other generation sources. In other words, “these are electricity producers, they are not thermoelectric [companies] by definition” [bn4]. Instead, as three of the four are multinational corporations, their attitude toward decarbonization reflects “their own headquarters or their own countries of origin” [pn7]. These corporations, because of international pressure on climate change, have decarbonization strategies that their Chilean strategy must align with. As an example, in December 2019, Engie announced the early closure of two coal units in Mejillones. In the press release, Engie described itself as “a leader in zerocarbon transition” (ENGIE, 2019). While all of Chile’s coal plants are owned by these four companies, these companies own power plants that use a range of energy sources, and their multinational nature coincides with international decarbonization strategies, mitigating their resistance to shifting from coal in Chile. Companies may also have entered these negotiations with the government in 2017 for a voluntary plan in order to avoid future legislation, which was seen as riskier [bn6]. Given the government’s probusiness approach and the reticence of the Ministry of Energy to lead a topdown transition, there was alignment between the GoC and the private sector wherein all actors preferred an internally negotiated agreement on coal phaseout. Rather than wait for the outcome of a nonparticipatory legislative process, the Big Four were able to negotiate a phaseout that included a potential for a 60% capacity payment if plants remained in “strategic reserve status” in case of emergencies (Bnamericas, 2020a, 2020b; Morawski, 2020). Discussion and conclusions The GoC’s Voluntary Coal Retirement Scheme was an unprecedented and bold policy in a sector whose initial design had precluded political interference. To understand the political forces driving Chile’s decarbonization efforts, we have highlighted four main objectives: (1) affordable electricity prices, (2) energy security, (3) air quality and (4) decarbonization. The MoE’s interest in affordability and energy security spurred changes in market design that enabled cheap renewables to compete with fossil fuel generation. This was made possible because of declining prices for solar, globally, as well as Chile’s particularly high solar potential (Bloomberg NEF, 2020). Mobilization of civil society around air pollution also jeopardized the financial viability of coal projects. However, these were necessary, but not sufficient conditions for coal phaseout. Decarbonization policy was spurred by civil society, government and citizen interest in climate change, leading to the creation of the voluntary coal phaseout agreement, which compensated companies that own coal assets to retire their plants ahead of schedule. 72 Paelina DeStephano et al. One key enabling factor that emerged in the narratives around decarbonization was Chile’s technocratic approach to governance. Technocracy is usually defined by decisionmaking led by technical scientific experts. Because of this, political power “tends to gravitate towards technical elites,” and science and technology become ways to legitimize decisions (Gunnell, 1982). In Chile, the government has traditionally relied on decisionmaking that is based on external sets of rules, criteria and models, especially in environmental policy (Barandiaran, 2016; Flores- Fernández, 2020; Simsek et al., 2019). In particular, the Ministry of Energy has relied on models that demonstrate the technical feasibility of the energy transition, and the outputs of these models helped actors come into alignment around a set of assumptions. In other countries, increasing renewables in the energy mix raised concerns around flexibility and intermittency. However, in Chile, there is minimal pushback [bn2, bn4, pn8], since academic models and modelers in the Ministry of Energy have stated that it is technically possible to significantly increase renewable capacity and the electricity system has not yet reached the thresholds of what it can manage. Chile’s technocratic orientation toward policymaking is reinforced by broad trust in these models, and support for an evidencebased, pragmatic and apolitical approach to decarbonization [bn3, bn4, pn5, pn6, pn7, si1, sn1, sn2, sn4, sn6]. However, during the second Bachelet administration (2014– 2018), there was an increased emphasis on incorporating public participation into government decisionmaking, which has been at odds with Chile’s technocratic approach. In Chile, public participation in decisionmaking has been framed as disruptive and unpredictable (Castiglioni & Kaltwasser, 2016; Ureta, 2017). During the Bachelet II administration, increased calls for public input led to a redrafting of the 1980 constitution, although this new constitution was never ratified (Seminario & Neaher, 2020). In the Ministry of Energy, under Maximo Pacheco, energy strategy was supposed to be “socially validated,” and the new energy agenda of the Ministry called for “deeper dialogue” with communities impacted by energy projects (Ureta, 2017). Given this recent participatory approach, we might expect a destabilization of Chile’s reliance on technocratic policymaking, though the influence of public engagement in energy policy remains unclear. Environmental activists believed that public participation was a façade, and that few meaningful inputs from consulted parties were incorporated into policymaking [sn5, sn8]. This may be in part because of limits to public participation that are enshrined in the Chilean Constitution, which, as of 26 October 2020, will be redrafted by an elected, representative body. An oftcited weakness of the current constitution, increasing public participation is a key goal among those who have called for a new constitution (Feng, 2020). The expectation from some actors has been that greater participation will increase the ambition of climate policy [pn5]. On the other hand, a competitive liberalized market, in tandem with a technocratic approach to policymaking, has avoided concentrating power in any particular energy company, which may have enabled the phaseout. Chile 73 Critics have called the 2040 deadline for coal plant closures unambitious, and even government actors voiced the opinion that NCRE energy laws are “very weak” and “not a strong policy” [pn5]. However, Chile’s commitment to coal phaseout is a step toward decarbonizing the electricity sector and demonstrates progress toward its goal of carbon neutrality by 2050. In order to strengthen this agreement, legislation was brought before Congress in August 2020 that would enshrine coal phaseout into law and expedite the timeline to retire coal by 2025. It would also initiate the immediate shutdown of power plants that have been in operation for more than 30 years (Bnamericas, 2020a). Even without new legislation, the coal phaseout has proceeded more quickly than promised, with Enel announcing that it would close its remaining coal plants by May 2022. At present, 17 coalfired power plants are scheduled to operate until 2040. In Chile’s case, these steps have been made possible in great part by limited fossil fuels reserves, high renewable energy potential and exposure to international markets that make energy security a priority. These contextual factors set the stage for policies and reforms that supported inexpensive renewable energy development, which could compete with coalfired power plants in Chile’s electricity market. However, it was the rise of civil society actors in response to local air quality concerns and the increased relevance of climate change in Chile’s national discourse that pushed government actors to develop an ambitious plan for coal phaseout in collaboration with energy companies. This alignment of actors and objectives facilitated action on decarbonization through coal phaseout in Chile, setting the nation on track to meet its international climate commitments. Appendix This chapter contains supplementary online material at www.mcc-berlin.net/ pecoal/ch04. References Agostini, C. A., Silva, C., & Nasirov, S. (2017). Failure of energy megaprojects in Chile: A critical review from sustainability perspectives. Sustainability, 9(6), 1073. https:// doi. org/ 10.3390/ su9061073 Allain, M., & Madariaga, A. (2020). Understanding policy change through bricolage: The case of Chile’s renewable energy policy. 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What rationales are shaping these major differences in the development of coal? In developing the AOC (‘Actors, Objectives, Context’) framework, covered in Chapter 1, Jakob et al. (2020) argue that climate and energy policies are influenced not only by economic or strategic factors but also by political economy factors. The UK is one of the phaseout countries, along with Chile, Germany, Bulgaria, and the United States. Insights on what political economy factors led to the UK’s transition away from coal might help guide similar transitions in other countries. In order to identify the objectives, actors, and contextual factors relevant to the UK coal phaseout in the study period 2000– 2020, 22 stakeholders were interviewed between 27 May and 1 October 2020. They were mainly identified by means of a literature review and internet research. Special attention was directed to having all relevant stakeholder groups represented. We interviewed eight policymakers (p), seven researchers (r), five societal actors (s), and two business actors (b). We further applied a ‘snowballing’ principle, meaning that, at the end of every interview, we asked interviewees whether they could recommend further experts for us to talk to. A full list of interviewees is provided in online Appendix A.2. The cited number codes for the interviews do not correspond to the order in which the interviews are listed in the online appendix, so that statements cannot be linked back to a specific interviewee. The interviews were conducted using a semistructured approach, following the interview guideline in online Appendix A.3. The answers were evaluated according to the AOC Framework to identify actors, context factors, and objectives that are relevant to the political economy of coal (Jakob et al., 2020). The results are intended to inform subsequent comparative analyses of different casestudy countries. United Kingdom 79 The remainder of this chapter is structured as follows. The “Country context” section gives some country context on UK energy policy and the coal phaseout process. In the “Political economy determinants of the coal phaseout” section, we present our results, namely the three main objectives we identified. We then structure the relevant contextual factors along with those objectives. The “Discussion” section then discusses the policy implications for the further energy transition in the UK as well as lessons learned relevant to other countries. The “Conclusions and outlook” section concludes. Country context The UK is a highincome country, a member of the G7 and the Organization for Economic Cooperation and Development (OECD), and the world’s fifth largest economy by nominal GDP. It was a member of the European Union (EU) until 31 January 2020. Historically, the UK had a strong coal industry (Littlecott, 2015). Coal was the most important energy fuel until the late 1960s, when domestic coal mining had already started to decline after peaking in 1952 (Michaels, 2016). The 1984– 1985 period was a major turning point as Margaret Thatcher’s Conservative government announced a large number of pit closures, which led to the miner’s strikes and subsequent destruction of union power (Phillips, 2014). The UK’s domestic coal mining industry has remained relatively small ever since, with most of the coal used for electricity generation being sourced from abroad (Michaels, 2016). In the late 1990s, the privatization of the British electricity sector followed, which is now dominated by the socalled Big Six suppliers (British Gas, EDF Energy, E.ON UK, Npower, Scottish Power, and SSE). The government department that is responsible for energy is the Department for Business, Energy and Industrial Strategy (BEIS). Climate change is also one of the areas of responsibility of BEIS. Following the coal phaseout announcement in 2015, the share of coal in the UK electricity mix has experienced a sharp decline (see Figure 5.1). Meanwhile, the deployment not only of wind (mainly offshore) and solar but also of natural gas has increased, accompanied by a decrease in electricity demand (BEIS, 2020c). From 2000 to 2014, coal’s share varied between 27% and 39%, falling rapidly from 2015 after the coal phaseout was announced. In 2019, the share of coal in the electricity mix was at only 2% (own calculations based on BEIS, 2021a). As of 2021, there are only four coalfired power stations left in the UK, three of which are planning to convert or shut down before 2024 (Evans, 2021).1 Figure 5.2 gives an overview of relevant policies and events surrounding the coal phaseout in the study period 2000– 2020, as well as selected prior developments that are relevant for contextual understanding. We briefly review which policies contributed to a reduction in coalfired power generation before the coal phaseout was officially announced in 2015. Climate change has been an important political issue since the early 2000s. However, the first pressures on UK coal power stations were exerted not by 86 Nora Stognief, Paula Walk, and Pao-Yu Oei proactively propose a bridge from high to low carbon [r7, s5] (Clean Coal Task Group, 2006). It was debated whether to allow new coal power stations to be built if they were ‘CCS ready’ [r3]. The NGO community had differing views on the technology. While some NGOs agreed to it under the condition that it was fullscale CCS, others fundamentally rejected it [s1]. The 2009 decision not allowing new coal without CCS, however, made an investment in coal so much more expensive that it led to coal coming off the system entirely rather than utilities investing in CCS [b1, r2, r6, r7]. The government still invested in largescale CCS demonstration projects, most notably the ‘White Rose’ project. However, it unexpectedly canceled the project in 2015, which caused anger in the industry and the loss of millions of euros of EU funding [p8, r3, s5] (Carrington, 2015). One interviewee pointed out that the coal industry initially had not invested in CCS at all, and as competition from gas increased, it was no longer economically viable [r6]. As of today, CCS has become uneconomic and is not expected to ever have a significant role in the UK power sector [b2, s1]. Trade unions have also shifted their stance away from CCS, one of the reasons being the residual carbon footprint [s5]. Party leaders’ joint pledge on climate Another important contextual factor along with the ‘climate action’ highlevel objective is the increasing effort of all three main parties – Conservative, Labor, and Liberal Democrats – to claim some of the UK climate policy space [r3]. In February 2015, ahead of the general election, a group of NGOs and climate think tanks composed a pledge for the three main party leaders, David Cameron, Nick Clegg, and Ed Miliband [p2, r1, r4, r6, r7]. The letter, which was signed by all of them, consisted of three main parts: (1) to work toward a below – 2°C compatible global climate deal at COP 21, (2) crossparty cooperation on carbon budgets according to the Climate Change Act, and (3) to accelerate the lowcarbon transition and end unabated coal generation (Cameron et al., 2015). The letter was a conscious effort of the initiating organizations to create a common position for party leaders and depoliticize the issue of climate change [r4, r6, r7]. As reported by some interviewees, the third section on coal phaseout was added only at the last minute at the insistence of some groups, while others did not initially make it a priority [r4, r7]. Especially the role of the Conservative Party was remarkable. The Conservatives had the reputation of not being very environmentally friendly during a time where climate change was increasingly getting to the forefront of voters’ minds. In the mid- 2000s, the Conservatives wanted to increase their ambition on climate change and include this issue in their election manifesto [p2, p7, r1, r2, r3, r7, s1]. Several interviews mentioned that there was an increasing depoliticization of decarbonization and a political consensus on the need for climate action [b1, p6, r4, r6, r7, s4]. This led to a certain degree of competition among parties so that questions around climate action focused more on the ‘how’ and not on the ‘if’. United Kingdom 87 International leadership on climate Several interviewees mentioned the UK’s efforts to position itself as a climate leader [p8, r3, r6, s1, s4], which is also why the UK wanted to increase its ambitions prior to COP 21 in 2015 [r4, r7, s4]. More recently, the objective of leadership on coal phaseout has emerged, such as in the form of the Powering Past Coal Alliance (PPCA) [p2, p7, r4, s4]. With the establishment of the PPCA, the UK aims to use its own record on coal use reduction to encourage similar transitions in other countries (Blondeel et al., 2020). In a broader sense, UK climate leadership ambitions also include international competitiveness and exporting lowcarbon technologies such as offshore wind [p4, p5, p6, p7, p8, s1, s4]. Low electricity prices and jobs in the power sector The question of how potential negative impacts of lowcarbon transitions on the workforce, affected regions, and consumers can be cushioned has gained increasing importance. Cushioning those potential negative effects might also include more active state intervention to replace fossil fuel sectors with green sectors (Healy & Barry, 2017). The objective to create new jobs and infrastructure and attract lowcarbon investment (such as RE and momentarily also CCS) was the most frequently mentioned aspect of the ‘low electricity prices and jobs in the power sector’ highlevel objective [p1, p2, p3, p4, p6, p7, r2, r3, r6, r7, s1, s4, s5]. A close second was to keep consumer electricity prices low [b1, p2, p4, p6, r1, r2, r3, r6, s1, s5]. Other aspects that were mentioned were planning certainty for workers, regions, and companies [p2, p4, p7, r2, r3, s4] and just transitioning for workers, including retraining [b1, b2, s4, s5]. Individual interviewees also mentioned democratization and decentralization of energy [p3] and global justice issues of the fossilfuel- based system [s3]. Influence of trade unions and the 1984– 1985 miners’ strike Many interviewees stated that the decline of coal actually had its roots already in the 1980s, entirely unrelated to climate change, when the Thatcher government’s fight against the coal unions resulted in the closure of hundreds of mines and the weakening of union power [b1, p1, p2, p5, p6, p7, p8, r1, r6, s2, s3, s4, s5]. The government’s goal at the time was to break the power of organized labor [p1, s1] (Phillips, 2014). The events following the breakup of the 1984– 1985 miners’ strike were very dramatic as the coal mining communities suffered severe economic repercussions that continue to have an effect to this day in terms of weaker social, educational, and health outcomes [p2, r1, r2, s1] (Beatty et al., 2019). The breakup of the union and the massive loss of jobs in the coal industry in a short period of time is generally seen as a negative example of a transition. These negative traumatic experiences are still very present in the UK and there is a strong consensus that future transitions need to be more socially 88 Nora Stognief, Paula Walk, and Pao-Yu Oei cushioned. The UK’s domestic coal mining industry is now very small and has little political power [p1, p5, p6]. Another effect was the undermining of the political support base for coal [r3]. Job potential of RE and alternative industries Some interviewees also mentioned the large job potential in RE, such as offshore wind [p2, s1], and other green sectors, such as retrofitting houses [r4, s4]. One interviewee named the Siemens wind turbine manufacturing plant in Hull as a positive example of just transition as it created several hundred jobs (Vaughan, 2016), some of them for former power plant or coal mine workers [s5]. This project was also said to have played a role in the UK’s decision to continue with offshore wind [r7]. However, the regional development aspect must be kept in mind, as the jobs created by green industries are not necessarily in the same places as fossil fuel jobs [s4]. Debate about electricity prices There have been public concerns, especially among Conservatives, about rising electricity prices in the early 2010s. A narrative employed especially by the coal industry was that coal would be needed to keep consumer electricity prices low (Brauers et al., 2020) [r6]. There were also concerns about the costs of offshore wind, which were originally perceived to be very high [r3, s1, p2]. However, offshore wind and other renewables became much cheaper in the second half of the decade and this has had a major political impact with respect to the feasibility of the energy transition [p2, r1, r6, s1, s4]. Furthermore, the coal phaseout decision of 2015 has not had a major influence on energy prices (Yilmaz et al., 2016) [p2]. Security of supply The highlevel objective ‘security of supply’ was mentioned by many interviewees [b1, p2, p4, p6, p7, p8, r1, r2, r3, r4, r6, r7, s2]. More specifically, a key objective was to meet demand and increase capacity margins, for instance by expanding RE and increasing overall electricity supply [b2, p3, p5, p6, r1, r3, r4]. Several interviewees also mentioned the objective of utilizing gas as a transition fuel to replace coal [b2, p2, p4, p7, r1, r2, r5, r7, s1, s4]. Closely related are issues of grid management and electricity mix, such as ensuring system stability and flexibility with higher shares of RE or ensuring baseload [b1, b2, p3, p4, r2, r4, r6, r7, s4]. Declining energy demand An important contextual factor along with the highlevel objective ‘security of supply’ is that, in the 2000– 2010 decade, the assumption was that electricity United Kingdom 89 demand would keep rising [r1, r3]. However, this has not been the case and demand has actually been falling [r1, r3, r7]. In 2005, final users consumed 349.35 TWh of electricity. By 2019, this number had decreased to 295.48 TWh (BEIS, 2020c), increasing the competition between remaining fossilfueled electricity providers. The two main reasons for demand reduction as stated by interviewees were the shift from heavy industry to highvalue manufacturing and services that occurred mainly in the 1990s and 2000s [r1, r3], as well as better energy efficiency of lighting and white goods, which was partly due to the EU Ecodesign Directive, as well as industrial energy efficiency [r1, r3, r7] (Evans, 2019). Reporting of capacity margins As some interviewees mentioned, there were significant concerns about future energy security due to the tightness of capacity margins in electricity, which also affected the coal phaseout debate [p2, p3, p6, p7]. However, as one interviewee pointed out, it turned out later that the capacity gap was not as small as initially thought, which was due to the way the tightness of margins was reported. Since visibility was only at a very high level, many capacity additions from onshore wind and solar were not measured. Based on this perceived tightness of capacity margins, government ministers wanted to keep some coal in the system to avoid security of supply issues [p3]. Security of supply concerns was the main reason for the establishment of the CM. Capacity market The CM was also part of the EMR and includes payments for generators for standing ready as well as additional payments if they actually provide supply [p3]. It was designed with the aim of encouraging the construction of new gas power stations to compensate for coal and thus ensure security of supply [b1, p6, r7]. Opinions on the effectiveness of the CM differed among interviewees. Some interviewees stated that it has generally been successful [b2, p4]. Others criticized that the CM initially had no carbon intensity limitations, which meant that coal power plants could get longterm contracts under certain circumstances [p3, r2, r7, s1]. Some interviewees argue that the CM has slowed the coal phaseout and kept some coal power plants on the system longer than they would have otherwise [b1, p3, r2]. The number of CM agreements for coal power stations has since decreased and it is expected to get to zero in future auctions [p4]. Discussion To summarize, the phaseout of coalfired power generation in the UK appears to be very successful for a number of reasons. First of all, there are several context factors that have led to low political stakes in coal. Furthermore, there is 90 Nora Stognief, Paula Walk, and Pao-Yu Oei a high political consensus on climate change across the major parties, which enabled effective climate policies. More recently, the change in the perception of the CCS technology has further ruled out coal as a viable source of future electricity. While the demise of coal seems inevitable, it is not entirely clear where the UK energy system is headed as a whole, as RE compete with nuclear and gas. Although barely mentioned in our interviews, it is important to note that the Hinkley Point C nuclear power station is currently under construction. The project is highly controversial; studies have found that it would have been more costefficient for the UK to invest in RE than in nuclear (Johnstone et al., 2017; Schneider et al., 2020; Suna & Resch, 2016). Further challenges arise with respect to gas, which needs to be phased out or decarbonized in order to meet the net zero target. There have been intense debates about the extraction of shale gas, which has been favored by governments but faces major public opposition (Bomberg, 2017; Johnstone et al., 2017). Increasing shares of RE have played a significant role in covering the UK’s electricity demand. However, during the study period 2000– 2020, government support for RE has varied substantially. Financial support for RE, especially through feedin tariffs, has declined, which especially affected the solar industry and has hindered the development of solar energy in the UK (George, 2020). It will also be interesting to see how the Conservatives position themselves in the future with regard to climate protection policies. As mentioned above, they have been speaking out more strongly for climate protection since the middle of the 2000s, but their policies have not always been in accordance with this. For example, when a Conservative majority government was elected in 2015, many environmental policies were stopped initially [p7, r7] (Vaughan & Macalister, 2015). However, by 2015, the majority of Conservative MPs were in favor of the coal phaseout, which became part of their election manifesto in the shape of the aforementioned crossparty climate agreement [p2]. The final decision to phase out coal was therefore, as mentioned by some interviewees, a measure to strengthen their climate credentials [p7, r2, r7]. As the UK is one of the first countries to have nearly completed the transition away from coal power generation over a relatively short period of time, the question that suggests itself is whether other countries can derive lessons from the UK’s coal phaseout experience. Several interviewees stressed that every country and market is different and there is no ‘onesize- fitsall’ type of solution [b2, r1, r3, s1]. What was pointed out frequently is that, in countries with a strong domestic mining industry, like Germany or Poland, regional and employment aspects add an additional layer of complexity that was not as prominent in the UK in the 21st century [p2, p6, p7, p8, r1, r2, r3]. What was also mentioned frequently was the effectiveness of creating appropriate market conditions for decarbonization [b1, p3, r2], particularly strong carbon pricing for the power sector [p2, p5, p6, p7, r3, r7, s1]. However, as many United Kingdom 91 interviewees have emphasized, carbon pricing is not a standalone solution but should rather be one component of a policy mix that is tailored to the country’s individual circumstances [p4, p6, p7, r3, r4, s1]. The need for accompanying policies to support investment in lowcarbon energy was mentioned frequently to replace phased out coal capacity [p1, p5, p6, p7, r4, s1, s4]. Conclusions and outlook The UK has almost completed its phaseout of coal generation over a relatively short period of time. In the 2000s, at the beginning of our study period, coal’s share of the UK electricity mix was at a relatively constant rate at around 27%– 37%. Starting in 2013, its share began to shrink rapidly to merely 1.74% in 2020. As part of this, by 2020, overall GHG emissions of the UK have been reduced by 48.8% compared to 1990 (BEIS, 2021b). This chapter identifies objectives, actors, and contextual factors of the UK coal phaseout using the AOC Framework by Jakob et al. (2020). From our evaluation of 22 stakeholder interviews, we derived 3 highlevel objectives that have influenced the UK case: (1) climate action, (2) low electricity prices and jobs in the power sector, and (3) security of supply. The UK coal phaseout has been enabled by a variety of policies and contextual factors. Notable policies include effective carbon pricing and support for the RE industry. Climate ambitions in all three major political parties, the importance of scientific advice and the avoidance of political polarization on the issue played a major role as well. Security of supply issues didn’t become a major problem as inter alia electricity demand – other than expected – was falling considerably. The coalfired power stations in the UK were old, and the civil society protests, especially in Kingsnorth, prevented the construction of new power stations in the 2000s. Unlike in other countries, like Germany (Brauers et al., 2020; Oei et al., 2019), the coal companies did not use their political power to slow down the decision to phase out coal because they had little to lose. They decided early on to invest in other energy sources. The official announcement to phase out coal that was made in 2015 is widely considered to be merely a formalization of something that would have happened anyway due to the preceding developments and policies that have shifted the economics away from coal. As a more recent development, in 2019, the UK has legislated for net zero emissions by 2050 due to the scientific evidence of the IPCC 1.5°C report and the CCC, as well as public pressure from climate movements. However, this is unlikely to have any significant further impact on the coal phaseout, which is already well underway. Instead, future challenges for the UK are related to natural gas, especially with respect to heating, as well as the future of transportation. In summer 2020, the UK experienced a coalfree run for 67 days, which was only interrupted for maintenance purposes of a coal power station (National Grid ESO, 2020). Much like in many other countries, the Covid- 19 pandemic 92 Nora Stognief, Paula Walk, and Pao-Yu Oei further raises the issue of how to achieve a climatefriendly economic recovery post Covid in the UK. Acknowledgments We would like to thank all interviewees for their valuable contribution that has made this study possible, as well as the participants of the Political Economy of Coal workshops hosted by MCC Berlin and the participants of the colloquium at the CoalExit research group for their useful discussions and suggestions. We would further thank two anonymous reviewers for their helpful comments on the manuscript, which have greatly contributed to improving this chapter. This work was supported by the German Ministry of Education and Research (BMBF) under grant number 01LN1704A (‘CoalExit’ project) and under grant number 01LA1810A (‘Future of Fossil Fuels in the Wake of Greenhouse Gas Neutrality’ project). Paula Walk gratefully acknowledges funding from the Heinrich Böll Foundation. Appendix This chapter contains supplementary online material at www.mcc-berlin.net/ pecoal/ch05. Notes 1 Kilroot power station is going to be converted to gas by winter 2023 and West Burton does not hold a capacity market contract for winter 2021– 2022. Ratcliffe and Drax do hold capacity market contracts for that period, but the latter has ceased coal generation and only keeps its coal capacity on standby (Evans, 2021). In line with the coal phaseout announcement, Ratcliffe power station will have to close by 2024 as well. 2 Please note that we were only able to conduct two interviews with business officials, a number that is too small to constitute a representative sample. 3 Gas in the UK was and often is also still cheaper than in many other European countries due to the availability of domestic production (Brauers et al., 2020). References Beatty, C., Fothergill, S., & Gore, T. (2019). 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At the federal level, energy and electricity are under the regulation of the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC), and environmental issues are under the jurisdiction of the Environmental Protection Agency (EPA). Public Utility Commissions (PUC) at the state level regulate electricity providers, such as utilities and independent power producers. Although their regulatory boundary varies from state to state, the most important functions of PUCs are rate setting, generation, transmission project approval, and reviewing business decisions faced by public utilities. We group actors’ objectives into four high-level strategic objectives of energy policy: affordability, reliability, climate change mitigation, and employment. In particular, affordability was highlighted by interviewees as the most important objective that shapes energy policies. Indeed, PUCs typically mandate utilities provide electricity at just and reasonable rates. Climate change mitigation, regarding both environmental and climate impact, was also identified by most experts. Although security is a major focus in the political discourse, it did not stand out as a crucial concern in our interviews. Perhaps the reason that security did not emerge in interviews is that coal, natural gas, wind, and solar are abundant domestically in the United States, so neither coal nor its competitors can make credible claims of being preferable on energy security grounds. Finally, employment and economic development for local coal communities stand out as major concerns for regional societal actors and politicians. Table 6.1 presents an overview of objectives, relevant actors, and the contextual factors shaping energy policy making in the United States. Figure 6.4 Growth rates in US coal production implied by government and expert forecasts of future coal production. Note: Growth rates are calculated over the first five years of the forecast. Experts were interviewed in early 2020. United States of America 103 Affordability The US federal government has been devoted to lowering energy prices and has branded cheap energy as one of the competitive advantages for US businesses. Over the past decades, the United States has had one of the lowest electricity rate among advanced economies. The rate for the industrial sector is even lower than that in many developing countries, such as China. In 2019, the residential, commercial, and industrial sectors accounted for 37%, 36%, and 26%, respectively, of the total US electricity consumption (EIA, 2020b). On top of that, some states and the federal government often provide various energy assistance or efficiency programs for low-income families, further improving energy equity and affordability. Many states also intend to minimize the electricity rate to attract investment, especially for the manufacturing industry. Therefore, minimizing electricity rates for local consumers is the most important regulatory objective for the PUCs and a critical principle of the wholesale market designed by the FERC. The average electricity rate varies from state to state (ranging from 7.77 cent/ kWh in Louisiana to 29.04 cent/ kWh in Hawaii, averaging at 10.80 cent/ kWh). In general, it is highest for the residential sector (13.36 cent/ kWh), and the lowest for the industrial sector (6.91 cent/ kWh), with the rates for the commercial sector (10.88 cent/ kWh) in between (EIA, 2021a). Electricity market deregulation has also contributed to this objective. Traditionally, the US electricity markets have been strictly regulated, where a public utility serves as a natural monopoly in a given region. In regulated markets, utilities hold control over all electricity services across much of the country, from electricity generation, transmission, distribution, all the way down to customer metering. The PUC in charge of rate setting and project approval aims to minimize electricity rates for the local customer while ensuring a fixed profit margined for investors. Following the enactment of the National Energy Policy Act of 1992, the federal government started to allow power producers to compete for selling electricity to utilities. In the late 1990s, the FERC issued three orders to establish several regional transmission operators (RTOs) and Table 6.1 Objectives, actors, and cross cutting contextual factors of US energy policy Objectives of energy policy Most relevant actors Affordability FERC, PUC, utilities Reliability and security DOE, FERC, coal mining industry Climate change mitigation Statelevel legislature, EPA, NGOs Employment Local coal community, local government, NGOs, politicians Crosscutting contextual factors Inexpensive, cleaner, technological advanced alternatives Polarized political environment Organized interest groups Lack of government supports for job creation in coal communities 104 Jiaqi Lu and Gregory Nemet independent system operators (ISOs) across the country, ensuring utilities’ fair access to the grid. In the 2000s, several large states, including California, Texas, and New York, initiated the deregulation reforms. Today, a total of 15 states have initiated reforms with different levels of deregulation and different emphases. The most common feature for all these reforms is to involve competition in both generation and service provision to lower prices and improve services. A significant consequence of such reforms has been the rise of investorowned utilities, which issue stock traded on stock exchanges and with a fiduciary responsibility to shareholders to maximize shareholder value. Under the price pressure from regulators and market competition, coal technologies, such as carbon capture and storage, once seemed profitable have become too expensive (see detailed discussion about CCS technology in the Online Appendix). Utilities, which consume more than 90% of US coal, have no choice but to build the most inexpensive power plants in order to minimize the electricity bill for customers. As the costs of natural gas and renewables have become much lower than that of coal, it is in utilities’ best interest to choose those technologies instead of coal to keep rates low and fair, even without additional climate regulation. Although the affordability objective is picked up by societal actors and national/ regional policy makers who are procoal, to some extents, their narrative contradicts their goal, because using coal for electricity production would result in higher energy bill in most parts of the United States. Reliability and security As alternative sources obtain increasing market advantage over coal, coal-heavy utilities and the coal mining industry start to stress grid reliability and energy security as their core competitiveness [pr1, b1]. Experts who are familiar with energy lobbying described how coal lobbying groups have switched from claiming “cheap and widely available” to “a reliable and secure energy source” as the main selling point for coal power [pr1]. The concept of grid reliability, also known as system security, is built on the idea of baseload power sources for providing stability and resilience to the electric system during times of grid constraint. Coal advocates argue that coalfired electricity can provide critical capacities to stabilize the grid and electricity prices in the wholesale market, especially during winter. Hence, they claim that coalfired power plants deserve additional service fees to help them stay in business [pr1, sn3, pn3]. For example, America’s Power (2020), an interest group that advocates on behalf of coalpower plants, indicates that the acceleration of coal retirement could lead to a 35% or US$ 29 billion increase in electricity bill due to extreme cold weather across multiple markets by 2024, while keeping those coal units could cut down such cost by over 93%. In 2018, FirstEnergy Solutions, a utility company that owns coal and nuclear power plants, asked the DOE to invoke its emergency power under Section 202(c) of the Federal Power Act to provide cost recovery to coal and nuclear plants for the next four years. This request was immediately rejected because the DOE has never issued an emergency order for economic reasons (Walton and Bade, United States of America 105 2018). Granting coal facilities that kind of bailout might have provoked waves of lawsuits from environmental groups and the renewable industry. Unsurprisingly, the security narrative resonates well with the policy agenda of the Trump administration. Since Trump took office in 2017, the DOE has been invoking electricity market regulations that favor coal fleets in the name of system security, and even considered invoking executive power under the 1950 Defense Production Act (DPA) to boost coalfired electricity production (John, 2018). However, there are only limited measures that the executive branch can use on security grounds. In late 2017, Secretary of Energy Rick Perry filed a Notice of Proposed Rulemaking that intended to provide bailouts for coal and nuclear power plants that maintain 90 days of fuel supply, citing the importance of grid resilience due to natural gas and renewable penetration, and unfair wholesale market design in favor of them (FERC, 2018). In 2018, this proposal was unanimously rejected by the FERC, despite the Commission’s consisting of two Democrats and three Republicans, four of whom were appointed by President Trump. The FERC ruled that the DOE failed to provide evidence to support their claims, citing reports from RTOs/ ISOs that show no security concern due to coal plant retirements (FERC, 2018). Climate change mitigation The third high-level energy policy objective concerns environmental and climate challenges. For decades, various social actors, including progressive think tanks, NGOs, and activists, have been pushing climate and environmental legislation at the state and the federal levels. More recently, pro-environment and pro-climate change grassroots movements have formed a strong anti-coal coalition, which imposes public pressure on utilities and banks to divest from coal. Experts express that such public pressure helps motivates utilities to choose natural gas or renewables over coal facilities out of public image concerns [sr2]. Many banks and institutional investors across the country have also committed to divestment. The divestment movement takes many forms. For instance, socially responsible investing (SRI), an investment strategy championed by investment banks such as BlackRock,2encourages investor-owned utilities to retire coal to placate shareholder activist groups. Furthermore, over the last few years, students have become a new powerful force in pro-climate change movements. Famous youth-led climate strikes, such as the Youth Climate Movement, have spread across the United States, calling the county, state, and federal government to take immediate climate actions and declare a climate emergency. Federallevel policies Even though an overwhelming majority of Americans support more progressive federal policies to address climate change (Tyson and Kennedy, 2020), climate legislation remains stagnated in the US Congress. In the early 1970s, protecting environmental quality had received considerable bipartisan support as much of the nation’s landmark environmental legislation, most importantly, the Clean 106 Jiaqi Lu and Gregory Nemet Air Act, was passed during the Nixon administration. However, since the late 1970s, the United States has experienced serious political polarization at both the state and the federal levels (Caughey et al., 2017, Grumbach, 2018, Lowry, 2008). Such division along partisan lines is also found on environmental issues. As the memory of the oil crisis in the 1970s faded away, energy policy became increasingly aligned with environmental policy (Lowry, 2008). The bipartisan support for energy and environmental policies decreased in the polarized political environment. When climate change first entered the sight of the general public in the late 1980s and early 1990s, the idea of shifting away from fossil fuels was already highly political. As a result, energy policies have become regulatory, and the prominence of partisanship on the issue increased over time. Scholars have found sharp polarization of conservativeliberal opinion about energy and environmental matters after the Cold War (McCright et al., 2014). Highly organized fossil fuel interest groups contributed to the political polarization on climate change at both the state and the federal levels (Grumbach, 2019, Stokes and Breetz, 2018, Jacques et al., 2008). In the past 13 election cycles, the coal mining industry has been the largest source of campaign finance within the mining industry, with 88% of those going to Republican candidates.3 In the early 2000s, the coal interest groups wield significant influence in Washington D.C. As one interviewee recalled: We [Senate democrats] tried to get [environmental/ climate legislations] enacted during the Bush administration … we were very close to a deal in 2001, so there would have been limits on the utility industry … but the Coal Industry and the Mining Association got to the Vice President’s office, and they killed that bill. And they also got the President (Bush) to reverse his pledge during the campaign to control carbon dioxide from power plants [pn1]. Coal interest groups found their natural allies in the conservative movement. Conservative think tanks, backed by the fossil fuel industry and the auto industry, play a major role in developing the rhetoric and talking points to support a position of climate denial (McCright and Dunlap, 2000, Boussalis and Coan, 2016). During the Obama administration, environmental regulation was the primary policy tool to reduce coal consumption. The most consequential regulations were the Mercury and Air Toxics Standards (MATS) that targets mercury emissions and the Cooling Water Intake Rule that manages wastewater from power plants [pr2, sn3, r2, b2]. In particular, the MATS regulation, proposed in 2008– 2009 and passed in 2012, imposed high costs (+ 100% operating costs) on old coal power plants, incentivizing many utilities to switch to gas rather than investing in pollution control equipment for coal units [r2, pr3, b3]. Experts suggest that the MATS alone contributed to roughly 5%– 10% of total coal retirements to date [r2]. The Clean Power Plan (CPP), the Obama administration’s centerpiece energy and climate policy, although highly celebrated, was never officially implemented, in part due to opposition from conservative politicians and procoal actors (see the online Appendix for more detailed discussion). United States of America 107 Under the Trump Administration, the EPA has been rolling back environmental and climate regulations that constrain the coal mining and utility industry. It is commonly believed that conservative politicians and coal interest groups are colluding with each other to bring coal back by ending “the war on coal.” Yet, the coal mining industry has long realized that regulatory relief could not reverse market force and revive coal [pn3]. As one interviewee put it: Politicians argue that [rolling back regulations can revive coal] … They [coal companies] do not argue that … most of them are just getting out of the business, they’re selling assets or they’re going bankrupt … Bob Murray4 is sort of the case in point. He has asked for an enormous bailout in the stimulus package. And he has repeatedly asked for government bailouts because it’s the only way that he can remain economic … What he says in public is different than the things he asked for, he doesn’t ask for regulatory relief. He asked for cash [pn3]. The Trump EPA also repealed the CPP and replaced it with a much weaker Affordable Clean Energy (ACE) rule, which would lower power sector carbon emissions by 11 mt by 2030, or between 0.7% and 1.5% from its 2005 level. Even though the high-ranking Trump appointees in the DOE and the EPA often take a hostile position toward climate change, midlevel and lower level bureaucrats were still taking the issue seriously and continued to prepare for future climate actions [pn4]. Under the Biden Administration, the federal government was able to reinstate and strengthen Obamaera regulations. President Biden has brought the United States back to the Paris Agreement and announced to use new executive orders to tackle climate change (The White House, 2021). However, it is unlikely a future Republican administration would continue to support these climate actions without new legislation from Congress. Statelevel policies With the US Congress in gridlock,5 many energy and climate policies that matter the most for the future of coal consumption are implemented by states [r1, r3, sn4]. When the Trump Administration withdrew from the Paris Agreement in 2017, some state governments led open protests against the federal government. Since 2016, a total of 34 states – including some Republican states – have released or updated their statelevel climate action plans, which generally include greenhouse gas mitigation targets and detailed policy tools to meet those goals.6 Nine states, together representing 40% of US greenhouse gas emissions, have passed laws mandating 100% carbonfree electricity by 2050 (Podesta et al., 2019). One of the most important state policy tools to date for climate mitigation is the Renewable Portfolio Standard (RPS), which requires a specified percentage of electricity from local utilities generated by renewable sources. From the late 1990s to the early 2000s, several states at the demand centers, 108 Jiaqi Lu and Gregory Nemet including California, Texas, and some New England states, led the effort to put the RPS into state law. As of 2020, a total of 38 states have implemented either a renewables mandate (31 states) or a volunteer target (7 states), with wide variation in terms of compliance options (NCSL, 2020). With the rapid growth of RPS popularity, the slow response of the coal industry in the 2000s and intense lobbying in the 2010s reflect substantial changes in market expectations. When the RPS was first introduced, the coal industry fails to anticipate that it could help make the renewables so much more competitive, and so did not lobby against its implementation (Stokes, 2020). However, as market conditions changed dramatically, coal interest groups across the country mobilized to prevent further state legislation. As a result, all mandated RPS were written into law before 2008. Since then, utilities and the coal mining industry have successfully blocked RPS in the states that did not yet have them and repealed West Virginia’s RPS, which was passed in 2009. The latest attempt to strip the RPS is the 2019 Ohio House Bill 6, which replaces the RPS requirement of 12.5% in 2027 to 8.5% by 2026, along with other procoal articles (The Ohio Legislature, 2019). A serious corruption scandal that involved FirstEnergy Corp. and Speaker of the Ohio House of Representatives was discovered to be behind the passing of this legislation (Wamsley, 2020). This incident once again suggests that the legislature and regulators can be easily captured by coal interest groups. Renewable energy interest groups also have growing political influence in liberal states such as California and Washington. The renewable energy industry coordinated with environmental groups to advocate for investment rebates and higher RPS targets at the state level and tax credits at the federal level. Unlike the fossil fuel lobbying associations that are concentrated, the number of renewable lobbying associations is relatively high, partially due to the distributed nature of the industry (Kang, 2016), making it difficult to funnel resources and political influence to clean energy producers. Despite having the fossil fuel lobby as the common enemy, surprisingly, renewable interest groups also devote resources to lobbying against nuclear power. As the competition between different lowcarbon energy intensifies interest group politics might increase the difficulty and cost of deep decarbonization (Sivaram, 2018). Employment and regional economic development Coal miners’ associations, such as the United Mine Workers of America, are important pro-coal social actors in the United States. These organizations often exert significant political influence on legislators, even though the coal industry only represents a small share of the economy. Coal mining and coal electric generation employ a total of 139,785 workers across the country in 2018, with the coal mining and utility generation segment comprising 54% and 17% of them, respectively (Ellis and Fazeli, 2019). In particular, coal mining jobs have decreased from 89,400 at the beginning of 2012 to less than 42,000 as of April 2020 (USBLS, 2020), which is also down from an alltime high of 1 million in 1920. Regarding the demographics of the work force, over 90% of United States of America 109 the coal mining labor forces are white, which is significantly higher than that of the national workforce average of 78% (Ellis and Fazeli, 2019). As of 2015, only 26 counties across ten states are considered coal mining dependent under the Department of Agriculture’s Economic Research Service (Morris et al., 2019). Many of these counties depend entirely on coal for the local economy, jobs, and tax revenue used for schools and other social services. In the existing market environment, coal communities across the country have been struggling. These communities have suffered from job loss, environmental degradation, decreasing new investment, limited alternative job opportunities, as well as shrinking local government budget due to the decline of coal, while state and the federal governments have provided very limited support [sr1]. Interviewees pointed out that many coal workers are reluctant to relocate to other places where jobs are growing [sr1, sr2]. Whereas the communities in Wyoming are in a denial stage, local communities in the Appalachia region, which have been dealing with the decline of coal for a much more extended period (since the 1920s) [sr1]. With the help from NGOs, such as the Beyond Coal Campaign of the Sierra Club, some communities have initiated various projects to explore alternative job opportunities and economic development paths [sr1, sr2]. Under the Biden Administration, the federal government incorporates “revitalize coal communities” as one of the targets in the executive order for tackling climate, though the effectiveness of such action remains an open question. Job losses associated with the decline of coal drive local political support for the Republican Party (Egli et al., 2020). The Trump campaign has been trying to appeal to voters in coalrich states [r1]. Trump won 19 of the 24 coal producing states in the 2016 election, 17 in 2020. President Trump repeatedly endorsed coal and coal mining companies, calling coal “beautiful” and “clean”, and promised communities to bring their coal jobs back. As a useful campaign strategy, Trump associated coal jobs with conservative narratives of the mining industry, which romanticize miners as brave and hardworking men who risk their lives in the mines for their family and the American Dream (Hermwille and Sanderink, 2019, Carley et al., 2018). These narratives also appealed to average Republican voters, who believe in the concept of small government, antiregulation, and traditional conservative values. Despite Trump’s failure to bring back coal, residents of the coal communities expressed appreciation for the political attention even though many of them have well acknowledged the inevitable decline of coal [sr1, pn2, b2]. Conclusions Based on quantitative data and insights from expert interviews, this analysis provides an overview of the recent evolution of the US coal industry. We identify affordability as the most widely embraced objective within US energy policy making. This objective of minimizing energy costs, combined with technological change in natural gas, wind, and solar, elevated market forces against coal to a prominent position, which lobbying, court cases, and President Trump 110 Jiaqi Lu and Gregory Nemet could not overcome. Under this growing market pressure, the coal mining industry is clearly in retreat, so much so that the vast majority of coal companies have accepted their diminishing role in the energy system. The defeat of the CPP was the last successful mobilization by the coal interest groups, with conservative movements and anticlimate groups being the main forces behind it. However, even this success did little to help the industry. Indeed, emissions are on pace to meet the CPP target just due to coal losing market share to gas and renewables. While the Trump administration has abolished domestic and international climate policies, it failed to revive the market prospects for coal. The procoal policies implemented by the Trump administration have been ineffective and have no tangible impact on the energy market nor – as both our interviewees and the US EIA’s forecasts show – have they done anything to improve the future of the industry. Many interviewees point out that coal companies have abandoned their strategies to preserve the market share in the US electricity sector. Instead, they employed different business plans to restructure their companies, exploring potential foreign export markets and the opportunities in metallurgical coal, and seeking government payouts in exchange for shutting down their companies. To date, the United States is on its way to meet its former climate mitigation pledge under the Paris Agreement. Carbon emissions are expected to decrease by 35% by 2030 even without any federal intervention. Although the United States has cultivated this remarkable decarbonization progress by replacing coal with shalebased natural gas, from a supplyside perspective, fracking additional natural gas is no more than to doubledown on the fossilfuel- fired development path. Even if the United States manages to power its entire economy with natural gas, as a hydrocarbon fuel, natural gas can only provide limited mitigation benefits because targets will soon need to approach zero and because methane leakage from gas infrastructure is coming under increasing scrutiny. Although frequently touted as a bridge fuel, in the United States it has seldom been asked where this bridge will lead, how long it will exist, and to what extent it will compete and delay the expansion of renewables. It is possible that the US power sector will become increasingly dependent on natural gas for the next 20– 30 years. If so, natural gas interest groups would become more deeply embedded in the political and socioeconomic context— in the same way that the coal industry has for the past three decades. If the polarized politics regarding renewable and climate policies were to continue, the natural gas industry would only get increasingly hostile toward renewables, potentially hindering further decarbonization. The political economy of climate policy in the United States will likely continue to be fraught despite the demise of the coal industry. Appendix This chapter contains supplementary online material at www.mcc-berlin.net/ pecoal/ch06. United States of America 111 Notes 1 For instance, Arch Coal sold some of their thermal coal mines in 2019 and expand metallurgical coal production. In 2020, the company renamed its name to Arch Resource, Inc. 2 BlackRock, the world’s largest asset management company, announced that they are divesting from companies driving more than 25% of their revenue from thermal coal. 3 Data from opensecrets.org. 4 CEO of Murray Energy, a privateowned coal mining company. He praised Precedent Trump for his procoal rhetoric and regulatory rollback on many media platforms, attracting nationwide attention. 5 In the United States, the political cleavage between Democrat and Republican politicians on climate- and energyrelated issues is salient, making it impossible to pass any national level climate or renewable energy legislation. Senate Republicans can block any climate or clean energy legislation with just 41 votes using filibuster. Senate Republican leader, Mitch McConnell, has repeatedly stated that the Senate would not put any climate legislation to a vote under his watch. 6 Data from the Center for Climate and Energy Solutions. www.c2es.org/document/ climate-action-plans/. References America’s Power (2020). National Lab Study Shows Higher Energy Prices Due to Coal Retirements. [Online]. Available: www.americaspower.org/ nationallab- studyshows- higherenergy- pricesdue- tocoal- retirements/ . Ansolabehere, S. & Konisky, D. M. (2009). Public attitudes toward construction of new power plants. Public Opinion Quarterly, 73, 566– 577. Ansolabehere, S. & Konisky, D. M. (2014). Cheap and Clean: How Americans Think About Energy in the Age of Global Warming, MIT Press. Ballew, M. T., Leiserowitz, A., Roser- Renouf, C., Rosenthal, S. A., Kotcher, J. E., Marlon, J. R., Lyon, E., Goldberg, M. H. & Maibach, E. W. (2019). Climate change in the American mind: data, tools, and trends. Environment: Science and Policy for Sustainable Development, 61, 4– 18. Berardo, R. & Holm, F. (2018). The participation of core stakeholders in the design of, and challenges to, the US Clean Power Plan. Climate Policy, 18, 1152– 1164. Boussalis, C. & Coan, T. G. (2016). Textmining the signals of climate change doubt. Global Environmental Change, 36, 89– 100. Breetz, H., Mildenberger, M. & Stokes, L. (2018). The political logics of clean energy transitions. Business and Politics, 20, 492– 522. Brulle, R. J. (2018). The climate lobby: a sectoral analysis of lobbying spending on climate change in the USA, 2000 to 2016. Climatic Change, 149, 289– 303. Brulle, R. J. (2019). Networks of opposition: a structural analysis of US climate change countermovement coalitions 1989– 2015. Sociological Inquiry, 91(6), 1– 22. Carley, S., Evans, T. P. & Konisky, D. M. (2018). Adaptation, culture, and the energy transition in American coal country. Energy Research & Social Science, 37, 133– 139. Caughey, D., Xu, Y. & Warshaw, C. (2017). Incremental democracy: the policy effects of partisan control of state government. The Journal of Politics, 79, 1342– 1358. 118 Cecilia Springer et al. We apply the AOC (“actors, objectives, context”) framework developed by Jakob et al. 2020 covered in Chapter 1 to examine the contemporary political economy of China’s coal sector. This framework addresses three key research questions: what are the objectives present in China’s energy policy domain? What actors represent these objectives? How do the socioeconomic, political, and institutional contexts shape these objectives? Following this framework, we conducted a literature synthesis on the political economy of China’s coal sector to identify the relevant actors, objectives, and contextual factors. We began the literature review by focusing on studies that develop theories of political economy for China’s coal sector, energy policy, and climate policy and deepened the review by searching for empirical studies with primary quantitative and qualitative data on China’s coal sector, as well as reviewing Chinese policy documents. The literature review was supplemented with key expert interviews to verify and extend our synthesis of the information based on informational gaps in the literature review, such as the current state of carbon capture and sequestration technology and policy; the link between domestic coal overcapacity and overseas industrial policy; and the role of industry groups in coal Figure 7.1 Coalmining employment and gross regional product by province, 2015. Source: National Bureau of Statistics of China (2019), China Statistical Yearbook (2019), NRDC (2018) China 119 policymaking. We identified and interviewed seven experts between January and November 2020, based on their known expertise in subject areas we were seeking to improve our information on and a snowball approach through our networks. We included notes from these interviews as primary information to supplement our synthesis approach. Key actors Policies that govern the coal sector emerge from a complex set of interplaying objectives on the part of a diverse set of actors (Jakob et al. 2020). In this section, we divide the actors that engage with China’s coal sector into political and societal actors, describe their main functions, and outline the ways in which they influence policymaking. Political actors The Chinese Communist Party (CCP) is the sole governing political party of the country, setting national strategies for economic development and, in recent years, a rhetoric of environmental protection. Coal has played a key role in fueling industrialization throughout the various phases of China’s economic development. Under Mao, coal was a core industry with wellpaid workers and low, controlled prices that were meant to boost industrialization with cheap fuel inputs. Over the next few decades, national leaders’ strategy of promoting reform and dualism meant that coal production was bifurcated into small township and village coal mines (TVMs) that sold coal on a market basis, and stateowned enterprises (SOEs) with a regulated price system. Since the Reform and Opening Up era beginning in 1978, the government has pursued a market or capitalist approach to coal production, but this has come into tension with the electricity generation industry, for which reform and deregulation is ongoing (Wright 2012). Under Hu Jintao and Xi Jinping, a prominent rhetoric of ecological civilization (shengtai wenming) has been promoted to unite the goals of economic development and environmental sustainability, and this highlevel commitment to environmental protection has led to increasingly stringent regulation of the coal industry. The specific actors that implement and enforce these highlevel strategies and goals are discussed below. National Development and Reform Commission (NDRC) The National Development and Reform Commission (NDRC) is a superministry that sits a half rank above China’s other ministries, responsible for broad development and economic planning. The NDRC prepares China’s national Five- Year Plan and sets national benchmark prices for a range of commodities, including coal and oil. In 1998, the former Ministry of Coal was phased out and its functions transferred to the NDRC (Peng 2009). The NDRC has the 120 Cecilia Springer et al. power to set energy pricing and to review and approve infrastructure projects throughout China as well as overseas. National Energy Administration (NEA) The National Energy Administration (NEA) is an independent agency within the NDRC in charge of energy planning and policy coordination. The NEA studies and drafts energy development strategies, implements policies in industrial sectors, and is responsible for promoting energy efficiency. For example, the NDRC and NEA created the risk warning system for coalfired power plants in 2016, effectively restricting which provinces could construct new coal plants. Ministry of Ecology and Environment (MEE) The Ministry of Ecology and Environment (MEE) is responsible for developing, implementing, and coordinating China’s climate change policies. Notably, it is responsible for establishing the national carbon trading system and, with the NDRC, developed China’s first nationally determined contributions (NDC) for the Paris Agreement on climate change. Formed in March 2018, this body consolidated environmental responsibilities formerly spread across a number of ministries, including climate change and emissions reduction policies formerly under the NDRC. Its formation elevated environmental policy to equal status with economic policies, represented by the agency being at the same level as the NDRC and other ministries in reporting directly to the State Council. However, being a new body without the historical influence of the NDRC, the MEE has a lower rank in China’s cabinet hierarchy and less power over Five- Year Plans and sectoral policy. In energy and climate policy, the lead agency remains the NDRC. Subnational government State organization is paralleled at all levels of government, with provincial and municipal DRCs exercising powers on behalf of local government. Provincial benchmarking pricesetting is informed by national benchmarks set by the NDRC. Similarly, national climate targets are implemented in part by assigning targets to provinces, with provincial and local leaders accountable for achieving them. As such, subnational governments, including provincial and municipal officials, have significant power to set the local climate policy agenda. Failure to achieve environmental targets became a potential barrier to promotion for officials for the first time in the 11th Five- Year Plan (2006– 2010), although economic targets remain the most important metric for promotion evaluation (Sandalow 2018). These competing incentives were tested from 2014 to 2016, when new coal plant approval was transferred from central government to the provincial level, leading to 210 project approvals in the span of a year, even as demand declined (Myllyvirta 2020). China 121 Stateowned Assets Supervision and Administration Commission of the State Council (SASAC) Stateowned Assets Supervision and Administration Commission of the State Council (SASAC) supervises and manages SOEs, including China’s large power companies and oil and gas companies. SASAC has the power to appoint, evaluate, and remove executives of the enterprises it supervises, and it can also restructure and reorganize these enterprises in support of policy goals. Although SASAC can integrate and restructure SOEs, it has limited direct influence over energy policy. Stateowned enterprises (SOEs) The Chinese government retains control over “strategically important” industries, including energy via SOEs. These can have national or subnational ownership and employ some 61 million people as of 2018 (Hart et al. 2019). While not directly involved in policy formulation, some SOEs play an important role in informing state investment decisions. For example, many SOEs receive state financial support to develop lowcarbon technologies, which informs policymakers as to what is technologically and economically feasible. Many national SOEs have quasiregulatory authority through their ability to adopt rules governing operations, a legacy of prior status as state bodies before corporatization. A revolving door of top executives and bureaucrats among SOEs and government agencies ensures strong lobbying influence and a conflict of interest between the regulator and regulated. Subnational SOEs are local governments’ most significant tax revenue source with taxes collected accounting for approximately 90% of local revenue (Hart et al. 2019). Combined with their ability to choose where within China to operate, SOEs have strong influence over local policy. Examples of SOEs that play a major role in the coal sector are the socalled Big Five electric power generation companies, which SASAC has increasingly consolidated over the years. China Energy Investment Corporation (CEIC) is China’s largest power producer. It operates in eight business segments, including coal mining, thermal power, transportation, and clean energy. CEIC owns China Shenhua Energy Co. Ltd, the world’s largest coal company. Shenhua first emerged as an SOE directly administered by the State Council in the 1980s and steadily increased vertical integration in the coal sector until SASAC merged it with CEIC in 2017 (Peng 2009). The other major SOEs that round out the “Big Five” are Datang Group, Huadian Corporation, Huaneng Group, and the State Power Investment Corporation. Societal actors Private coal companies The private coal sector is significantly smaller than SOEs, to the point of not being competitive domestically, especially after continued consolidation of 122 Cecilia Springer et al. SOEs. The majority of private business streams are moving to international projects. For example, China Kingho, the largest private coalmining company in China, has projects in Mozambique, Sierra Leone, and Pakistan. Expert organizations These include Chinese academies, such as the Chinese Academy of Science, and top national universities, particularly those in Beijing with access to government officials. These are supported by government funding sources but operate relatively independently and openly. They influence policy through their expertise and ability to inform and legitimize political and economic positions. In addition to academic organizations, there are several quasigovernmental research institutions that also provide research and analysis support that informs the development of Chinese energy and climate policy. These include the National Center for Climate Change Strategy and International Cooperation (NCSC, founded under NDRC and transferred to MEE), the Energy Research Institute (ERI, part of NDRC), and more. Major coalconsuming industries End users of coal in China, like the iron and steel industry, have historically benefited from low coal prices. These industries will be affected by various coalrelated policies, including the coal cap, emissions regulations like China’s emissions trading system (ETS), and China’s carbon neutrality target. NGOs These can be divided into three categories: governmentsponsored NGOs, grassroots NGOs, and international NGOs. Roles include government engagement and raising public awareness. Governmentsponsored NGOS, sometimes known as governmentorganized NGOs (GONGOs), have the most policy influence, but all face a restricted political space. During the mid- 2000s, most pollutionrelated civil society activity was directed by statesponsored or state subcontracted nonprofit organizations, which served as an extension of the CCP’s policy research institutions (Chen et al. 2013). GONGOs are not independent from the state, nor are they deeply connected to grassroots movements, and thus usually abstain from “radical confrontation” with or explicit protest against the national government (Fei 2015). The first set of Chinese environmental GONGOs emerged during the first phase of Deng Xiaoping’s Reform era. In 1979, the government sponsored the Chinese Society of Environmental Science (CSES), a GONGO that established a framework wherein the public could “openly” discuss environmental issues and policy solutions with CCP authorities. Today, NGOs are not officially consulted in the construction of NDCs and pricesetting but may have influence through relationships with expert organizations. A handful of domestic NGOs are actively advocating for China 123 decreased coal use in China. A number of international NGOs have offices in China and pursue similar advocacy goals, including the Natural Resources Defense Council, the World Resources Institute, and Greenpeace. However, international organizations are subject to increasingly strict oversight. Objectives In recent years, several trends have emerged in China’s coal industry, including massive overcapacity of coalfired power generation, the facilitation of coal power developers going abroad via the Belt and Road Initiative, a highlevel commitment to emissions reduction and clean energy transition within China, and ongoing issues with provincial- to- national economic and environmental reporting. These clear trends reflect a diverse set of objectives on the part of the actors discussed above. In this section, we identify and cluster the objectives of the above actor groups into several themes: economic development, economic reform, and clean energy and environmental governance. Each of these objectives exerts different pressures on decisionmaking for China’s coal sector. Economic development Economic growth is the foundation of the Chinese government’s political legitimacy. Since the Reform and Opening Up era, China has seen rapid economic development, a subsequent growth in the middle class, and a rise in energy consumption. China’s economic growth has been driven by coal as its dominant source of both primary energy and electricity supply. In 2011, China became the world’s secondlargest economy, with its GDP at US$7.2 trillion. However, as economic growth in China slows, there is a growing gap between the growth rate of installed coal capacity (7.8%) and electricity demand (0.5%) (Ming et al. 2017), a problem referred to as overcapacity. By some estimates, China has around 200– 260 GW of excess coal capacity (Yuan et al. 2016). Since 2017, the NEA has canceled more than 200 GW of planned coalfired power generation capacity, yet more projects continue to be approved, even in 2020. This severe overcapacity issue has been driven by a mandate for economic development. At a broad scale, China’s coal overcapacity problem is a result of the need to maintain massive flows of capital investment that signal economic growth in a political sense. Incentive structures for local governmental officials to promote rapid economic development have been in place since the early Reform era. Major investment in electricity supply was needed to meet booming energy demand that began in the 2000s, and coal was seen as a pillar for domestic energy security. Incentives for local officials included policies like national subsidies for manufacturing to stimulate local growth and personal incentives for local leaders (i.e. CCP recognition and promotions to national government). Investment in coal mines and coalfired power plants directly boosted provincial GDP. Coal was particularly favored over other energy 124 Cecilia Springer et al. sources because many local government officials were also on company boards of manufacturing companies and SOEs for coal production that operated in provinces or municipalities that they governed (Rogers and Vogel 2018). Today, coalfired power plants continue to be seen as a familiar and reliable investment within China for provincial economic planners. Overcapacity has been driven not by energy security concerns, but by a policy shift. In 2014, the approval authority for coal power projects was decentralized and shifted from the central government to local governments, and approval time was shortened (Ren et al. 2019). Provinciallevel government officials have traditionally been evaluated by the central government based on economic performance. With project approval for coalfired power plants decided upon at the provincial level, provincial governments have an incentive to keep approving coal plants even when the capacity is not needed (Feng et al. 2018). In addition to misalignment between national policy and local interests, our literature review also finds that overcapacity is attributed to misguided regulatory practices that guarantee rates of return for coal plants, timing misalignment in the adjustment of regulated prices for coal and electricity, and mistaken assumptions about the economy. This excess capacity is not unique to the coal sector – many other coalintensive industries, such as steel and aluminum, also face domestic overcapacity due to years of rampant and uncoordinated investment, which has driven continued high demand for coal. This overall industrial overcapacity represents enormous investment waste, low returns for many individual plants, and difficulty in achieving environmental targets. However, through industry groups, China’s coal enterprises continue to promote coal as essential to energy security and power system reliability in order to maintain their market share. The highlevel mandate to continue economic growth also means delivering continually rising living standards for Chinese citizens, especially via the labor market. Traditionally, employment in China’s coalmining sector provided wellpaid but dangerous jobs for millions of workers, peaking at over 5 million workers in coal mine enterprises in 1990 (Wright 2012). As China manages a transition to clean energy, there will be significant effects on workers employed in the coal industry, a major issue for other coalproducing countries considering energy transitions such as India, the United States, and Poland. The negative effects of closing unneeded coal plants and coal mines have also disproportionately affected the poorer interior provinces and workers in less urban areas (Hao et al. 2019). Additionally, other coalcapacity- cut programs resulted in unemployment and regional economic decline (Shi et al. 2018). These effects are of concern to central government leaders in terms of how they might affect economic development in relation to political stability, given the entrenched political power of the coal industry and the importance of avoiding mass unemployment in key regions. The contribution of the coal sector to China’s economic development also hinges on the trajectory of China’s renewable energy industry as an alternative to coal power. China’s domestic solar and wind manufacturers are competitive on a global stage, and equipment export has been a major growth area China 125 for domestic renewable energy companies. China’s domestic renewable energy target and other climate policies will also create a favorable policy environment for increasing installation of renewable capacity. Renewable energy companies tend to be private companies operating on a much smaller scale than the traditional SOEs that are involved in coal mining and coal power development, which has meant they have not wielded the same political power. However, the major SOEs are increasingly getting involved in renewable energy development as part of an asset diversification strategy. In addition, given China’s ambitious climate policies, SOEs are receiving pressure from the national government to innovate in technologies besides renewable energy that enable lowcarbon industry, including energy storage, ultrahigh voltage transmission, smart grids, and carbon capture and storage (CCS). CCS can be paired with coalfired power generation to significantly reduce CO2 emissions and may be of particular interest to SOEs now facing competing objectives of ensuring that their existing coal projects do not become stranded investments while also meeting carbon reduction targets. These SOEs continue to hedge on coal by supporting other technologies that can prolong coal’s high market share, like coal- to- gas development. Economic reform From a political economy perspective, it is important to distinguish between economic development and economic reform in China, although both processes are inextricably linked. Economic reform refers to the transition in economic structure and management that has taken place over the past few decades in China, and which continues to be a major goal of economic policymakers. In Box 7.1 The Belt and Road Initiative, economic development, and coal The Belt and Road Initiative (BRI) is portrayed as an important new model for global economic development, led by China (Hofman and Ho 2012), but it also facilitates further economic opportunities for Chinese firms in overseas markets. The BRI strategy helps Chinese companies access new markets, maintain profitability, and solve the issue of industrial unemployment and slowing growth within China (Inskeep and Westerman 2019). Domestic coal plant technology developers have benefited from China’s involvement in coal plant development overseas (Shearer et al. 2019). Demand for coal power development in BRI host countries has driven financing for overseas coal power plants from China’s policy banks (Gallagher et al. 2021). China’s involvement in overseas coal power has led to significant backlash from international NGOs and Western development finance institutions due to the climate and environmental impacts of a lockin of coal infrastructure. 126 Cecilia Springer et al. the late 1970s and 1980s, China’s Reform and Opening Up process was remarkably “unplanned” in the sense that it lacked a preordained, topdown structure. The reforms occurred through a dualtrack system that allowed coexistence of the traditional planned economy as well as a market channel at the firm level (Naughton 1995). Yet the reforms did not eliminate planning altogether. From the 1990s onward, Chinese planning changed in its nature, becoming more of an iterative, responsive coordinating mechanism rather than an overall command system (Heilmann and Melton 2013). China’s efforts to partially transition to a market economy have had significant implications for the coal sector. Both large, national coalmining SOEs as well as smaller TVMs struggled with the transition to a market economy (Wright 2012). TVMs, which were allowed to transition to a market pricing system, received the bulk of criticism related to the environmental and social costs of coal mining, while SOEs struggled with mandated low coal prices that reduced incentives for investment and efficiency. Over time, as reform has continued, power over the coalmining industry has increasingly consolidated within the national SOEs (Peng 2011). In recent years, the geography of China’s coal production has been driven in part by a “strategic westward movement” promoted by the central government in order to further consolidate resources in larger firms and upgrade production (Woodworth 2015). In addition to coal production, the electric power sector has been a target for reform and marketization since 2015. The electric power sector is the main destination for coal in China. The main goals of reform are to increase generation efficiency, decrease consumption and pollutant emissions, develop renewable energy, and decrease industrial electricity prices (Guo et al. 2020, Victor and Heller 2007). In China, residential electricity prices are heavily subsidized, in part to maintain social and political stability. However, industrial electricity prices are higher than those of most developing countries and even some developed countries. Premier Li Keqiang set a goal of reducing the price of industrial and commercial electricity by 10% in 2018, 10% in 2019, and 5% in 2020 (Li 2018, 2019, 2020). Prior to 2015, the sector operated in a single purchasing agency model where one grid company (State Grid or the Southern Power Grid) purchased electricity from generator companies and sold to consumers at regulated prices. Under this model, wholesale electricity markets were not competitive in structure, meaning that the marginal cost of producing electricity did not determine the electricity price or the dispatch order for power generators (Kahrl et al. 2013). Lowcost renewable energy has often been curtailed due to system balance concerns and limited transmission capacity despite being legally prioritized in transmission and distribution by the NEA. This has slowed a transition away from coalfired power generation. In 2015, new reforms were introduced to enhance marketbased competition by creating competitive wholesale and retail markets. As of 2018, all provinces in mainland China have established power exchange centers to support marketbased electricity transactions. On top of these provincial markets, six regional power markets exist for interprovincial transmission. Interprovincial China 127 and interregional transmissions remain low as they face hurdles, including low density of connections between networks and highly diverse market models across jurisdictions (Guo et al. 2020). These reform efforts embody a contradictory logic wherein policymakers claim to want competition, foreign investment, and privatization while still setting prices, limiting foreign ownership, and keeping stateowned power generation companies in the hands of small political networks, especially those with vested interests in coal power (Yeh and Lewis 2004). In particular, the longterm tension between coal production and coalfired electricity generation, referred to as mei dian zhi zheng, continues. Given low residential electricity prices, electricity generators seek lowcost fuel inputs, while coal producers desire a higher price for their product. This tension has led to increased vertical integration of the coal sector, without resolving the underlying economic contradictions. Clean energy and environmental governance In recent years, a number of policies have been set forth in order to regulate the environmental impacts. The State Council issued the Energy Development Strategy Action Plan in 2014, which set a target for national coal consumption at 4.1 billion tons per year by 2020, which many experts agreed was not a particularly stringent cap, given a plateau in coal consumption at around 3.7– 3.8 billion tons per year beginning in 2013. However, regional coal consumption caps are more stringent. In 2016, the NDRC and NEA released guidelines that required 13 provinces and regions with growing coal overcapacity to halt approval of new coal projects. The NEA also established a warning system that evaluated risk of overcapacity for provinces and led to the cancellation of dozens of plants in provinces deemed high risk (Lin et al. 2016). The 13th Five- Year Energy Development Plan, released by the NDRC in 2016, set a target for coal to provide no more than 58% of primary energy by 2020. In 2017, the NDRC announced a new limit on total installed coalfired generation capacity of 1,100 GW. At the same time, there are a number of environmental laws and plans that regulate the coal sector, such as the State Council’s 2013 Air Pollution Prevention and Control Action Plan, the 2015 Environmental Protection Law, and the 2017 Environmental Protection Tax Law. The national ETS will regulate CO2 emissions in the form of a tradable performance standard that will be first applied to the power sector, and eventually expand to other major emitting sectors that will account for over half of China’s CO2 emissions (Goulder et al. 2017). While not a traditional carbon price that would directly increase the cost of coal for end users, depending on a number of policy design features, the national ETS could incentivize deployment of lower carbon fuel sources in regulated sectors, especially if pursued in tandem with sectoral reform and marketization efforts (Myllyvirta and Slater 2021). Table 7.1 summarizes the key energy and environmental policies regulating coal sector. Part IV Coal exporters DOI: 10.4324/9781003044543-17 13 Mining a fractured landscape The political economy of coal in Australia Peter Christoff Introduction Australia’s coal reserves underpin the nation’s electricity supply, and Australia is the world’s largest exporter of metallurgical coal and secondlargest exporter of thermal coal. Yet Australia’s landscape for coal production is fractured. The national political terrain is split: fossil fuels are promoted by the Liberal National Coalition parties (‘the Coalition’ or LNP), opposed by the Greens, with Labor wavering in between. Australia’s subnational States and Territories are divided between coal-producing and non-coal producing states, with contrasting energy policies, capacities, requirements, and ambitions. Responses to climate change are also refashioning demand and affecting supply. Australia’s coal output is divided between local and export markets, with the first declining, the second still growing. This chapter aims to examine the existential challenges confronting Australia’s coal sector and to answer the question: what is the future of coal in Australia? To examine these fractures, this chapter first describes the salient characteristics of Australia’s coal sector. Second, it outlines the historical and current drivers reshaping coal production and use, focusing on institutional features such as Australia’s federated political system, ideologically driven political hostilities around climate and energy policy, and the impacts of corporatization, privatization, and technological innovation. The chapter concludes by considering trajectories and projections for Australia’s coal sector. Methodologically, it is influenced by the AOC (actors, objectives, context) analytical framework used by Jakob et al. (2020) covered in Chapter 1 and draws on insights from literature on historical institutionalism (e.g. Thelen and Mahoney 2010). Applying this framework includes identifying the societal and political actors and factors most relevant for the formulation of energy and climate policies; spelling out actors’ underlying objectives; and assessing the economic, institutional, and environmental contexts which determine how certain objectives matter for certain societal actors. The framework is amended here to concentrate on interactions within and between four clusters of factors: actors, political institutions, economic and technological influences, and broader (ecological and economic) context. This occurs to better accommodate the 234 Peter Christoff perceived strong influence of institutional and economic/ technological factors in this narrative. The complex interrelationship between discursive contests and ideational shifts – the ‘work’ of actors in specific settings – and the influence of politicallegal institutions, and of disruptive economic/ technological and climatic shifts, in a federal system like Australia’s – produces a kaleidoscopic tale with multiple storylines (Christoff 2013). It also creates a substantial methodological challenge: in this chapter, the record of actors’ views and objectives has primarily been drawn from published statements, reports, and documents – tested, where necessary, through interviews. Australia’s coal sector With 10% of the world’s black coal reserves, Australia’s coal resources rank fifth behind the United States, Russia, China, and India in size (GA 2021) and hugely exceed what can be burnt if global warming is to be held to the goals of the Paris Agreement. In 2017, Australia produced 6% of global output of black coal, including 54% of global metallurgical coal exports (17% of total global production), and some 20% of global thermal coal exports (OCE 2019, 34, 43). Its coal production has risen significantly over the past four decades (Figure 13.1) (DISER 2020a) with roughly four times as much Australian coal now exported as is used domestically (Table 13.1). Figure 13.1 Australian energy production, by fuel type (1979– 2019). Source: DISER (2020a, Figure 3.2). Australia 235 Table 13.1 Australian coal production (2018– 2019) Domestic use Export Percent of Australian coal production Qld (Mt) (%) NSW (Mt) (%) SA (Mt) Tas (Mt) Vict (Mt) WA (Mt) Black coal (thermal) (262.3 Mt) 52.5 20% 209.8 Mt 80% 58% Black coal (metallurgical) (191.2 Mt) 7.7 Mt 2% 183.5 Mt 98% 42% Total black coal (453.8 Mt) 60.2 Mt 13% 393.6 Mt 87% 90% 250.6 55% 196.6 43% 0 0.3 6.2 Brown coal (43.3 Mt) 43.3 Mt 100% 0% 10% 0 0 0 43.3 Source: OCE (2019); DISER (2020b). newgenrtpdf 236 Peter Christoff Coal production Australia’s coal sector is dominated by a small number of exportoriented multinational companies, the composition of which has changed significantly over the past decade. Pearse et al. (2013), writing about Big Coal in Australia in 2013, referred to the dominance of four major producers – BHP Billiton, Rio Tinto, Xstrata, and Anglo- American. By 2020, Rio Tinto had sold all its coal (and gas and oil) assets globally, citing them ‘high risks’ for a lowcarbon future. The lead group now includes BHP Billiton, Glencore, Yancoal, Anglo- American, and Peabody Energy Australia (Table A.13.1). Anglo- American has indicated it intends to exit thermal coal by 2025. BHP is heading in that direction. Queensland (Qld) (with 51 mines) and New South Wales (NSW) (42 mines) together account for 98% of black coal production and over 90% of coal mining employment (ABS 2019). Over the past decade, employment in coal mining has fluctuated between 40,000 and 60,000 jobs in total (fulltime and parttime), having risen from around 18,000 jobs in 2000. Some 36,000– 58,000 people worked directly in the sector in May 2019 (ABS 2019), mainly concentrated in the Bowen Basin (Qld) and Hunter Valley (NSW) (Table A.13.2). This represents only 0.7% of total national fulltime employment. However, coal mining provides a significant concentration of economic activity in a handful of regions which in several instances also have electoral power sufficient to influence policies that affect them. By contrast, in 2019 there were some 14,700 jobs, dispersed across Australia, in construction of renewable energy capacity (CEC 2020, 13– 14). Sizeable revenue streams from mining royalties underpin strong state support for coal in coalproducing states. Such revenue fluctuates also by changes in demand and in prices, and also by the impacts of natural events on output. In 2018– 2019, Queensland’s coal royalties totaled some $4.4 billion (Zhou 2020) and were the largest source of income growth and 7% of total income for that state (Qld Govt 2019, 77). In NSW, total mining royalties amounted to $2.1 billion that year – 2% of total revenue – and were forecast to deliver an annual average of $2 billion per annum for years to come (NSW Govt 2019, 4– 4). At the same time, coal mining companies are recipients of substantial subsidies – including through tax arrangements discounting investment costs, diesel fuel rebates, and ‘deferred’ subsidies associated with the substantial costs of mine rehabilitation, which will fall to the public given current arrangements. Australia’s domestic coal use As noted earlier, approximately 20% of Australia’s coal production is for domestic use. In 2020, 90% of ‘domestic coal’ was burned to produce electricity, the remainder was used for steel production. In 2018– 2019, thermal coal provided 58.5% of Australia’s electricity supply (gas produced 20%, and oil 2%). Coal’s contribution to electricity generation has fallen dramatically, from 83% some two decades earlier. Renewable energy Australia 237 sources provided almost 20% – a rate doubled over the past decade (DISER 2020a). Renewable energy is displacing ‘domestic coal’ (Figure 13.2) and is expected to meet around half of Australia’s electricity demand by 2025, with coal’s share of power generation falling to 28% (Edis and Bowyer 2021). The mix of fuels used for electricity varies greatly across Australia (Figure 13.3). In effect, the country splits into two blocs – the coal-producing, and non-coal producing states. Of the three coal-producing states – NSW, Queensland, and Victoria – the first two are both heavily dependent on coal for electricity and also major contributors to Australia’s coal export economy. Victoria is not a ‘coal exporter’. The non-coal producing states – the Northern Territory, South Australia, Tasmania, and Western Australia – are neither dependent on coal for power generation nor coal exporters (Western Australia and the Northern Territory are heavily dependent on natural gas for domestic power and as an export). Coalfired electricity generation In 2021, 22 coalfired power stations operated in Australia. In that year, Australia’s coalfired power generation fleet had an average age that varied between States – from 38 years for NSW, 35 years for Victoria, and 25 years in Queensland (Table A.13.3). The age of these plants defines the path toward their closure: most of Australia’s coalfired power stations will come to the end of their working lives by 2035 unless regulatory obstacles are created to their closure or subsidies are provided to slow their retirement. Given the falling profitability of coal- and gasfired power generation in Australia and the surging support for renewable Figure 13.2 Australian energy sources for electricity (2010– 2020). Source: Australian Energy Market Operator (AEMO 2020b). 238 Peter Christoff energy, substantial new investment to maintain or upgrade fossil fuelbased power generation is unlikely. Twelve coalfired stations have closed since 2010, and no new ones have been commissioned. Five additional closures have been flagged between 2021 and 2035, involving almost half the remaining coalfired generation capacity in the National Energy Market (NEM) that supplies the populous east coast. Australia’s coal exports Australia is the world’s largest exporter of metallurgical coal by volume and value (Ball et al. 2020, Figures 5.6 and 5.8), with exports of 184 Mt, worth AUD $43 billion (fob) in 2018– 2019 (OCE 2019, Table 2.2). Almost all of Australia’s metallurgical coal, used for steel making, is produced from mines clustered in Queensland and NSW. It is also the world’s secondlargest exporter of thermal coal (20% of total in 2020), after Indonesia (41%) and followed by Russia (17%) (Ball et al. 2020, 53). Exports of thermal coal totaled 210 Mt in 2018– 2019 and were worth $26 billion (fob) (OCE 2019, Table 2.2). Australia exports most of the fossil fuels it produces – including some 87% of its thermal and metallurgical black coal and 74% of its liquid natural gas (LNG) output in 2018– 2019 (DISER 2020a, 33). Australia’s coal exports have expanded substantially in recent years (Figure 13.4). Between 2000 and 2019, Figure 13.3 Australia: electricity generation, fuel mix by subnational states (calendar year 2019). Source: DISER (2020a, Figure 2.9). Australia 239 thermal coal exports increased by 140% by volume, while exports of metallurgical coal increased by 66% (OCE 2019, Table 1). However, the real boom for Australian coal began a decade ago, with the rapid growth in demand from China. On average, coal exports have grown by 3% a year over the past decade (DISER 2020a, 33). As Pearse et al. (2013, 30) noted, the consequences for regional Australia were dramatic, with rapid and massive investment in mine, port, and rail expansions – some $55 billion in 2010– 2011 alone – to facilitate export of coal and gas. Australia’s coal exports mainly go to Japan, China, India, South Korea, and Taiwan (Table 13.2). India is expected to overtake China as Australia’s major market for both thermal and coking coal by 2025, and South East Asia is also Figure 13.4 Australian energy exports, by fuel type (1978– 2019). Source: (DISER 2020a, Figure 4.2). Table 13.2 Coal exports by major destination, coal type, and volume: 2018– 2019 Export destination Thermal (Mt) Metallurgical (Mt) Total (Mt) Percentage of total coal export (394 Mt) (%) China 47 41 88 22 India 4 47 51 13 Japan 79 35 114 29 South Korea 32 18 50 13 Taiwan 24 11 35 9 Total 338 86 Source: OCE (2019, Table 38). 246 Peter Christoff consequence, the power sector now reflects a mixture of public and private ownership that varies across States. While, as this chapter will suggest, state encouragement of renewable energy production has increased over the last decade, privatization has inevitably diminished regulatory control over the infrastructural investment decisions of private and often international corporations operating in the electricity sector. This has made the sector vulnerable to rapid shifts in capacity (as per the retirement of Hazelwood in Victoria) and security of supply. In all, the consequence of privatization, and subsequent investment and ownership by multinational power companies, has made the Australian power generation system more vulnerable to the vagaries and the tipping points of market forces and therefore more difficult to govern. But it has also accelerated the transition away from coal. Grid expansion and regulation The States once maintained discrete power grids. Grids in eastern Australia were joined up in 1998 to create the NEM. This produced the largest wholesale electricity market in the country, covering Australia’s eastern and southerneastern coasts and supplying some 10 million customers (see DISER [n.d.] and AEMO [2020a]). A smaller, geographically isolated grid – the SWIS (South West Interconnected System) – services southwest Western Australia. The creation of the NEM was intended to increase market efficiency and enhance security of supply, thereby lowering electricity prices, but it also created new problems. For instance, the retirement of major generating plants and the addition of renewable energy capacity now have an impact on supply, reliability, and electricity prices beyond the borders of individual States. As a result, three national bodies were established to regulate and govern the NEM: the Australian Energy Market Commission (AEMC), the Australian Energy Market Operator (AEMO), and the Australian Energy Regulator (AER). The rise in national planning institutions has not, however, yet led to an effective integration of Statebased or corporate activities, or to coordinated governance over investment in existing coalfired capacity, new renewable generating capacity, and storage. The most recent attempt to do this is the AEMO’s updated Integrated System Plan, which is seen as a ‘dynamic roadmap for Australia’s complex energy Transition’ (AEMO 2020b). However, this overarching attempt has failed to supplant the more localized dynamics in Australia’s energy system noted in this chapter and elsewhere (e.g. Parer 2002). Market forces and new technology The core logic of capitalism, searching for profit and allergic to loss, is now driving the domestic energy transition. The LCOE (levelized cost of electricity) has shifted in favor of renewables over the past decade. Investment in solar and wind power has grown very rapidly – solar by 50% in 2018– 2019 alone – with Australia 247 much of this growth coming from rooftop solar and the establishment of largescale PV power plants (DISER 2020c, 29– 30; CEC 2021). At the same time, reliance on coal for electricity generation has fallen (Figure 13.2). Given current rates of private investment in electricity generation, various States are now seen to face problems such as projected shortfalls in security of power supply (AEMO 2020c). The rapid uptake and the falling costs of renewable power have led to a crisis of value and profitability among coalfired power producers. The value of coalfired power stations, including new ones, has fallen quickly over the past decade with some now being written down off by their parent companies as low or worthless. These factors drove decisions by the French company Engie to shut Hazelwood in 2017, and AGL and EnergyAustralia, to announce closures of, respectively, Liddell in 2023 in NSW and Yallourn W in 2028 in Victoria. In Western Australia, the Japanese energy conglomerates Sumitomo and Kansai, joint owners of Australia’s newest power station (Bluewaters 1 and 2, built in 2010 and barely ten years old), wrote down the value of this asset to zero in December 2020 in the face of competition from renewable energy, mainly solar (Mercer 2020). Queensland’s three generator companies in 2021 wrote down the value of their power stations by over $1 billion (QAO 2021, 7– 8) while two major Australian energy companies, Origin Energy and AGL, have downgraded returns, earnings before interest, taxes, depreciation and amortization (EBITDA) by 8.6%, and written down assets by over $2.7 billion, because of falling wholesale energy prices. Edis and Bowyer (2021) conclude that the emerging energy mix will lead to a reduction of coal plant revenue by 44– 67% by 2025. Security of electricity supply The last source of pressure on coal comes from the need to secure electricity supply. Australia’s electricity market faces three forms of insecurity – the uncoordinated exit of operators, the uncoordinated introduction of intermittent renewables, and plant breakdown. Policy interventions and state funding, alongside technological innovation – specifically the development of largescale energy storage technologies, such as lithium megabatteries and pumped hydro – are consolidating the prospect for energy security using renewable technologies. This will enable a faster transition away from fossil fuels. Statesponsored and partfinanced development of ‘Renewable Energy Zones’ not only includes a focus on gridded renewables, but also on battery and pumped hydro storage to bridge low renewable generation periods. Several examples underscore this trend. Following a grid failure in South Australia caused by climate changeimpelled extreme weather, Elon Musk offered to build the world’s thenlargest battery to enable storage to bridge power shortages or surges in demand. In 2017, Tesla and Neoen then partnered to build what was then Australia’s first and the world’s biggest megabattery (150 MW) – a global show project following a power outage in South Australia earlier that year. 248 Peter Christoff This successful initiative has been followed by a flood of investment in battery storage that will prove the most economic means to undergird renewable power and deal with reliability during summer periods of peak demand in the NEM. This flood is marked by competition to install the ‘world’s largest battery’ (see Hutchens and Terzon 2021;Toscano et al. 2021). Origin’s proposed 700 MW battery and Neoen’s 500 MW battery, both in NSW, will be the two largest storage devices in the world and will be worth a combined $1 billion. Also in March 2017, Coalition Prime Minister Turnbull unveiled a plan to publicly fund a major expansion of the Snowy Mountain Scheme, Australia’s largest and iconic hydrogeneration complex, by adding Snowy 2.0, a major pumped hydroproject (DISER 2020d). Graham et al. (2020, viii) suggest that when these technologies are added to renewable generation, wind and solar PV ‘are the least cost generation technologies for the [Australian] electricity system for any expected level of deployment’. Even in the absence of subsidies and assistance, assessments of the capital costs of generation technologies indicate that coal has been priced out of the market since 2018, compared with gas, solar thermal, rooftop solar, largescale PV, and wind (Graham et al. 2018, Figure 2– 1). These measures have substantial benefits for utilities, for grid operators and for guaranteeing the security of power supply. They further increase the opportunities for a fast exit from coal. Export coal By contrast, the larger, more lucrative export coal sector seems immune to domestic pressures for decarbonization. The cast of national actors supporting coal export is smaller in number, economically more substantial, more unified, and more politically effective than its counterparts in the domestic coal sector. As a consequence, Australia’s export coal sector is driven by international economic and political influences. These include international demand and associated market conditions, as determined by the energy and climate politics and policies of importing countries, and the risk appetite of funders and owners of existing and new mines, as determined by investing institutions. Overwhelming political support The coal export industry lobby’s narrative has reinforced an enduring politically bipartisan ambition – strongly expressed since the 1990s by both Labor and the Coalition in successive Energy White Papers – to exploit Australia’s comparative advantage in fossil fuel resources, and to use trade as a means to integrate Australia into the Asia- Pacific region, in particular with Japan and South Korea and more recently with China, for economic and security. None of the major political parties – Liberal, National or Labor – has openly challenged fossil fuel exports. The giant Carmichael (Adani) Mine has become the bellwether of political support for export coal. Australia 249 Labor, caught between wishing to appeal to rural resourcebased electorates and to fend off pressure from inner urban Greens, is struggling to determine its position on Adani and export coal mining expansion in the Galilee Basin. Labor believes its failure to support Adani contributed to losing critical Queensland ‘mining seats’ and to its defeat in the last national election (a position disputed by Tranter and Foxwell- Newton [2020]). Possibly disciplined by this interpretation, and by pressure from retiring Labor backbencher Joel Fitzgibbon, its resource spokeswoman Madeleine King in April 2021 announced that Labor will not stand in the way of new mines and that she believes Australia will export coal beyond 2050 (Brown 2021). This same ‘anxiety’ and policy paralysis is also evident in the policy stances of subnational governments in the two major export coal states, NSW and Queensland. Both continue to support growth in export mining while promoting domestic decarbonization. For instance, the NSW Liberal government has committed to enabling the opening of ten new coal mines in the Hunter Valley, despite its simultaneous commitment to local and global emissions targets of net zero by 2050 and evidence of majority community support for a moratorium on new mines. Until around 2015, opposing Australia’s existing fossil fuel export industries was also deemed too difficult by Australia’s national environment organizations, such as the Australian Conservation Foundation, given the coal sector’s perceived contributions to the national economy. Now, the proposed Adani mine provides a galvanizing and unifying focus for actors opposing export coal, including ENGOs, farmer organizations, and the Greens. This opposition has been amplified by concerns about ‘unburnable carbon’ (CTI 2011; CC 2015). Geopolitical tensions Australian trade in thermal and metallurgical coal is facing potential economic and political pressures from two sources. The first arises from growing geopolitical tensions afflicting Australia’s relationship with its main market – China. China is the world’s largest importer of metallurgical coal and also Australia’s largest market for thermal coal. Australia, a major regional ally of the United States, is susceptible to ‘trade wars by proxy’. The Morrison government’s intransigence on a range of political differences with the Chinese government has also chilled this trade relationship. These factors have led to informal import restrictions (bans and port slowdowns) on a wide range of Australian exports, including thermal and metallurgical coal, and the suggestion that China may seek alternative suppliers (Canada and Russia, for instance). This situation may be transient, but if it endures for a decade, it may have a profound impact on Australian energy exports given the larger context of global moves toward renewable energy sources. Reduced demand may depress the price of Australia coal, which would either increase its competitiveness in other markets, or reduce profitability to the point where existing production declines 250 Peter Christoff as companies withdraw or collapse (the exchange value of the Australian dollar is also a factor here). Climate change and decarbonization by trading partners The second pressure is more generalized and enduring. Major importers of Australian thermal and metallurgical coal – China, India, Japan, South Korea – are seeking to increase energy efficiency, reduce greenhouse emissions, modernize their steel production processes or lower steel output (as per Japan [Ball et al. 2021, 45]), and enhance their energy security. Australia’s shortterm trade in thermal coal has fallen, led by declining import demand from China, India, and the European Union (EU). Much depends, in particular, on whether or not China and India continue construct coalfired power stations, and how they intend to fuel them. Developments in China’s domestic coal market, growth in renewable energy provision and use, and its climate policies, pose ‘risks’ to Australia’s coal export future. China has vowed to peak its use of coal by 2025, and to achieve netzero emissions by 2060, which will require it to unwind its dependence on domestic and imported coal. India has announced it will stop importing thermal coal by the 2023– 2024 fiscal year. Meanwhile, the EU is moving steadily toward decarbonization of its power sector. As the global transition to cheapening renewable energy accelerates, Australia’s trade in thermal coal can be expected to decline with increasing speed, probably over the next 10– 20 years. By contrast, Australia’s metallurgical coal exports may prove slightly more durable. India is just beginning to produce steel, has limited domestic metallurgical coal resources, and is beginning to import coking coal. Australia is its main source. When and how India will develop its steel industry, and how it will seek to leap over the carbon dependency trap technologically, remain to be seen. These factors have variable implications for Australian coking coal trade. Outlook Domestic coal A range of possible futures has been envisioned for Australian domestic coal. For instance, Jotzo et al. (2018) consider two scenarios for domestic coalfired power. Their ‘moderate’ scenario has coal power plant capacity and coal use declining rapidly through the 2020s and 2030s. Coal use would be less than half the present level by 2030 and declines by over 90% by 2040. This scenario is based on average plan lifetimes gradually declining as renewables become still cheaper than they already are and comprising a quickly rising share of power generation. Their second ‘faster’ scenario has plant lifetimes diminishing more quickly, with coal use ‘reduced by around 30 percent compared to today by Australia 251 2025, reduced by two thirds by 2030, and falling to very low levels during the 2030s’ (Jotzo et al. 2018). By contrast, the AEMO’s more recent Integrated System Plan contains five scenarios1 developed through consultation with those closely involved in the power generation sector. Its ‘fast change’ and ‘step change’ scenarios project a reduction in coalfired capacity by between 60 and 80% by 2040, with renewables and storage having substantially supplanted the role of coalfired (and gasfired) power generation (AEMO 2020b, 44, Figure 10). However, recent events, including the announced early retirement of Yallourn- W by 2028, suggest the transition is already moving quicker than the fastest expectations of the above scenarios. Given the confluence of pressures and influences described in this chapter, the end of coalfired power in Australia is highly likely by 2035, and possibly will occur earlier. At present, without the benefit of an integrated and orderly national strategy, this transition is likely to occur in a chaotic and uncoordinated fashion with, problems arising for electricity supply security and for the social and economic stability of regional communities supporting power generation. In Victoria, this will most likely lead to the end of brown coal mining; elsewhere, thermal coal currently destined for domestic use could possibly be exported – depending on Australia’s coal export markets. Export coal Meanwhile, it is likely that Australia will continue to export substantial volumes of thermal and metallurgical coal over the next decade, with existing mines unimpeded by political or policy intervention at either the national or subnational levels. However, it is unlikely that new mines will open, and exports will be into a diminishing global market which will cause the sector to contract by 2040. Although the Commonwealth Government has a capacity to restrict trade for environmental reasons, its powers have not been used against fossil fuel exports. Attempts using national and subnational environmental laws to encourage or force national governments to close existing coal mines or stop the development of new ones, on the basis of direct harm to individual species and ecosystems (including aquifers), and indirect harm caused by exported emissions, have failed. There is currently no international mechanism for ensuring an orderly withdrawal from coal trading (although the WTO or even the UNFCCC could perhaps be utilized to establish such a process or measure). Disorderly withdrawal – involving uncoordinated unilateral bans on fossil fuel exports by the national governments of coalproducing states – is seen as merely encouraging substitution from other exporting countries which would be advantaged by that withdrawal. In Australia, calls for unilateral withdrawal have been regarded as fanciful and politically unsaleable. 252 Peter Christoff Discussions toward the establishment of an international mechanism such as a Coal Ban Treaty, to regulate and fairly distribute the economic burden of withdrawal from coal and gas markets are progressing in academic circles but are nascent at best. Nevertheless, analysts consider that investment in coal exploration and mine development has peaked in Australia, in anticipation of these declines. Cunningham et al. (2019) suggest that Australian coal production and exports are expected to grow fairly slowly, driven by productivity improvements, the restart of some existing mines, and completion of investment projects. However, mining companies generally maintain a cautious approach to any expansionary investment. Ball et al. note (2020) that there are 42 metallurgical coal projects in the pipeline with a total investment value of $23– 31 billion. Of these, 30 are at the feasibility stage ‘but progress has slowed’ (Ball et al. 2020, 49). Some 53 thermal coal projects in the pipeline which would have a total investment value of $64– 74 billion. While 34 of these projects at the feasibility stage, most have not progressed for years. ‘Only six projects have committed investment, two are new “greenfields” projects and four are mine expansions’ (Ball et al. 2020, 65). Over the medium/ longer term, export markets for Australian coal will contract as power generation and steel production are decoupled from coal use, and demand for thermal and metallurgical coal declines, and as global efforts to counter over climate change intensify. This chapter suggests that Australian coal exports will begin a steep decline by 2035 given these factors. Conclusions This chapter finds a rupture occurred in domestic coalrelated politics and policy around a decade ago, driven by a conjuncture of political, economic, and ecological factors. Before then, procoal actors in industry and government maintained a hegemonic discourse about the benefits of fossil fuels for Australia’s economic future. The national political sphere was seen by procoal actors to be where the greatest influence would lie for ensuring favorable outcomes for coal both domestically and for trade. These actors have continued to dominate fossil fuel export policy but failed to recognize the importance of the subnational sphere of governance for domestic energy policy. The layering of Australia’s federal system provided opportunities for subnational policy experimentation unhindered by the deep political schisms and policy paralysis over climate change which affected the national sphere. Nationally, it is still the case that ‘neither the Labor Party nor the Coalition, which together account for close to 80% of the vote, offers a strong, reflexive, ecologically modern vision’ (Warren et al. 2016, 10) that would lead to an orderly and rapid exit from export coal. At the subnational level, however, gamechanging decisions have established an ‘autonomous’ track for domestic coal, leading to its accelerating decline. Australia 253 From the mid- 2000s onwards, Premiers of subnational States, acting as policy entrepreneurs, produced the greatest impetus for change. Novel climate laws and targets were transferred from South Australia to other non-coal producing States through processes of political competition, and policy and legislative mimicry and learning. Meanwhile, a unique combination of considerations – including environmentrelated interests (ENGOs, the Greens, popular opinion favoring action against climate change), the high levels of emissions from aging power plants burning lignite, and economic factors (such as marketcompetitive renewable energy alternatives) – led Victoria, a coal producing State, to break ranks and begin to decarbonize in 2010. NSW and Queensland eventually followed. Subnational measures promoting renewable power initiated a rupture that has led to an emergent alternative energy policy regime that is displacing coal. Whereas subnational political leaders opened the door to mitigation and promoted renewables onto the States’ agenda through preferential policy measures, market forces are now irrevocably in control. Initially, policyassisted, the uptake of cheaper, reliable renewable technologies – now driven almost purely by commercial considerations – is spelling the end of investment in domestic coal- and gasfired power generation in Australia’s electricity sector. There is little that national or subnational governments could now do to stop or even slow the accelerating decline and probable demise of domestic coal over the next decade. This transformational trajectory is also influencing, albeit much more slowly, the export coal sector. The close relationship between the Australian state, Coalition and Labor political actors, and national and multinational corporate elites, still protects and prefers the interests of carbon capital in that sector. This chapter has argued that coal (and gas) exports have to date grown without significant policy obstruction, despite their massive contribution to greenhouse emissions and to global warming. However, it is now only a matter of time before Australia’s coal exports – and its substantial exported embodied emissions – become targets for concerted international and domestic action. In all, Australia’s coal sector can be seen as fractured – temporally, institutionally, geographically, and economically – and in decline. It is divided between the period before and after about 2010. It is split between national and subnational political spheres, and between coal-producing and non-coal producing states. Australia’s national climate and energy resource policies run along two separate and increasingly contradictory paths – one domestic and the other exportoriented, a split most clearly evident in relation to coal. The forces reducing the distance between these tracks remain international and subnational rather than national – including the slowly refashioning of demand for Australian coal as importing countries and Australia’s subnational states recognize the economic and ecological opportunities that renewables offer, and as growing public alarm at the accelerating threat of global warming reshapes the political landscape ‘from below’. 254 Peter Christoff Appendix This chapter contains supplementary online material at https://www.mccberlin.net/pecoal/ch13. Note 1 These are central, slow, and fast change, step change and High DER (Distributed Energy Resources. ‘The Central scenario is determined by market forces and current federal and state government policies. The other scenarios vary in the pace of the transition – a Slow Change scenario with slower economic growth and emission reductions, a High DER scenario with more rapid consumer adoption of DER, a Fast Change scenario with greater investment in gridscale technology, and a Step Change scenario where both consumerled and technologyled transitions occur in the midst of aggressive global decarbonisation’ (AEMO 2020c, 11). References AEMO (Australian Energy Market Operator). (2020a). Fact sheet: the National Electricity Market. At: www.aemo.com.au/ - / media/ files/ electricity/ nem/ nationalelectricity- marketfact- sheet.pdf (accessed 12 March 2021). AEMO (Australian Energy Market Operator). (2020b). Integrated system plan. July 2020. At: https:// aemo.com.au/ energysystems/ majorpublications/ integratedsystem- planisp/ 2020- integratedsystem- planisp AEMO (Australian Energy Market Operator). (2020c). 2020 System strength and inertia report: December 2020. 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Canberra: Commonwealth of Australia. DISER. (2020a). Australian energy Update 2020. September 2020. Canberra: Commonwealth of Australia. DISER. (2020b). Australia’s emissions projections 2020. Canberra: Commonwealth of Australia. DISER. (2020c). Technology investment road map: first low emissions technology statement, 2020. At: www.industry.gov.au/ data- and- publications/ technologyinvestment- roadmapfirst- lowemissions- technologystatement- 2020 DISER. (2020d). Snowy 2.0— Making power more affordable and reliable. At: www.energy. gov.au/ publications/ snowy- 20- makingpower- moreaffordable- andreliable DISER. (2021). Australian resources and energy Quarterly 2021. March 2021. Canberra: Commonwealth of Australia. DISER. (n.d.). National Energy Market. At: www.energy.gov.au/ governmentpriorities/ energymarkets/ nationalelectricity- marketnem. Edis, T., & Bowyer, J. (2021). Fast erosion of coal plant profits in the National Electricity Market. Green energy markets/ Institute for Energy economics and financial analysis. At: https:// ieefa.org/ wpcont ent/ uplo ads/ 2021/ 02/ Coal- Plant- Profit abil ity- Is- Erodi ng_ F ebru ary- 2021.pdf. 262 Lina María Puerto-Chaves and Felipe Corral-Montoya Figure 14.1 Coal mines, coalfired power plants, and transportation infrastructure in Colombia. Source: own elaboration based on Mingorance- HREV (2021). Colombia 263 From a regional development perspective, coal plays a key role in shaping the local political economy landscape, as coal mining contributes the most to the General Royalty System (SGR by its acronym in Spanish), which invests in solving basic needs of the departamentos and municipalities [isa1, npa2, npa3]. La Guajira and Cesar are the regions that generate the most royalties from coal (85%) (UPME, 2020b), but even after decades of mining bonanza, these regions continue to have high levels of poverty and social exclusion [isa1, nsa4, nsa9]. Nonetheless, by combining the fundamental material necessity to funnel coal rents to lowincome mining municipalities, the prospects of additional revenues, and the high external vulnerability of Colombia’s balance of payments position in public discourse, decision makers aim to maintain these revenue flows from coal extraction for as long as it is feasible [npa1, npa2, npa3, npa4, ea3]. Appropriation of natural resource rents, and securing or expanding export markets The strategies to support the objective of maintaining the revenues from coal extraction stem from the idea of seizing Colombia’s coal endowment to secure rents [npa4, ea3]. The discussions in this setting revolve around changing the source of rents, rather than reflecting on overcoming rentdependency via planned approaches to diversify exports toward products that increase economic complexity [npa1, nsa7]. Considering that Colombia’s coal reserves could continue to be extracted at 2017 levels for over a century (UPME, 2012; 2017), the motive of seeking to prolong and appropriate rents explains for some actors [npa3, npa4, ea3] the recent extensions of mining concessions. These extensions, according to an interviewee [npa3], were granted under a regime that provided a higher government take, understood as the sum of all governmentdirected payments from a natural resource extraction activity (Rudas- Lleras & Espitia- Zamora, 2013). This could also explain ongoing efforts to attract other mining conglomerates to take over the operations of companies that are suspending their activities, like Prodeco, Colombia’s 3rd largest coal mining company operated by Glencore, which decided to hand back its mining titles to the government alleging the negative economic perspective from coal (Atwood & Medina, 2021). Both the National Mining Agency (ANM by its acronym in Spanish) and the Colombian Mining Association (ACM by its acronym in Spanish) are considering strategies to secure export markets for Colombian coal and assure that there will still be a demand for it in the short term [npa3, npa4, ea3]. However, for some actors [npa1, npa6, nsa2, nsa3, isa2], this disregards what market trends suggest, as well as Colombian coal’s competitive disadvantage in the Pacific markets due to freight costs that could be almost double than those incurred for coal shipments from Indonesia or Australia (IEA, 2020b; Oei & Mendelevitch, 2019; Yanguas Parra et al., 2021). Strategies to expand market space in countries like China, India, or Turkey have also been considered by the Ministry of Mines and Energy (MME), the ANM, and ACM [npa3, npa4, ea3]. The Colombian mining sector has also highlighted the importance of 264 Lina María Puerto-Chaves and Felipe Corral-Montoya diversifying the country’s mining basket toward copper, gold, and rareearth extraction (Portafolio, 2020) to overcome the shrinking space of coal exports [nsa8, npa3, npa4]. Guaranteeing power system reliability and security of energy supply Colombia’s historically high reliance on hydropower Colombia’s power system is characterized for its high reliance on hydropower [nsa1, ea1, npa2, npa5, nsa7, nsa9] (Rubio & Tafunell, 2014; Zapata et al., 2018). Since 2006, hydropower has represented over 76% of power generation (UPME, 2020a). Droughts associated with El Niño Southern Oscillation (ENSO) have become more recurrent (Cai et al., 2014). Twice in Colombia’s recent history (1992/ 1993 and 2015/ 2016), droughts caused by the ENSO phenomenon have reduced hydrobased power generation to the extreme of either causing widespread power outages or needing electricity rationing. To respond, Colombia encouraged the operation and construction of coal- and gasfired power plants via capacity mechanisms (cargo por confiabilidad in Spanish) as a backup to hydroelectric power plants [ea1, npa2, nsa5, npa5] (Olaya et al., 2016). However, when hydrology is normal, thermal power plants operate at low capacity levels, making them financially unviable (Paredes & Ramírez, 2017). As the climate crisis deepens and vulnerability to extreme weather patterns increases, government and corporate voices have urged to expand (or “diversify”) the power system via two strategies. The first consists of largescale, auctionled deployment of solar and wind projects, mainly in the Caribbean region [ea1, nsa5, npa7] (MME, 2020). In Colombia, solar and wind energy already offer prices of less than 2.5 cents per kWh according to the results of the 2019 renewable energy auction [ea1, nsa5] (Revista Dinero, 2019). The second consists of the refurbishment or expansion of existing gas- and coalfired power plants, together with the construction of new thermal power stations [ea1] (López- Suárez, 2020). Proponents of this strategy have pointed out the significant delays of the Hidroituango project, a 2.4- GW water dam on the Cauca River which would satisfy over 10% of Colombia’s power demand (Henao & Dyner, 2020). Since most energy planners counted on Hidroituango to be fully functional by 2019 [npa5], policymakers were quick to suggest the fast deployment of new gas- and coalfired power plants to provide reliable electricity instead. These developments could stall additional expansion of renewables risking both renewable energy targets and climate policy commitments [nsa7, isa2] (Arango- Aramburo et al., 2020; González- Mahecha et al., 2019). Reasons for domestic coal phasein: security of supply and international coal market developments Guaranteeing “security of supply” and “energy selfsufficiency” were consistently mentioned as policy priorities in Colombian energy policy [npa2, Colombia 265 npa5, e1, nsa1, nsa7] (Martínez & Castillo, 2019). This also applies to the latest National Energy Plan 2020– 2050 (UPME, 2021b). Yet, this does not necessarily affect coal extraction, since TNEs responsible for almost 90% of coal extraction in Colombia export over 95% of their output. As Figure 14.2 shows, of the coal used in Colombia, most is used for final consumption in coking plants and industrial processes (e.g. cement production, and for process heat in paper and food industries, amongst others) [npa3, npa4, npa5]. The coal used for domestic consumption is produced in the Andean region by small to medium, often informal, companies in laborintensive, underground mines which employ over 60,000 workers (Salazar et al., 2011). As electricity generation in Colombia relies largely on hydropower (Zapata et al., 2018), coal plays a minor role in power generation. Nevertheless, the ubiquitous threat of electricity rationing and power outages due to more extreme and frequent droughts plays an important role during the energy planning process [ea1, nsa5, npa5, nsa7, nsa9]. Expanding coal- and gasfired generation capacity is thus invoked by trade associations4 to diversify the energy mix and provide reliability of supply (ANDEG, 2021). Similarly, they also highlight the low emissions factor of the Colombian electricity mix to justify these additions [ea3] (ibid.). For some interviewees, the role of trade associations has also been instrumental in maintaining the schemes that favor the prioritization of gas- and coalfired power plants. For example, their active participation in the debates around the carbon tax in Colombia has been fundamental in securing the exclusion of coal and gas in the tax base so far [npa1, npa6, isa1]. Another driver for domestic coal phasein consists of expanding a domestic market for coal. Current plans for new coalfired power generation units in Córdoba (TermoBijao), Cesar (TermoLuna), and Norte de Santander (TermoTasajero) imply a 1.4- GW expansion on top of the existing 1.6 GW (Global Energy Monitor, 2020; UPME, 2021a; 2021b). The additional coalfired capacity in the pipeline is considered by some actors to withstand the narrow prospects from international coal market developments [npa3, npa4, ea3]. Disconnect between climate goals and mineralenergy planning instruments Our research indicates signs of disconnect between Colombia’s climate policy instruments and its mineralenergy policy [isa1, isa2, nsa9]. For instance, the standing National Plan for Mining Development expects to increase coal extraction and prolong exports well after the 2050s [nsa8] (UPME, 2017). Further, the National Energy Plan 2020– 2050 expects additions in both coal- and gasfired power plants by including 1.4 GW of coal- and 2.7 GW of gasfired power plants by 2050 and contemplates well over half of primary energy to come from fossil fuels (UPME, 2021b). Despite Colombia’s commitment to carbonneutrality by 2050, full decarbonization is still lagging behind in Colombian mineralenergy planning instruments [npa5, isa2]. 266 Lina María Puerto-Chaves and Felipe Corral-Montoya Figure 14.2 Coal consumption by sector (in kt) 2006– 2019. Source: own elaboration with data from UPME (2020a). newgenrtpdf Colombia 267 If policy is executed as planned (UPME, 2021b), by 2050 Colombia will have important amounts of renewables installed [npa7]. Nevertheless, it will not have phased out fossilfired power plants in line with its NDC commitments. In fact, according to Gonzalez- Mahecha et al. (2019), building the pipeline of coalfired power plants in Colombia would double emissions from electricity generation. Further, from a fossil fuel supplyside perspective, Colombia’s prolongation of coal extraction could make global climate protection targets even harder to achieve considering that over 80% of coal reserves must remain unburned to meet at least a 2°C warming limit [isa1, isa2] (Lazarus & van Asselt, 2018; McGlade & Ekins, 2015). All interviewees recognized the risks and causes of climate change and considered addressing it as a top priority for all sectors and actors. However, there were significant differences with regards to concrete actions and policies. For example, some utilities are already scrambling to increase renewables in their portfolios and are invested in their deployment. At the same time, they are considering technology refurbishments to improve the efficiency of obsolete coalfired generation instead of closing down coalfired assets [ea1]. Some even consider coal phasein as an adaptation measure to the vulnerability of the hydroreliant Colombian electricity sector to more extreme and frequent droughts [npa4, ea3]. In this regard, no consideration is given to how increasing temperatures and water availability could also affect the efficiency and cooling capacity of thermal power plants (Van Vliet et al., 2016), and how the carbonintensive alternatives proposed worsen the climate crisis that they are aiming to adapt to [nsa9]. Representatives from the mining sector also recognize that climate change is caused by the combustion of fossil fuels [ea3]. Nevertheless, as coal combustion does not occur in Colombia, it is not accounted in domestic GHG emissions inventories [ea3, np4, npa7, nsa7]. This could explain the absence of strategies to phaseout or - down fossil fuel extraction in Colombia’s climate policies and their disconnect with energy production [isa1] (Piggot et al., 2020). For some, continuing to bet on fossil fuel extraction and combustion is a risky strategy [npa1, isa2] as reiterated by the 2020 crash in oil prices, and the COVID- 19 pandemic (Piggot et al., 2020; Yanguas Parra et al., 2021), and could even increase committed emissions from the electricity sector in Latin America (Delgado et al., 2021; González- Mahecha et al., 2019). Managing socioecological conflicts Antagonistic relationship between social actors and accumulated socioecological liabilities of coal extraction Since its beginnings, local indigenous, afrodescendant, and peasant communities have opposed coal extraction and its expansion [nsa9] (EJOLT, 2019). According to Vélez- Torres (2014), this was followed by a military securitization strategy to control underground resources and guarantee an attractive [Document text truncated for crawler view.]