Just Transition of Coal Regions: A Cross-Case Analysis of Chile and Romania

 

by Laura Camarut

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The European Green Deal marks a turning point for energy and climate policy in Europe. Achieving net-zero greenhouse gas emissions for the EU as a whole will require an overhaul of the way energy is produced and used, across all sectors and regions. In this context, the coal industry is among the first targeted by policymakers: primarily used in power generation and in industrial processes, coal is a highly carbon intensive energy source, accounting for 31% EU ETS emissions in 2019.[1] To achieve the new 55% GHG emission reduction target by 2030, the European Commission assessed that coal will likely become negligible in final energy demand in 2030, down from the current 15%.[2]

Despite this strong momentum at European level and the seemingly favorable conditions at national level, particularly given its balanced and diversified electricity mix, Romania does not yet have an official coal phase-out plan.[3] Eliminating the use of coal is a fundamental step in fighting climate change, being the most carbon intensive fossil fuel[4], and it would also make an important contribution in reducing air pollution. Besides, this is not only a matter of climate and environmental concern: with plunging costs for renewables, rising carbon prices, and aging infrastructure, the economic fundamentals of coal are increasingly weak.

Nevertheless, the difficulties of a coal phase-out are not to be downplayed. The regions where coal mines and power plants are concentrated are deemed to suffer due to the loss of direct and indirect jobs. Another difficulty present in the European context is the risk of people perceiving the transition as a top-down decision, taken at EU level, without proper consideration of local circumstances.

Given all these complexities, it is important to take stock of similar situations outside the European space. Discussions to phase-out coal are taking place in numerous other countries, which are now recognizing that such a carbon intensive and polluting fuel cannot be part of the future energy systems. Chile, where coal accounts for approximately 40% of power generation, has launched an ambitious coal phase-out initiative, to match its goal of becoming carbon neutral by 2050.

This report seeks to show that the Chilean experience could provide valuable lessons for Romania and other countries in Eastern Europe, where the issue of the energy transition tends to be seen as clashing with other economic goals. Romania and Chile have several comparable indicators, with similar GDP/capita (slightly higher for Chile, who is also an OECD member since 2010), population and even annual CO2 emissions. Both countries experienced authoritarian regimes until 1989, which left an important footprint on the economic development models and energy infrastructures. While Chile’s economy is a lot more dependent on coal than Romania’s, the country is now committed to an ambitious energy transition, that includes closing all coal power plants by 2040 and boosting the share of renewables in electricity generation to up to 70% by 2050.

This paper will analyze the Chilean experience regarding coal phase-out, with the aim of extracting some lessons that could be useful in raising Romania’s ambitions on this matter. To exhibit how this comparison can reveal important lessons, the analysis will look at five key points in evaluating of the countries’ energy transition plan, namely:

  • The role of coal in the country’s energy sector and economy
  • The role of the private sector in the coal phase-out plan
  • The impact on jobs and strategies to mitigate the losses
  • The coal phase-out plan and the set of policies that support it
  • Stakeholder engagement strategies in the coal phase-out plan

 

[1] Energypost (2020). Europe’s 55% emissions cut by 2030: proposed target means even faster coal exit.

[2] European Commission (2020). Impact assessment on stepping up Europe’s climate ambitions. Part 1.

[3] At the time of publication, a leaked document submitted by the Romanian Government to the European Commission indicates that Romania plans to phase out coal by 2032. However, an official date has not been confirmed yet by the authorities.

[4] According to the 2006 IPCC Guidelines, the weighted emission factor for hard coal is 94.6 t CO2/TJ and 101.0 t CO2/TJ for lignite.

 

Laura Camarut is an EPG Fellow. The views expressed in this paper are those of the author and do not necessarily reflect the opinions of EPG. 

 

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