The end of coal in Europe: What does it mean for South Africa?

Transitioning from fossil fuels to clean energy is fundamental to tackling the climate crisis. Now, with gas, coal and oil prices the driving force behind high inflation in Europe, this transition also offers a unifying solution to enhance energy security and affordability, drive post-pandemic economic recovery and address the cost of living crisis.

Therefore, despite a rush to build new fossil fuel infrastructure, Europe is already on the “irreversible” path away from fossil fuels, finds a new report by think tank Strategic Perspectives. Moreover, implementing the European Green Deal, which sets an ambitious 2030 decarbonisation target, will mean the EUs energy landscape will be “transformed” in the next seven years — with fossil fuels increasingly displaced by cheaper, more efficient renewables.

Likewise, many analysts predict the world is about the reach peak fossil fuel use. In October 2022, the International Energy Agency (IEA) also said that Russia’s invasion in Ukraine will likely accelerate the world’s transition from fossil fuels to clean energy. We are at the “dawn of a new industrial age”, it stated. Analysis of the global electricity market by Ember corroborates this. The year 2022 could mark the “beginning of the end of the fossil age,” said Ember’s Małgorzata Wiatros-Motyka. “We are entering the clean power era.”

The decline of coal since the Paris Agreement

In many nations, renewables have been steadily displacing coal in the electricity mix for years. For example, Ember’s analysis found wind and solar grew by 9.7 per cent between 2015 and 2022 in the EU, while coal use reduced by -8.6 per cent over the same period.

G20 countries map a similar trend. Ember’s data reveals that wind and solar almost tripled in G20 electricity share over these years – increasing from 5 per cent in 2015 to 13 per cent in 2022. Conversely, coal power fell from 43 per cent to 39 per cent in those seven years.

Meanwhile, despite the EU’s recent surge in demand for South African coal, overall exports from the country have steadily declined from their peak of 76 Mt in 2015 to 63 Mt in 2020, according to IEA data. In 2022, exports from South Africa’s Richards hit a 29-year low.

Irreversible decline of EU coal demand

Europe’s increase in demand for South African coal last year is not expected to last. In 2022, Europe bought up almost 30 per cent of South Africa’s coal exports, but is now sitting on a massive stockpile it looks unlikely to need. As a result, analysts predict the EU’s coal imports could fall back sharply this year. Demand for South African coal in other important markets, including Asia are also falling.

In the EU, meeting its robust decarbonisation target will mean a structural and steep decline in coal import demand, falling 73 per cent by 2030, notes Strategic Perspectives. This is because as well as reaching emission reduction goals, coal will simply not be cost-competitive against cheaper and more efficient wind and solar, which will dominate electricity consumption by this date. “Countries seeking to export gas, coal and oil to the EU should not fool themselves: consumption is going down, irreversibly”, said Linda Kalcher, Executive Director of Strategic Perspectives.

International collaboration and cooperation

This new energy landscape demonstrates the urgent need and vast opportunity for South Africa to forge a new economic partnership with the EU. The report notes that developing new economic partnerships with third countries is a “key pillar” of implementing the European Green Deal. “This provides an opportunity to shape a new approach to economic cooperation with non-European countries that is mutually beneficial… new economic partnerships on critical raw materials and net-zero technologies can turn into a strategic priority for the next European Commission as the demand will grow even more over the next decade.”

The IEA also echoes the importance of strong international partnerships to drive the clean energy transition. While achieving greater energy security is “the biggest driver of renewable energies”, international collaboration for the clean energy transition is also essential,  said IEA executive director Fatih Birol. “Since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”