Closing the supply-side gap: using a novel vulnerability index to identify the right policy mix for coal producing countries

Abstract

AbstractRapid coal phaseout is a key measure to reach the 1.5 °C warming target. With projected global coal demand declining faster than global supply, a poorly anticipated and planned transition in coal producing countries would have huge local and national economic and social impacts. Identifying the vulnerabilities of specific coal producing countries and regions to this transition is important for designing appropriate policies to manage its potential local and national impacts. For this purpose, the novel Coal Transitions Vulnerability Index (COTRAVI) is developed, composed by 12 key “transition risk” and “ability to cope” indicators, for the 10 largest coal producing countries. In addition to indicators included in previous transition risks analyses such as energy and economic dependency, coal reserves, and age of coal assets, the COTRAVI includes indicators to account for the likely speed of the transition (based on simulations from the COALMOD World model), the exposure and resilience of coal producing regions, the national economic resilience, and the transition policies in place. This provides a more holistic approach to identifying and comparing the challenges of producing countries. The results show the high importance of Just Transition plans in increasing the ability to cope with the transition, as well as the need for more structural changes and targeted policy efforts in highly vulnerable countries and heavily coal-dependent regions. The COTRAVI analysis also identifies two relevant roadblocks for a globally just coal transition: high cost of capital and stranded assets risk in the coal producing countries.