Coal Under Fire | Anne-Claire Howard

For centuries the undisputed energy king, coal has made possible the great advancements of the industrial age.

But coal is now tarnished with a dirty reputation, and both investors and consumers have started to avoid it.  We met Anne-Claire Howard, Executive Director of BetterCoal, to ask: is the end of coal coming with a bang or a whimper?

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With support from the German Federal Ministry for Economic Cooperation and Development, through BGR, and the Inter-American Development Bank.

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Transcript

Åsa Borssén:
A political and business establishment increasingly swinging behind the forthcoming energy transition seems to have condemned coal to the past. The energy king is dead – or is it? My name is Åsa Borssen, and this is Highgrade.

Åsa Borssén:
Welcome to this Natural Resources Podcast. Coal has made possible the greatest
advancements of the industrial age. It has literally fueled the world economy over the last
two centuries, and until just a few decades back, the so-called black gold was the
undisputed energy king. But coal is now tarnished with a dirty reputation, and both
consumers and investors have started to avoid it. Today I talk to the Executive Director of
‘BetterCoal’, Anne-Claire Howard. As we drag Anne-Claire over the coals, she argues that the issue is not black or white. Anne-Claire, thank you for joining me.

Åsa Borssén:
Anne-Claire, thank you for joining us.

Anne-Claire Howard:
Well, thank you very much for having me.

Åsa Borssén:
Let's start from the beginning, what is BetterCoal?

Anne-Claire Howard:
So better coal was set up a quite a while ago, probably about seven or eight years ago by a number of buyers of coal who wanted to encourage responsible sourcing. So, the main premise behind the organization was that as long as coal was being mined, as long as it was being burnt, we had to ensure that it came from responsible production sites. And that's why these buyers set up the BetterCoal code, which is a mining standard, which is the backbone of our entire organization. And that code is applied directly to mine sites. And the fundamental idea was to leverage the power of the buyer to encourage producers to produce more responsibly. So, we focus on their ESG performance and we ensure that the buyers can increase their purchases that come from responsible mines.

Åsa Borssén:
Before we launch into the actual discussion of coal, I'd like our listeners to get to know you. Tell me about your professional journey. You have a development background; how did you end up working for a coal organization?

Anne-Claire Howard:
It's interesting, because that's a question I get quite often, and I don't view my current role in the in the coal space is being opposed to my background in development. On the contrary, you know, if you look back at the development of our own economies, this was fueled by coal. Without coal, iron ore, we would have had no Industrial Revolution, no electricity and no economic development. And if you look at the world today, and especially in the developing world, a lot of the problems faced by these countries is around the lack of access to reliable and affordable energy. And coal, in some shape or form, has helped to achieve this. But obviously, it has a massive cost and a massive toll on the environment.

Åsa Borssén:
And you have worked in the oil industry as well. How is that different from the coal sector?

Anne-Claire Howard:
I think it's very similar. You know, if you look at, I've worked in gas, I've worked in oil, I'm now working in coal. My mother keeps telling me one day I'll work in nuclear energy and I would have gone full circle. But I think that, you know, extractives in general, and fossil fuels in particular, play a significant role in our economies. For me, the focus has always been around how we can ensure that the, you know, the positivity impacts are maximized and that the negative impacts are minimized as much as possible. And I don't believe there's a way to do any of this 100% cleanly. But I do believe that there's a lot of things we can put in place to minimize the negative impacts that the extractive sector has on the environment and on people.

Åsa Borssén:
Coal is a major contributor to global carbon emissions. Where do you stand on climate change?

Anne-Claire Howard:
It's hard to argue against, you know, the fact that coal is probably the major contributor to global carbon emissions today. I won't argue against that. My family comes from the east of France, and I've seen firsthand the devastating effect that coal mining can have on the environment, on people's health, etc. And then the burning of coal itself obviously is a significant contributor to emissions. And we burn coal for a number of reasons: energy production, steel manufacturing, we use it in cement. It's a fuel that's used in many, many industrial purposes. So my staunch, personally, is I'm a fervent environmentalist, believe it or not. But I'm also a pragmatist, which is, I believe we need to have a constructive conversation on the role of coal in our world today. And as our economies, you know, in the West, are declining their dependence at pace we have to accept that this pace of change is not the same everywhere. It's still you know, last year it was 36% of the electricity mix. 10% of coal production is actually used in steel manufacturing. Coal is a resource that's still widely used, and we can't wish it away. And we have to have an energy transition; it's imperative if we want to save our planet and if we want to meet the objectives that we've set ourselves through the Paris agreements. But coal is still being mined. And what I see as my role and what I get very, you know, fervent about is, as coal is still being mined, we have a duty to ensure that it's being mined properly and that we are holding to account not just the users of coal, because a lot of the pressure right now is on the steel industry, on, you know, power producers to reduce their emissions. But with the coal miners it's more of, well, yes or no, it's stopped mining coal as opposed to, well, as you look at how you can phase out coal, how can you ensure that while coal is being mined is being done responsibly. And I get very, you know, upset when I read the news, and I see a lot of coverage and a lot of interest on child labor in cobalt or lithium and you read all sorts of stories about, you know, gold, diamonds. But you read very little stories about the hundreds of coal miners who die in Pakistan every year or other countries where coal mining should be done better.

Åsa Borssén:
Let's look at a little bit more in detail the benefits of coal and you will be better than me at this for sure. But I'm going to try to make a pitch for coal. It's relatively ubiquitous, it's cheap, and it's very energy efficient. What else? What would you like to add to that list?

Anne-Claire Howard:
It's a difficult one, you know, at the end of the day, my role is not to pitch for coal or for any fossil fuel for that matter. It is very abundant. You know, it's one of the most abundant fossil fuels in the world. If you look at coal reserves today, the latest estimate is that around 1.1 trillion available. There's recoverable reserves in about 70 countries in the world. If you look at the current rate of production, that's enough production for about 150 years. So it pales in comparison to oil and gas. You mentioned its efficiency, and it's very efficient, although I would caveat that the efficiency rates really vary depending on the quality of the coal that you're burning. All coals are not created equal. And I think that's something important to note. It's hard to make a pitch for it. But coal is useful. For a lot of countries, it's the cheapest alternative to importing gas or importing fuel. Or even whilst you're trying to build up your renewables capacity and when you try and get the investments required, you know, new coal fired power plants is the easiest way to move forward. You know, for Europe, as I said before, it's fueled our industrial revolution. But again, if our priority as a planet is to reduce our emissions and achieve the 1.5 degree scenario, we need to end unabated coal we need to deploy CCS at scale, and not just for coal, but every industry which has significant emissions.

Åsa Borssén:
Then let's dig deeper into what is wrong with coal. Basically, relative to other sources, it generates a lot of greenhouse gas emissions per unit of energy produced. Is that right?

Anne-Claire Howard:
Yes. I'm not going to debate that. And I think that there are other organizations who debate this till the cows came home. But yes, coal is a huge contributor both at the mine site, and at the end use is a contributor to greenhouse gas emissions. But then if you look at mining in general, coal is no different to gold mining, copper mining, and mining has a very significant impact on everything around it: people, you know, water, land, biodiversity. Coal is the same. I think in my mind, the case against coal is twofold. There's the emissions at the mine and the end user level, but there's also the whole dust and impact on workers and communities. You know, if you look at Wales where obviously workers in the coal mines have suffered long lasting health problems even now, one generation after the coal mines have been closed. I think the problem is that the latter can be addressed. So, you can do a lot of work around dust and the impact on health and your local communities, it can be addressed, and it is being addressed by the vast majority of coal mining companies out there. The first one, the emissions, is the piece that in my mind has rallied, you know, stakeholders. Coal is a large emitter when you burn it, and there are alternatives. And that's the reality. If we do stop burning coal, we will be a little bit closer to reaching the 1.5 degrees scenario. But coal and ending coal is not what's going to get us there. And I think that's why I focus on a lot of other things is coal and ending coal is the low hanging fruit in in the fight against climate change. But we're so focused on ending it that we're paying very little attention to how it's actually being produced and there's very little scrutiny on how it's being mined.

Åsa Borssén:
And that leads us to the name of your organization: BetterCoal? How do you make coal better? Is it about technology?

Anne-Claire Howard:
It's a very good question. And I remember when I joined BetterCoal as CEO three years ago, my first question was, why did you call it that? Really, it's, it sounds like we're trying to make coal sound, you know, sexier than it actually is. The focus we have as an organization is really around environmental, social and governance performance at the mine site level. So, all of the power producers that are members of BetterCoal want to ensure that they're burning coal that was produced responsibly, and they want to, in some way, also alleviate the risks that they're exposing themselves to. In that sense, it's no different to any, you know, ESG performance metric that you would use as an investor as a buyer as a third party who wants to know, OK am I exposed to a lot of risk by buying from this particular mine site? What we do as an organization, how we improve coal, as opposed to making it better, is we work with the mines to improve their performance. So once a mine has been assessed against the BetterCoal code, it either meets or doesn't meet a lot of the aspects in the code. We then work with these mines on continuous improvements. So, one of the key principles is we're not a certification mechanism. We don't get a pass or fail. No, we work with the mines on improving their production processes throughout the cycle of the assessment. We also know that technology is a great game changer. And for that our members all in their own right have, you know, increasingly good technology on improving the performance of their plants, lowering their footprints. All of our members have very clear commitments around decreasing their own emissions, not just from coal, but from all of their activities. And then we work with knowledge partners, like the IAEA clean coal center, who are the ones developing those technological solutions to carbon footprints.

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You are listening to Highgrade, and this is our Natural Resources Podcast. With me today, I have Anne-Claire Howard from the organization BetterCoal. She is not supporting coal per-se – her point is rather that, as long as coal is being mined, we need to do it more responsibly.

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Åsa Borssén:
One question that I find very interesting is coal is definitely cheap. But who should be paying for the negative externalities of coal? Should it be the companies mining it or should it be the government's using coal?

Anne-Claire Howard:
I think there's like a lot of these questions. It's about everybody coming together and finding ways to mitigate the negative impacts. You could argue, you know, historically if you look, I'm gonna take the example of Wales because it's an interesting one. You know, the negative externalities were never really financed by anyone. The coal companies just shut down the mines and ran away. The government didn't really deal with the mass unemployment that followed. And the buyers certainly didn't want to get involved in any of this. And these are conversations we're having today. And I think there's a very interesting example, which is the one of Colombia. So, Colombia produces a lot of coal. The vast majority of that coal is for exports. If you look at Colombia's economy, they probably wouldn't have used a lot of coal domestically. So, the reason they started mining coal and the reason parts of the country have been significantly impacted by coal mining was because Europe needed high-quality coal and that coal came from Colombia. Today, obviously Europe is importing less and less coal and less and less coal from Colombia specifically. And therefore, there's actually a very interesting conversation happening at the moment, which is, well, these mines are going to close eventually, probably in the next decade, which means that a) the Colombian government's revenue from taxing coal production is going to decrease. The local government, which largely is the largest beneficiary of royalties in the states is suddenly going to find a massive hole in its budget. And workers are no longer going to have jobs and these communities which have built themselves around the coal mine are going to suffer. And the most interesting question around this is, okay, well, does Europe have a role to play in this? Are we going to acknowledge the responsibility we have in the fact that the mines are closing because we have now made the decision to stop using coal and replace it with other sources of energy? And I think for me, that's a really interesting debate that's happening right now, which is around, you know, at whose door do you lay the responsibility for what's happened? And how can you get all these entities to actually start discussing things together around, what does responsible transition look like?

Åsa Borssén:
It is interesting to see it all playing out. On the one hand, the likes of the World Bank no longer fund coal projects. And you get investors and traditional producers, take Rio Tinto for example, that are actively walking away from coal, “cleaning up their portfolios”, as they say. But on the other hand, coal continues to be consumed all over the world. And more to the point, as we speak, China is firing up coal power plant construction to fuel the post-COVID economy. Do you see a role for coal in the energy matrix 20 years from now?

Anne-Claire Howard:
If I only had a crystal ball to answer that question. I think the future of coal is challenging to say the least. You know if anything, yes, post-COVID reconstruction in China is relying on coal. But if you look at Europe, for instance, our coal consumption has never been so low. You know, the IEA report on a sustainable recovery highlighted the coal demand is expected to drop by 8% in 2020. That's the largest contraction since the Second World War. That's not something we should take lightly. And I'm really happy that you asked me this question because it highlights a couple of the challenges that we're dealing with, not just BetterCoal, but I think our world in general. And to answer your question, I'm going to touch on a couple of points, which are the first one which is around coal versus coal, as I like to call it, which is that the investment community and NGOs and now insurers have chosen to differentiate between thermal and metallurgical coal. So, the former one is bad, and the latter is tolerated, so to speak. So multi-commodity mining companies are being praised on the one hand for divesting their thermal coal assets, but they're keeping the metallurgical coal ones. And you can argue that at the mine level, the ESG impact of both is literally the same. Sometimes it actually even comes from the same pit so you can't even argue it's that different. So, it's the use of the product which contributes mostly to the GHG emissions. I find that distinction somewhat hypocritical, if you look at it purely from an ESG standpoint. From a financial point of view, in terms of portfolio resilience, it does make sense because thermal coal is probably going to last less long than metallurgical coal. But what I don't really appreciate is the fact that we're, you know, coining this as ESG performance when at the end of the day, it's just about economic sense.

The second one, and I think the Rio Tinto question around that is quite valid, which is around divestment. And I personally, and this is entirely my personal view, I view divestment as the least sustainable thing that a company can do. If a company truly believes that the mining of coal is wrong, or that it's uneconomical than the right thing to do, and the thing that we should all praise them for doing is proper mine closure. In my mind, divestment is simply passing the buck on to someone else. And the challenge is that that actually creates more risk in the coal supply chain. We're seeing this, you know, with a large multi-commodity player attempting to sell off their thermal coal assets because they don't want to have to deal with the pressure anymore. And these are being bought up either by smaller players or companies that don't necessarily have an interest in demonstrating good ESG performance. They usually buy the asset sweated and then close it, if you're lucky mine closure is semi decent, but most of the time the asset is just abandoned. So, I'd like to see just once a company being rewarded for actually closing their assets ahead of schedule, following best practice around mine closure, as opposed to selling it and cleaning up their portfolio, as you said. And then the other point is, is around, you know, the split in the world. You know, on the one hand, Europe has never consumed so little coal for power generation. But on the other side, you mentioned China is building plants. Pakistan just mentioned that they were thinking of ditching gas for more coal. And if you look at the path that we're on, and the different IEA scenarios, coal will still play a role in the future both for power generation but also for steel manufacturing. Production is likely to decline. I think the big debate is around the pace of decline. And that depends largely in my mind on government policy and carbon pricing. And with the right focus, yes, coal use and coal production could decline significantly. But as it does, in my mind, surely, we need to ensure that what coal is being burned comes from responsible mines.

Åsa Borssén:
And then this question of a just transition. Who should take the lead on that?

Anne-Claire Howard:
Well, if you look at Europe, there's been a lot of really interesting work done recently around what does a just energy transition mean for Europe's coal mining regions, and there we’re talking mostly about Poland and Germany. But on a on a more kind of global stage that there is a need for a real conversation around the just energy transition. You know, if you look at the most recent IEA reports, they projected the drop in coal demand this year alone will decrease employment in coal-based electricity generation by 0.2 million. So imagine what numbers could be by 2030. And we have a duty to ensure that coal mine closure and power plant closure doesn't negatively impact those who are already so impacted by the externalities of coal. And I think everyone's responsible. The buyers who were the ones who led to this production in the first place, the mining companies, the financiers, who suddenly decided that it was an economical and have decided to step away. And I think the key thing is the mine closure, not just for coal for any mine product, but coal mine closure now because it's so relevant, requires a lot of thought and a lot of preparation to be done well, and, you know, currently the coal sector employs according to the IEA, 6.5 million people. We need to start thinking about how we prepare these communities for this and how we prepare the future. So I think there's a lot to be said for you know, abating the production, and the use of coal. You know, it will have the biggest impact on GHG cuts, much more than displacing gas or any fossil fuel use. But there are consequences. And I think that's why it needs to be done pragmatically and in dialogue between all of the parties, which is why, you know, stepping away from this conversation, which is what some of the players are doing in my mind is not the best way to do this responsibly.

Åsa Borssén:
And when will we close the last coal mine?

Anne-Claire Howard:
The last coal mine? Not before 2050, I'd say. And in some countries, God, it's hard to even imagine when that could be. I think it really depends on what alternatives we find, you know, we've already seen the renewables can carry much more weight in the system than we ever thought possible. Like everyone I think for power generation, I'd like to think that by 2050, we either have, you know, zero emission coal fired power plants, with CCS or other technologies. But I think that if you can, you know, develop CCS at scale, I would not see the coal industry as being the one benefiting from this. I think there's other industries which have much more longevity, which will benefit from carbon capture and storage. Coal for steel. I don't know if you speak to the large steel manufacturers with hydrogen and all of the alternatives that are coming up. It all depends on how much of the price hits you want to make the customer bear the brunt of, you know. If new production of steel using electric arc furnaces and things like that is entirely feasible, but it means for a lot of companies completely changing your whole manufacturing processes, which has a cost, and someone has to bear the cost of that. So yeah, I think 2050 in my little blue-sky thinking - in reality, probably later than that.

Åsa Borssén:
Anne-Claire, this has been a really interesting conversation. Thank you so much for joining us.

Anne-Claire Howard:
It's been my pleasure and really thank you for allowing me to share some of my thoughts. I know this is a challenging topic for anyone to engage on. So it's always good to have a constructive conversation around a topic which I view as critically important for the energy transition.

Åsa Borssén:
That's what we do at Highgrade.


Åsa Borssén:
Thank you for listening. Coal has been essential to human development. But climate change has rendered coal persona non-grata. People have been increasingly expecting the end of coal, though facing it out is not going to be pain free – and it is now important to have an honest discussion on who will pay the bill. 

This podcast was done with support from the German Federal Ministry for Economic Cooperation and Development, through BGR, and the Inter-American Development Bank, make sure to subscribe to our channel on whichever podcast platform you are using. 

Next time, early in the year, we will explore the fundamental trends to watch out for in 2021.

Until then, so long!