The G7’s Last Nail In Coal’s Coffin… Again?

Let’s call this the virtue signal heard ‘round the world. 

At first glance, the historic decision reached by the G7 nations was a historic moment in global energy policy. 

Last week, the Group of Seven nations — Canada, France, Germany, Italy, Japan, the United Kingdom, and the U.S. — struck an incredibly monumental deal to end coal power generation by 2035. 

The plan involves phasing out coal power during the first half of the 2030s. 

For something this historic, the news didn’t seem to garner much attention. This was certainly a departure from COP 28 last year, when the Cop 28 president mocked the idea of phasing out fossil fuels to limit climate change. 

Perhaps there’s a reason why the news didn’t turn many heads. 

It’s not hard to understand why…

The G7 Virtue Signal

Look, I’m not going to bash anyone optimistic enough to think this will move the needle on coal consumption, but it’s hard not to see the G7’s decision as simply another virtue signal for climate talks. 

I have a feeling the veteran members in our investment community already know why, too. 

Like most concerns over climate change today, we need to see real action where it counts. 

Think about it…

Here in the United States the coal industry has been in a downward spiral for more than a decade. Not only are we no longer building new coal power plants, but the ones that ARE operating are more than 43 years old. 

If you consider that the average age of a retiring coal unit is around 54 years old, then it makes the pledge to phase out coal by 2035 a little anticlimactic — that’s when the U.S. coal fleet will be retiring anyway!

In 2023, coal already makes up nearly half of planned utility-scale electric generating capacity retirements: 

Trust me, the reason why coal is dying isn’t because the global cabal of politicians are forcing us to phase it out of our energy dynamic — it’s because the U.S. coal industry has been gutted by the one-two punch of dirt-cheap natural gas and an overzealous, aggressive push toward renewables like wind and solar. 

I hate to tell the G7 leaders this, but we were going to phase out coal during the next decade regardless of their decision. 

But this virtue signal gets even worse when you really dig into it.

What’s interesting is that this decision by the G7 was a long-time coming, but member countries like Japan were putting up roadblocks whenever it could. Truth is, Japan was holding out because coal still accounts for nearly one-third of its energy consumption. 

Remember, Japan suspended all of its nuclear plants after its Fukushima Daiichi accident back in 2011. Starting in 2015, the country has been slowly bringing its nuclear reactors back online after having been forced to turn to sources like LNG for electrical generation. 

However, that brings us to the elephant in the room that nobody in the G7 is going to talk about. 

I’m referring to the biggest coal consumers on the planet: China and India. 

Both China and India have ramped-up their usage in recent years, and are the world’s first and third largest consumers of coal, respectively. 

If you want to know how deep these two are into coal power, just consider that it accounts for 61% of China’s power generation and 75% of India’s!

Of course, let’s keep in mind that despite all the phase-out plans, heartfelt announcements and proclamations that we’ll eliminate fossil fuels from our energy mix, the world demands more coal than ever before. In fact, global coal consumption hit a record of 8.5 billion tons in 2023. 

And according to the IEA, the world isn’t slowing its hunger for more. 

The good news is that the natural phase-out of coal in the U.S. is going to open up an interesting situation for certain coal companies that are positioned to export their supply abroad. 

We may soon hammer in the last nail in the coal industry’s coffin here inside the United States, but our rich coal resources will simply be sold off to India, where one-quarter of our coal ended up last year. 

Meanwhile, the loss of coal from G7 members’ power generation won’t come without its own ramifications. Next time, I’ll show you exactly where we’re going to make up that loss — and it won’t be from renewables.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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