The multidisciplinary project PEGASOS investigates the political economy of a coal phase-out. The aim is to shed light on economically efficient and politically viable solutions for a coal phase-out at national and global levels. These solutions should take the distributional effects of different policy options into account. The project analyses historical coal transitions and conducts case studies in several countries to identify drivers, barriers, and interests behind national phase-outs. An energy-economy model is used to conduct policy simulations at the global level.
Update on the project´s process
We collected 15 case studies on the political economy of coal that will be published in one integrated volume by Routledge. Systematic reviews and model based studies are completed and already published or under review in scientific journals.
Models find a diversity of coal transition patterns in Paris-consistent mitigation scenarios, ranging from proper phase-out scenarios to coal renaissance scenarios. Including additional dimension in models shows that phasing out coal yields substantial local environmental and health benefits that outweigh the direct policy costs due to shortening of the energy supply. From a welfare perspective, the phase-out is a no-regret strategy for most world regions, even when neglecting the global benefits from slowing climate change.
Based on case studies from 15 countries we identify drivers that facilitate or impede the use of coal from a political economy perspective. First, affordable energy and secure energy supply are overarching policy objectives in the energy sector, while environmental objectives are less important. Second, vested interest are important to stabilize coal use across countries, with arguments connected to jobs, regional development, royalties as well as lobbying being important factors. Third, multi-level governance as well as the structure of energy markets can be important game changers to overcome vested interests.
Preliminary results of the project
The Figure shows (panel a) the direct annual policy cost and globally aggregated monetized values of local health and environmental effects across policy scenarios relative to a reference scenario. Overall, the positive net social benefit of exiting coal is substantial. Direct annual policy cost is derived from consumption losses, human health impacts are valued through willingness-to-pay metric, environmental damages are valued through restoration cost. The inner bars show the cost/benefits for the different categories (stressors). For the outer (thick) bars, stressors are grouped by the impact channels: that is, ecosystem damages, human health and direct policy cost. The solid black lines indicate the resulting net societal effect. The red lines are the sum of local and global net societal benefits. The whiskers indicate the uncertainty ranges of the net societal benefit from the translation of human health and environmental impacts into the social cost. Panel b shows the benefits of the coal-exit scenario for the year 2050 in absolute terms.
Rauner, S., Bauer, N., Dirnaichner, A., Dingenen, R.V., Mutel, C., Luderer, G. (2020). Coal-exit health and environmental damage reductions outweigh economic impacts. Nature Climate Change, 1–5. doi.org/10.1038/s41558-020-0728-x
Jakob, M., Flachsland, C., Steckel, J. C., Urpelainen, J. (2020). Actors, objectives, context: A framework of the political economy of energy and climate policy applied to India, Indonesia, and Vietnam. Energy Research & Social Science, 70, 101775. doi.org/10.1016/j.erss.2020.101775
Minx, J.C., Hilaire, J., Müller-Hansen, F., Nemet, G., Wiseman, J., Diluiso, F.,...& Steckel, J.C. (2021). Coal transitions – Part 1: Phase-out dynamics in global long-term mitigation scenarios (under revision)
Diluiso, F., Annicchiarico, B., Kalkuhl, M., Minx, J.C. (2021). Climate Actions and Stranded Assets: The Role of Financial Regulation and Monetary Policy (under revision)
Bertram, C., Luderer, G., Creutzig, F., Bauer, N., Ueckerdt, F., Malik, A., Edenhofer, O. (2021). COVID-19-induced low power demand and market forces starkly reduce CO2 emissions. Nature Climate Change, 11: 193–196. doi.org/10.1038/s41558-021-00987-x