Phasing out coal in Chile and Germany

“Coal exit” is a buzzword in the international energy transition. Since the world’s first coal power station went into operation in 1882, coal has been the world’s primary source of energy for generating electricity. Accordingly, coal demand for electricity production has grown enormously in recent decades and is currently responsible for some 20 per cent of global anthropogenic GHG emissions.

With such an immense GHG footprint, the continued use of coal is not compatible with the need for rapid decarbonization. More importantly, given progress in the development of renewable technologies, including associated cost reductions, continued reliance on coal generation is economically irrational.

While the rate of coal power capacity expansion is still exceeding that of plant closure, the actual utilization of the ever-growing coal fleet has been shrinking. Since 2018, this has led to a reduction in global coal generation of 7 per cent. Against the backdrop of the pandemic induced economic crisis, the increasing competitiveness of renewable generation, and policy action to spur green economic recovery, the demise of coal seems unavoidable.

This is good news for the climate and the overall efficiency of our economies. But the structural changes associated with exiting coal can be profound. For this reason, policymakers must work to reconcile the conflicting interests of investors, workers, and communities.

In this publication, we analyse the experiences that Chilenand Germany have gathered in this area to distil lessons for policymakers needing to navigate the challenges of exiting coal in their own countries.