THE level of carbon emissions generated by coal-fired power plants in the Asia-Pacific can be reduced by 74 per cent between now and 2050, according to findings released on Tuesday (Nov 21) by the MSCI Sustainability Institute.

These reductions are possible if the plants are phased out in a manner that would result in the least disruption to the economy, jobs and electricity access – or what the report terms as an “orderly transition”.

A 74 per cent reduction translates to about 160 gigatonnes (GT) of carbon dioxide equivalent that would have been prevented from being released into the atmosphere, compared to a scenario where the coal plants continue to operate until their intended retirement, stated the report by the sustainability research arm of the index provider.

This includes reductions of 116 GT in mainland China, 23.2 GT in India and 5.9 GT in Indonesia – some of the region’s biggest emitters out of the 15 Asia-Pacific markets which the report looked at.

When compared against the level of reduction required for the region’s coal sector to reach net zero by 2050, 160 GT of avoided emissions also means that about 83 per cent of coal power reduction has been achieved.

Based on analysis by MSCI, the most orderly transition scenario – which the report defines as a process that proceeds along an anticipated timeline that comes with the addition of clean-electricity generation capacity – would involve retiring coal plants that have operated for about 20 years, with 2040 as the backstop date.

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Scenarios with an earlier backstop year, such as 2030, generally tend to be disorderly as a concentration of plants would have to be retired over the remaining six years of this decade. This would require the sudden ramp-up of renewable energy, and the capital to develop this infrastructure, to meet the shortfall created due to the closure of these plants. 

Retiring plants younger than 20 years would lead to a situation where the phase-out takes place over a shorter time period, leading to the need to add renewable capacity all at once. 

Conversely, allowing for plants to operate longer after 20 years would incentivise the market to slow their phase-outs and have less need to generate electricity from renewables. As the backstop approaches, however, the market faces the need to add sustainably produced power suddenly, creating disruption and cost.

The report found that the sweet spot for an orderly phase-out would apply to markets including China, India, Indonesia, Malaysia, the Philippines and South Korea. A managed phase-out of coal plants in these markets would aim to retire plants that have operated for about 20 years before 2040.

However, the most orderly pathway for coal phase-out also differs for each market.

In Japan and Taiwan, for example, where existing plants are older, the most orderly transition scenario would limit the life of the coal plants to 30 years.

For Laos and Hong Kong, the report found that the most orderly pathway for these markets is still relatively disruptive.

The level of carbon emission reductions also differs by markets, with Bangladesh being able to cut down its emissions by 95 per cent, while Taiwan would reach a 39 per cent decline.

Assuming that each market follows its most orderly transition pathway, some of them – such as India, Indonesia and Bangladesh – would be able to reduce coal power generation by more than or close to 100 per cent of their share of the global carbon budget for the use of coal-fired power.

Other markets such as Australia and Taiwan would be able to cut their coal power generation by less than 60 per cent of the levels needed to reach net zero by 2050 for the region’s coal sector.

The additional amount of renewable energy capacity the region would need to substitute for coal power also differs widely, with 3,350 gigawatts (GW) needed in mainland China, while Hong Kong requires roughly 3.2 GW.

The report said that managed phase-out of coal power plants is an important contributor to broader energy-transition plans.

It provides an opportunity for investors interested in promoting an orderly transition to invest in whole-economy decarbonisation.

“Such investors could measure avoided emissions to quantify the potential contributions to mitigating warming from their investments,” said the report.

These investors can also help coal plant owners reconfigure their operations around renewable energy.

“These companies can often struggle to raise capital because of their ownership of coal-fired power plants, but such an alignment may improve their access to capital and lower its cost,” said the report.