Stranded on a low-carbon planet: Implications of climate policy for the phase-out of coal-based power plants

Abstract

Limiting global warming to 2 °C will likely entail the complete phase-out of coal-based electricity generation without carbon capture and storage (CCS). The timing and rate of this phase-out will depend on the stringency of near-term climate policy and will have important implications for the stranding of coal power plant capacity without CCS. The objectives of this paper are to better understand the relationship between near-term climate policy and stranded coal capacity (assuming a long-term goal of limiting warming to 2 °C) and to explore strategies for reducing stranded capacity. Our analysis suggests that strengthening near-term climate policy (i.e., lowering the global greenhouse gas emission target in 2030) generally reduces stranded coal capacity and its costs. An effective strategy for reducing stranded capacity is to minimize new construction of coal capacity without CCS, which can be accomplished by reducing electricity demand through energy intensity improvements and/or by keeping existing plants operating through lifetime extensions. Another strategy, providing emission exemptions for pre-existing coal plants (i.e., grandfathering), would eliminate stranded capacity, but also decreases the likelihood of achieving the 2 °C target. Finally, the ability of CCS retrofits to significantly reduce stranded capacity depends on how quickly the technology can be deployed.