Hans-Dieter Karl

Jana Lippelt

English

Research Papers in Economics

CESifo Forum 4/2011 68
Spotlight
ELECTRICITY GENERATION:
COAL USE AND CUTTING CO2
EMISSIONS IN THE FUTURE
HANS-DIETER KARL AND
JANA LIPPELT*
High demand for electricity is an essential feature of
developed economies. This is true not only for indus-
trial production in which the growing use of electric
energy largely contributes to improving productive-
ness and enables specified production; it also applies
to the creation of services in the consumer sector,
where the application of power is indispensable and
expanding into a growing number of applications. For
this reason, electrical energy as a share of final global
energy consumption rose from 15.5 percent to
17.3 percent between 2000 and 2009. This figure takes
into account that around 83 percent of total gross
electricity generation is included in final energy con-
sumption. During this period electricity as a share of
final consumption increased by nearly 2 percentage
points to 21.6 percent in developed OECD countries.
In less developed countries the share of electricity was
significantly lower, although some emerging countries
are already catching-up fast. 
In China, for example, the share of electric energy in
final energy consumption increased from 11.7 percent
to 18.4 percent between 2000 and 2009, while an in  -
crease from 9.9 percent to 13.4 percent was observed
in India. Latin America, on the other hand, saw only
minor changes to the electric energy component of
final energy consumption, which increased from
15.5 percent to 16.9 percent. In Africa the increase in
the share of electricity in final energy consumption
was even smaller, rising from 8 percent to 8.9 percent,
while in Asia (excluding China) an increase from
10.8 percent to 13.4 percent was observed. 
Since the availability of electrical energy is essential to
the promotion of economic development and repre-
sents a key way of closing the gap to developed coun-
tries, there are extensive plans for the worldwide
expansion of electricity supply. Currently, over 1.3 bil-
lion people, mostly in Sub-Saharan Africa and large
parts of Asia, do not have access to electricity
(International Energy Agency 2011). The outstanding
importance of electrical energy is also reflected in the
size of the investment required to expand the electric-
ity supply compared to total investment in energy
supply. According to a recent estimate, the electricity
sector will account for nearly 45 percent of total
world investments in energy supply in 2011–2035 (see
also International Energy Agency 2011). However,
the significant advantages offered by electric energy
come at a high price. In addition to the high capital
costs of building the requisite infrastructure, there is a
growing focus on the carbon dioxide emissions associ-
ated with electricity generation. The world currently
produces around two-thirds of electrical energy from
fossil fuels, with coal representing by far the largest
share of this figure. Since the production of electrici-
ty in thermal power plants suffers from relatively low
energy conversion efficiency, the percentage of fuel
input usually accounts for a multiple of the electric
energy generated. Therefore, the fuels used add up to
around a quarter of global primary energy consump-
tion. As a worldwide average, the energy conversion
efficiency of fossil power generation amounted to
approximately 37.7 percent in 2009 (International
Energy Agency 2011), which means that around
62 percent of the fuel energy used was lost in conver-
sion. Power generation is therefore associated with rel-
atively high emissions of greenhouse gases. This
applies to the operation of all heat engines, including
internal combustion engines, while relatively small
losses occur in the conversion of fuels into heat. 
Figure 1 depicts the importance of electrical power
generation in terms of global CO2 emissions from fos-
sil fuel combustion. In the 2008 data there is only one
statistic for emissions from electricity and heat pro-
duction, and notably for the provision of heat for dis-
trict heating networks via a third party (International
Energy Agency 2011). As electricity generation is like-
ly to account for a share of around 87 percent, it
largely determines the emissions from this sector. * Ifo Institute.CESifo Forum 4/2011 69
Spotlight
Overall, this sector represented a share of 40.8 percent
of worldwide CO2 emissions from fossil fuels in 2008.
While this share totalled 39.5 percent in OECD coun-
tries, it reached the even higher level of 44.5 percent in
non-OECD countries. The fact that this figure did not
rise even higher is due to carbon-free electricity gen-
eration from nuclear energy, hydropower and other
renewable energies, which accounts for around 30 per-
cent of the electric energy produced worldwide. There
are major disparities between the different regions of
the world, and even greater differences between indi-
vidual countries. While in Asia (excluding China),
almost 46 percent of carbon emissions stem from the
power plant sector, in Latin America this figure is
only around 20 percent due to the large share of
hydropower in power generation. This share is partic-
ularly high in countries where power generation is
largely based on coal. In Australia, the Czech
Republic and Poland, 50–60 percent of carbon emis-
sions stem from the power plant sector, whereas in
South Africa this figure is even higher at around
63 percent. 
Global electricity production is currently dominated
by coal and is likely to remain so in the short-term. In
2009, 40.5 percent of electric energy was provided by
coal, followed by gas at 21.4 percent, hydropower at
16.2 percent, nuclear power at 13.5 percent and oil at
5.1 percent. The remaining production of 3.3 percent
was accounted for by other renewable energy sources
(International Energy Agency 2011). There are, as can
be seen in Figure 2, huge disparities in the share of
coal in electricity generation by country. At the top of
the ranking there are coal-producing countries like
South Africa (94 percent), Poland (91 percent), China
(79 percent), Australia (78 percent), India (69 percent)
and the Czech Republic (62 percent). Even countries
like the United States at 49 percent and Germany at
46 percent, however, generate a large part of their
electricity from coal. As a result, and also because of
its higher specific CO2 emissions relative to other
fuels, coal contributes significantly to global green-
house gas emissions. In 2009 coal-fired power plants
accounted for 72.8 percent of the global CO2 emis-
sions produced by total electricity generation and for
29.7 percent of the total global CO2 emissions from
fuels. There are good reasons for the importance of
coal in electricity production. The following aspects
are particularly crucial: in many countries, coal can be
produced cheaply, there is global, efficient coal trad-
ing and the reserves are, compared to oil and gas,
much larger. In addition, combustion is becoming
increasingly efficient in larger furnaces. 
In view of the growing electricity demand to be
expected in the future the goal is to prevent carbon
Share in percent
not specified
1 - 10%
11 - 20%
21 - 30%
31 - 40%
41 - 50%
51 - 60%
61 - 70%
71 - 80%
Share of electricity and heat production in total CO2 emissions
Share of coal-generated electricity in total electricity generation
Figure 1
SHARE OF ELECTRICITY AND HEAT PRODUCTION IN TOTAL CO2 EMISSIONS
Sources: IEA (2011); OECD (2011).CESifo Forum 4/2011 70
Spotlight
dioxide emissions from increasing further or even to
reduce them. To this end, the following measures can,
in principle, be taken (in addition to the option of
increasing the productivity of electricity use and thus
saving electrical energy): 
￿ increase the conversion efficiency of fossil-fired
power plants,
￿ construct additional of facilities for the use of
renewable energies, and
￿ expand nuclear energy.
A significant increase in the efficiency of fossil-fired
power plants can only be achieved by replacing the
old facilities. The average efficiency of existing global
coal-fired power plants is currently 35.5 percent
(according to estimates based on figures from the
International Energy Agency (2010a), International
Energy Agency (2010b), International Energy Agency
(2010c)). There is a range which extends from about
25 percent for older power plants up to 46 percent in
modern facilities. If all power plants had the highest
efficiency today, the use of coal as well as CO2 emis-
sions could be reduced by around 23 percent. With a
further increase in efficiency, which is expected in the
coming years, a reduction of around 25 percent would
be possible. However, since coal-fired power plants
are generally operated for around 40 years, a modern-
ization of all facilities will extend over a long period.
The effects of modernization will therefore only be
felt in the long run. Another option is to replace coal-
fired power plants with gas-fired equivalents.
However, on a global scale, this alternative is not real-
ly practical given the limited availability and the price
of gas. In other words, a large-scale replacement of
coal with gas is hardly conceivable. Since modern gas-
combined power plants achieve efficiencies of around
60 percent, this would result in a fuel saving of around
40 percent compared to the average of coal plants.
Lower specific CO2 emissions would also make it pos-
sible to slash emissions of greenhouse gases by
around two-thirds. Overall, increasing power plant
efficiency can indeed be an important measure for
reducing CO2 emissions, but the potential of this
instrument is limited and it can only be mobilized in
the long run. 
The facilities for the use of renewable energies and the
expansion of nuclear energy represent another option
because they allow operation without CO2 emissions.
A key feature of these systems is the high capital
expenditure necessary for their construction. How  -
ever, while nuclear power plants are usually built in
large units, and are therefore primarily for industrial
and emerging countries with high electricity demand,
wind and solar plants in particular can be used for
Share in percent
not specified
1 - 10%
11 - 20%
21 - 40%
41 - 60%
61 - 80%
81 - 100%
Share of coal-generated electricity in total electricity generation
Figure 2
SHARE OF COAL-GENERATED ELECTRICITY IN TOTAL ELECTRICITY GENERATION
Sources: IEA (2011); OECD (2011).CESifo Forum 4/2011 71
Spotlight
power generation even in small units to complement
and partly replace the existing supply system. The
main drawback of electricity generation via wind and
sun, however, is that it is subject to sharp fluctuations,
making sufficient control and reserve power plants a
necessity. In many regions of the earth there are rela-
tively good conditions for the generation of solar and
wind power, while there is also still considerable
potential worldwide for the use of hydropower.
However, even the extensive construction of these
high-performance facilities requires investment, which
can only be realized in the long term. By using these
options, it seems possible to significantly decrease the
high carbon emissions associated with the employ-
ment of fuels to generate electricity in the long-term,
and to clearly reduce the weight of the conversion sec-
tor as a CO2 emitter. 
References
International Energy Agency (2010), CO2 Emissions from Fuel
Combustion, Highlights, Paris.
International Energy Agency (2010a), Electricity Information, Paris.
International Energy Agency (2010b), Energy Balances of OECD
Countries, Paris.
International Energy Agency (2010c), Energy Balances of Non-
OECD Countries, Paris.
International Energy Agency (2011), World Energy Outlook 2011,
Paris. 

Electricity Generation: Coal Use and Cutting CO2 Emissions in the Future

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Electricity Generation: Coal Use and Cutting CO2 Emissions in the Future

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