South Korea has vowed to phase out thermal coal in a move that spells trouble for Australia's fossil fuel exports, according to analysts.
South Korea officially joined the Power Past Coal Alliance overnight in Brazil, where the COP30 climate talks are being held amid wavering support from some rich countries for emissions reduction efforts.
In doing so, South Korea — one of Australia's biggest thermal coal customers — joined a group of about 60 nations committed to ending the "unabated" use of the commodity, which is primarily used to generate electricity.
The move was applauded by climate campaigners, who said Seoul had sent a powerful message about the actions needed to keep global warming in check.
"[South Korea's] commitment to phasing out coal power sends a powerful signal to Australian decision makers and investors," said James Bowen, a director at energy and climate consultancy ReMap Research.
"For Australia to continue to rely on fossil fuel exports in the medium to long-term is a risky strategy."
Declining trade to drop further
According to the International Energy Agency, a club of mostly rich nations, South Korea is the world's fourth biggest importer of thermal coal.
It sits behind only China, India and Japan and is responsible for about 8 per cent of global trade in the commodity.
What's more, South Korea is Australia's third-largest customer for the fuel, taking about 15 million tonnes a year, though its demand has fallen sharply in recent years.
[embed thermal coal exports to South Korea graph]Kpler, a data analytics firm, estimates the value of those exports to Australia is still worth as much as $US1.5 billion ($2.3 billion) a year.
In a statement, South Korea's Climate Change and Energy Minister Kim Sung-hwan said the republic's decision was a key plank in its decarbonisation agenda.
As part of that agenda, Seoul has committed to lowering its greenhouse gas emissions by between 53 per cent and 61 per cent by 2035 compared with 2018 levels.
Mr Kim said South Korea wanted to send a signal through its actions.
"Through the Alliance, we will kickstart our coal phase-out, as well as help the Alliance advance the coal transition worldwide," Mr Kim said.
"The shift from coal to clean power is not only essential for the climate.
"It will also help both the Republic of Korea, and all other countries increase our energy security, boost the competitiveness of our businesses, and create thousands of jobs in the industries of the future."
Much like Australia, South Korea has long relied on coal to power its economy and propel the rise in its living standards.
The country boasts a fleet of 62 coal-fired plants — one of the biggest in the world — which supply about a third of its electricity.
Gas accounts for almost a third of South Korea's power demand, as does nuclear, while renewable energy makes up most of the rest.
However, under the decision announced at COP30, South Korea will phase out those coal plants by 2040.
Given coal power accounts for about 60 per cent of the country's emissions, such a move would be a major step by Seoul to meet its own climate ambitions.
Wake-up call for coal exporters
Experts say it will also have even wider implications, jarring the economies that depend on South Korean thermal coal demand and technology.
Mr Bowen from ReMap Research said, in the first instance, exporters like Australia and Indonesia faced a rude shock.
"The Australian Treasury's latest modelling predicts Australian coal and gas exports will fall by about 50 per cent in value over the next five years — a decline of more than $60 billion by 2030 — regardless of Australia's own emissions targets," he said.
"It's time for Australia to fully embrace the safer future and economic opportunities that will come from becoming a clean energy superpower."
Beyond that, observers have predicted it is likely to have a knock-on effect for the South-East Asian nations, which have come to rely on imported South Korean technology and finance to build coal plants.
The Minerals Council of Australia, a lobby group representing mining companies including coal producers, pointed out South Korea's commitment extended to "unabated" coal power.
The term refers to coal-fired electricity generated without using technologies to capture or reduce its carbon emissions.
CEO Tania Constable suggested this left the door open to Korea's continued use of thermal coal so long as the emissions from its combustion were buried or otherwise captured.
Ms Constable said South Korea had indeed been a valued Australian customer, taking 10.6 million tonnes of thermal coal — or 4.5 per cent of Australia's exports of the fuel — in the 12 months to June 30.
Similarly, she said the North Asian nation was also an important destination for Australian coking coal, which is used in steel making.
She said Australia could remain a long-term supplier of coal to South Korea "with the right policy measures and supportive industry partnerships".
"The MCA notes that South Korea is not alone in its commitment to phase out unabated coal power, with many countries actively pursuing and funding carbon capture, utilisation and storage technology to reduce their emissions while using coal for reliable, lower-cost energy," Ms Constable said.
"Australia's long-term coal customers can continue to provide lower-cost, reliable power to households and businesses while reducing carbon emissions."
Reminder for Australian climate commitments
Tim Buckley, a director at think tank Climate Energy Finance, said Seoul's intervention should give Australia pause for thought.
"This should send a strong reminder to Australia as the second largest exporter of thermal coal behind only Indonesia, that our key trade partners are responding to climate science and their treaty obligations," Mr Buckley said.
"Australia's largest four commodity exports in 2024 [low quality iron ore, LNG, coking coal and thermal coal] are all terminally challenged over the coming decades if the world is to collectively deliver on our Paris Agreement commitments."
Despite the withdrawal of America from the Paris climate accord that is supposed to restrict global temperature rises to 1.5 degrees Celsius above pre-industrial levels, other countries have attempted to boost ambitions at the talks in Brazil.
It comes amid the latest political flare-up over climate policy in Australia, where the opposition Liberal Party last week moved to abandon its pledge to carbon neutrality by the middle of the century.
