Investing in more renewables without phasing out coal mining is not climate action

Last week, Exxaro Resources presented its 2022 interim results. The company’s new CEO, Dr Nombasa Tsengwa, spoke at length about Exxaro’s growth plans for its renewable energy business. But what was not said is equally important. There was not a word about decarbonising — or running down — the company’s coal operations.

Instead, most of the presenters talked about maximising value from the company’s coal assets, and overall the tone was jubilant thanks to the announcement of an interim dividend of R15.93 per share. “The coal gods are smiling” on Exxaro, someone had said in the preceding media briefing.

But still, it is apparent that South African coal companies have stepped up their interest in renewable energy — Seriti and Thungela have also recently made announcements about their plans. How are we to understand this?

Let us be very clear on the two separate aspects of “shifting to renewables”: first, coal companies’ use of renewable energy to power their coal operations; and second, their actual decarbonisation plans.

The power that coal miners use to run their operations is currently mostly derived from electricity purchased from Eskom. Using renewable energy to power mines, production facilities, offices, etc, reduces the company’s reliance on Eskom, and reduces its scope 1 and 2 carbon emissions.

This is relatively simple and easy to commit to and achieve. Renewable energy is the cheapest source of energy and the quickest to establish. The technology needed to account for the variability of solar and wind power is advancing rapidly, and the barriers to industrial users developing their own renewable energy facilities are falling. It looks clear that SA’s coal companies are all preparing to make this shift.

However, by far the most significant type of emissions for coal miners are scope 3 emissions, which are the emissions that arise from the use of the company’s product. For example, Exxaro’s most recent scope 3 emissions were 70,931 ktCO2e (or 98% of its total emissions for that year), almost 71 times its scope 1 and 2 emissions, which together came to 995 ktCO2e. For coal companies, which produce the most carbon-intensive fossil fuel in the world, decarbonising means shifting their business altogether away from mining, producing and selling coal.

This is where it becomes more complicated and where there is significant potential for greenwashing. Most coal companies now recognise the commercial necessity to shift their business away from coal in the long term. Consequently, they are building renewable energy businesses by developing major projects or purchasing majority stakes in existing entities.