There is good news out there, even if it feels like scraps in a world on the brink. Some came last week – with plenty of caveats – when analysts at the Paris-based International Energy Agency (IEA) found coal-fired power generation decreased in both China and India last year.
This is a potentially big shift. Among other things, it exposes the hollowness of arguments in Australia that there is no point doing anything about the climate crisis because the big Asian economies are building endless new coal plants.
China and India are easily the world’s most populous countries, and two of the three biggest emitters. Both need to act faster, along with developed countries, if the world is to limit climate damage.
The drop in Indian coal generation was in part due to the country’s largest ever increase in renewable energy generation – a 20% rise in a year. The surge coincided with a strong early monsoon that cooled the weather and meant people used less electricity. As renewables rose, coal lost out.
This historic reversal in coal output may be short-lived. The IEA expects polluting generation to increase again as demand for energy grows.
It’s a different story in China, where more coal capacity is being crowded out of the system each year. Chinese solar generation leapt by more than 40% in 2025. Wind energy – which Donald Trump recently claimed isn’t used in China – was up 12%. Together they provided 22% of the country’s electricity, up from 18% a year earlier.
Coal generation fell only about 1%, but the IEA is confident that decline will continue. Its forecasts suggest Beijing will install more solar and wind power over the next five years than the rest of the world combined.
The flipside of this positive trend is that the US – the second-biggest emitting country – is climate denying its way in the wrong direction. Dirty coal power was up last year as the Trump administration oversaw a slowdown in plant closures and killed support for renewable energy. An increase in the cost of gas-fired power relative to coal played a part.
It’s clear what the Trump administration is trying to do – it spent this week planning to overturn a 2009 Environment Protection Agency finding that greenhouse gases endanger public health and welfare – but experts believe the president and his acolytes are ultimately fighting a losing battle. They might slow coal’s decline in the US, and do damage along the way, but won’t ultimately be able to prevent it falling again.
This aligns with the international story. Renewables roughly matched coal output last year and the IEA says zero emissions energy including nuclear will be about 50% of global generation by 2030.
This sounds great, and it is. But here come the caveats: much of the new generation will be used to meet increasing electricity demand, not displace fossil fuels; dirty electricity generation is only part one of the climate problem; and solutions in other industrial sectors are often more challenging.
Most importantly, addressing the climate crisis is not ultimately just about boosting clean technology.
It is about the emissions of heat-trapping gas that are already driving worsening heatwaves and extreme events. Those emissions remain stubbornly high. Research by the Global Carbon Project suggests pollution from fossil fuels may have increased 1.1% last year.
There is reason to believe that will soon start coming down. But the Intergovernmental Panel on Climate Change found global emissions needed to be cut by 43% between 2019 and 2030 to keep the Paris agreement goal of limiting heating to 1.5C above preindustrial levels in play. We are light years from that.
Which brings us to Australia. Its electricity grids are transforming. National emissions have started to come down, mostly thanks to the rise of solar power. But fossil fuels continue to thrive, particularly the coal and gas export industries.
Since the start of the year suggestions about what the government should do to address this have included the policy that dare not speak its name in Canberra – a carbon price.
Speaking on Tuesday, the head of the Productivity Commission, Danielle Wood, lamented that by abandoning carbon pricing Australia was ignoring the cheapest way of cutting pollution. She said either a carbon tax or an emissions trading scheme looked “pretty damn attractive” compared with existing policies, which have mostly been pieced together since Tony Abbott abolished a functioning carbon price scheme in 2014.
Labor has resisted returning to carbon pricing, fearing another politically damaging misinformation campaign over costs. But some experts believe that if ever there was a moment when it could be revisited it is now, given the opposition is a shambles and long-held political wisdoms are being overturned.
Probably the loudest champions of the idea have been at the Superpower Institute, led by the longtime Labor adviser Ross Garnaut and the former consumer watchdog chair Rod Sims. In a recent report, the institute called for two new taxes – a “polluter pays levy” on companies that extract or import fossil fuels and a “fair share levy” that would raise the tax local gas producers pay on profits from about 30% to just under 60%.
It’s hard to find people who work on climate policy who think it is a bad idea on paper. Frank Jotzo, professor of climate economics at the Australian National University and sometime government adviser, described it as “simple, elegant and effective”.
But Jotzo is also among a group who believe a polluter levy is probably politically unviable. Writing in The Energy, he said the political right still made false assertions that carbon pricing would hurt living standards and economic competitiveness, and history showed negative campaigns about cost were more politically potent than generous compensation packages.
Jotzo joined other experts who have instead called for a further expansion of the safeguard mechanism, a policy introduced by the Coalition and revamped by Labor in 2023 to require major industrial sites to cut emissions.
The debate over whether to keep overhauling a contentious policy introduced under Tony Abbott or to start again will be at the heart of an argument this year over how the government can meet its 2035 emissions target. It will need to do something – it is currently way off track.
It means there will be more focus than we might otherwise expect on a review of the safeguard that kicks off later this year. Technical details aside, the review will ultimately be about one question: will the government significantly increase the legal and financial pressure on polluters to clean up their operations?
And if not now, then when?
