The exploitation of thermal coal in Colombia faces great challenges despite the abundance and quality of the country’s reserves. The main challenges are due to the external context: the downward trend in prices due to the structural drop in consumption due to the rapid substitution of coal for less polluting fuels or renewable sources in the European market, coupled with the great distance to Asian markets, have raised doubts about the economic viability of coal exports from Colombia.
Colombia could be one of the first countries to suffer from the contraction in global demand for thermal coal, because its main markets are Turkey (23 percent) and the Atlantic ports in Europe (19 percent), two markets where demand will likely diminish in the short term. The contraction in demand would have various effects on the country’s economy, as it is the second-most important export (after oil), an important source of royalties and one of the main axes of the economies of La Guajira and Cesar departments.
This study analyzes the implications of the decline in coal demand for the national economy and for the main producing regions, such as La Guajira and Cesar, which are highly dependent on coal exploitation. The study explores the following questions:
Is there a risk that Colombian thermal coal will become a stranded asset?
What would a contraction in thermal coal exports mean for the Colombian economy?
What would be the consequences in the producing territories?
The contraction of coal exploitation would have important consequences for tax revenues and exports, as well as for the economies of Cesar and La Guajira. Therefore, officials should start planning for a “just transition” away from coal, which may soon become a stranded asset without economic prospects.
In the global context of energy transition, due to the commitments in the Paris Agreement to reduce global warming, fossil fuels such as coal and oil will likely be replaced in the medium and long terms.
Colombia’s main mining export is thermal coal, and it is an important source of economic activity and fiscal income, especially in La Guajira and Cesar departments. Declines in demand and international prices cast doubt on the viability of these export operations, the suspension of which would drastically affect the economy and employment at the regional level.
Strategies and policies must be designed in a concerted manner to ensure a progressive and just transition, generating alternatives for those affected and promoting a more diverse regional economy to reduce the negative impact of the decline in coal exports.
The government of Colombia needs to be prepared to promote the planned transition in dependent regions in coordination with key actors in the sector: state agencies, sub-national governments, civil society, and companies.