South Korea has announced plans to phase out thermal coal, a significant move that could impact Australia's fossil fuel exports. The announcement came during the COP30 climate talks in Brazil, where South Korea officially joined the Power Past Coal Alliance. This coalition includes around 60 nations committed to ending the unabated use of thermal coal, primarily used for electricity generation.

Climate advocates welcomed South Korea's decision, viewing it as a strong message to Australian policymakers and investors. James Bowen, a director at ReMap Research, stated, "(South Korea's) commitment to phasing out coal power sends a powerful signal to Australian decision makers and investors. For Australia to continue to rely on fossil fuel exports in the medium to long-term is a risky strategy."

South Korea is the world's fourth-largest importer of thermal coal, following China, India, and Japan. It accounts for about 8% of global thermal coal trade and is Australia's third-largest customer, importing approximately 15 million tonnes annually. However, demand from South Korea has declined in recent years. Kpler, a data analytics firm, estimates that these exports are valued at around $1.5 billion annually for Australia.

Kim Sung-hwan, South Korea's Climate Change and Energy Minister, emphasized that the decision is part of the country's decarbonization strategy. South Korea aims to reduce its greenhouse gas emissions by 53% to 61% by 2035 compared to 2018 levels. Kim stated, "Through the Alliance, we will kickstart our coal phase-out, as well as help the Alliance advance the coal transition worldwide. 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."

Currently, coal-fired plants supply about one-third of South Korea's electricity, with gas and nuclear energy each accounting for nearly a third as well. Under the new plan, South Korea will phase out its coal plants by 2040, a significant step toward meeting its climate goals, as coal power contributes to about 60% of the country's emissions.

Experts warn that this decision could have broader implications for economies reliant on South Korean thermal coal demand. Bowen noted that Australian coal and gas exports could decline by about 50% in value over the next five years, resulting in a loss of more than $60 billion by 2030, regardless of Australia's emissions targets. He urged Australia to embrace the transition to clean energy.

The Minerals Council of Australia, representing mining companies, pointed out that South Korea's commitment pertains to "unabated" coal power, which refers to coal-fired electricity generated without carbon capture technologies. CEO Tania Constable suggested that this leaves room for continued thermal coal use in South Korea if emissions are managed. She noted that South Korea has been a significant customer for Australian thermal coal, importing 10.6 million tonnes in the year ending June 30, which is 4.5% of Australia's thermal coal exports.

Tim Buckley, a director at Climate Energy Finance, remarked that South Korea's decision should prompt Australia to reconsider its reliance on thermal coal exports. He stated, "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."

Despite the challenges posed by climate commitments, discussions at COP30 continue as countries seek to enhance their climate ambitions. This comes amid political debates in Australia, where the opposition Liberal Party recently moved to abandon its pledge for carbon neutrality by mid-century.