Even though global coal demand is set to increase only marginally this year, it is enough to push it to an all-time high, amidst the global energy crises, says the International Energy Agency (IEA).
The IEA’s latest Coal 2022 report forecasts that the world’s coal consumption will remain at similar levels in the next few years in the absence of strong efforts to accelerate the transition to clean energy use.
The use of coal around the world is set to rise by 1.2% in 2022, surpassing 8 billion tonnes in a single year for the first time. This would eclipse the previous record set in 2022, says the IEA.
Coal usage will eventually decline, but not yet
Based on current market trends, the Coal 2022 report forecasts that coal consumption will then remain flat until around 2025. Declines in mature markets will be offset by continued robust demand in emerging Asian economies.
This means coal will continue to be the global energy system’s largest single source of carbon dioxide emissions by far.
Expected coal demand for 2022 is very close to what the IEA forecast in their Coal 2021 report a year ago, even if coal markets have been shaken up by a range of conflicting forces since then.
The global energy crisis has led to high natural gas prices and an increased reliance on coal to generate power. At the same time, slowing economic growth has reduced electricity demand and industrial output. Also, power generation from renewable sources has risen to a new record.
The world’s largest coal consumer China has experienced a heat wave and drought, pushing up coal power generation during summer. This happened even as strict COVID-19 restrictions slowed demand.
Keisuke Sadamori, IEA Director of Energy Markets and Security says the world is close to a peak in fossil fuel use, with coal set to be the first to decline, “but we are not there yet.
“Coal demand is stubborn and will likely reach an all-time high this year, pushing up global emissions. At the same time, there are many signs that today’s crisis is accelerating the deployment of renewables, energy efficiency and heat pumps – and this will moderate coal demand in the coming years. Government policies will be key to ensuring a secure and sustainable path forward.”
Supply and demand of global coal consumption
The international coal market will remain tight in 2022, as coal demand for power generation hits a new record. Coal prices rose to unprecedented levels in March, and then again in June. The price went up thanks to the global energy crises, spikes in natural gas prices, adverse weather conditions in key international supplier Australia.
Europe has been heavily affected by Russia’s reduction in natural gas glow and is now on course to increase coal consumption for a second year in a row. Still, by 2025 European coal demand is expected to decline below 2020 levels.
China, India and Indonesia, the world’s three largest coal producers, will all hit production records in 2022. The world’s third largest coal exporter in the World Russia has been banned and sanctioned in many countries because it invaded Ukraine. This has resulted in a reshuffling of global trade as buyers seek alternative supplies. The gap left by Russian coal supplies in Europe has been largely filled by South Africa, Colombia, Tanzania, Botswana and other smaller producers.
However, the report does note that despite high prices and comfortable margins for coal producers, there is no sign of surging investment in export-driven coal projects. This probably reflects caution among investors and mining companies about the medium- and longer-term prospects for coal.
What to do to bring down global coal emissions
Coal demand is forecast to fall in advanced economies over the next few years as renewable energy sources increasingly displace it as electricity generation source. AT the same time emerging and developing economies across Asia will increase coal usage to help power their economies growth, even as they add more renewables.
Development across the world’s largest coal consumer China will have the biggest impact on global coal demand over the next few years, with India providing a significant influence.
Even though most of the world’s biggest coal consumers are promising net-zero emission goals, global coal demand has been stable at near record highs for the past decade.
If nothing is done to address this, emissions from existing coal asset alone, will tip the world over the 1.5ºC limit set by the Paris Agreement.
This is according to the International Energy Agency’s (IEA) special report, Coal in Net Zero Transitions: Strategies for Rapid, Secure and People-Centred Change published in November.
That Coal in Net Zero Transitions report provides a comprehensive analysis of what it would take to bring down global coal emission rapidly enough to meet international climate goals while supporting energy security and economic growth, and addressing social and employment consequences.