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Bending the Coal Curve in Asia: A Critical Priority for 2023

As the world enters 2023, California is belted with an atmospheric river causing historic flooding. It is one more sign of the growing impact of climate change and the urgency of slowing the growth of GHG emissions. Yet the news was not good in 2022 in terms of progress in reducing the consumption of coal, which is vitally important to progress on emissions reduction. The December International Energy Agency Coal 2022 report projects an 1.2% increase in global coal consumption in 2022 over 2021, which already was the highest level since 2014.

Although the Asia/Pacific region, especially China with 53% of global coal consumption, dominates global coal use with 79% of the total in 2021, we saw increased coal consumption in many nations, including in the United States and Europe. The IEA sees further increases in 2022 in India, Europe, and China due to greater demand in the power sector resulting from the war in Ukraine and natural gas supply and prices factors.

The IEA market outlook to 2025 sees expanded coal use in the power sector, particularly in India, China, and Southeast Asia, while consumption resumes its decline in Europe and the United States. But the challenge of European gas diversification and meeting 2023 winter demands may require continued coal plant operation. Although natural gas prices have currently moderated from early 2022 levels, LNG import prices in Asia are still high and have slowed the substitution for coal and delayed some import regasification projects. Continued strong growth in coal use in India, estimated at 7% in 2022, is predicted while the hope is that China will peak coal consumption by 2025. Coal growth in Southeast Asia is expected to average about 4% per year to 2025, especially in Vietnam and Indonesia. The COP27 in Egypt announced a US-Japan-led $20 billion partnership with Indonesia to reduce coal use and develop alternatives; but in the near term, the IEA sees robust growth in Indonesian coal consumption of almost 5% with the addition of 10GW of new coal capacity.

Bending the coal curve, especially in Asia, thus remains a high priority on the global climate agenda. This transition is very much affected by the higher import costs of LNG and the escalating input costs of renewable energy equipment due to supply chain problems. But governments in Asia and outside need to increase their political will to implement diversification policies and create more favorable investment climates for low-emission alternatives.

Over 2023, we plan a series of posts in this Bulletin on the transition from coal in Southeast Asia.

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