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Global Coal’s Resurgence and/or Demise? A Review of IEA’s Coal 2021 Report

In previous pieces I have highlighted the critical role of coal in the Asia-Pacific region and some of the developments at COP26 to phase down or phase out coal. This blog reviews the December 2021 report of the International Energy Agency, Coal 2021, and its disturbing conclusions.

The report’s findings are important in driving home the reality that the challenge of reducing coal use, which accounts for about 46 percent of global GHGs, is enormous. Driven by the economic recovery in 2021, the strong growth in global electricity and energy has led to a resurgence of coal to record levels. And rising prices for natural gas has fostered the substitution of coal, notably in both the United States and Europe. This development is also highlighted in the Rhodium Group’s report on Preliminary US Greenhouse Gas Emissions Estimates for 2021, which estimates a 6.2 percent increase in US GHG emissions in 2021 over 2020 resulting largely from a 17 percent increase in coal consumption.

In the power sector, coal-fired generation increased by an estimated 9 percent and coal output met over 50 percent of the growth in electricity demand, outpacing the contribution of renewable energy to additional demand for the first time in several years. Coal power generation reached record levels in the big Asian coal consumers China and India, whose electricity consumption increased by an average of 10 percent.

This surge in coal use ramped up global emissions to record levels with coal accounting for most of the 800 MT of CO2 increase in 2021. This fact was in stark contrast to the expressed aims at COP26 to rapidly reduce emissions over the next decade to have a chance to achieve net zero by 2050, even though a growing number of countries have committed to phasing out or down coal.

The IEA report anticipates that global coal production will peak in 2022 but this remains unclear given the likely persistence of high natural gas prices. Increases in coal production are still expected to continue in China, India, Indonesia, and Russia. China is opening large new open-pit mines and has responded to coal supply constraints, including impacts from tensions with Australia and Indonesian export limitations, by authorizing increased coal production in some areas. The Indian government, despite its large renewable and nuclear development program is seeking to expand domestic coal production and reduce coal imports. But efforts by Coal India Ltd., which produces 80 percent of India’s coal, to expand coal production to 1000 MT by 2023-24, do not appear enough to reduce imports.

Although declines in coal demand are expected in most of Europe (except Russia), North and South America and in Japan and S. Korea over the period to 2024, increases are projected for South and Southeast Asia as well as China.

The availability and price of gas and LNG over the next few years will be critically important to coal’s trajectory. China wants to peak coal demand by the end of its current five-year plan in 2025 and is looking to increase imports of gas from global LNG markets as well as Russia. The primacy of Asia in the emissions equation is abundantly clear. Despite increased government pledges to work towards net zero emissions, economic and market forces continue to drive coal use. Stronger government price, tax and other incentives and business efforts are essential to accelerate investments in renewable energy, energy efficiency and nuclear energy. But affordable gas supplies will be essential to bending the coal curve in the region in the short and medium term.

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