Global power generation from coal is expected to increase 9% this year to an all-time high of 10,350 terawatt-hours, according to the agency’s latest Coal 2021 report.
IEA estimates that global coal demand could hit new highs next year — depending on weather and economic growth — and will likely “remain at that level for the following two years”, underscoring the need for fast and strong policy action.
The largest consumers China and India hold the key in steering future coal demand. The two economies account for about two-thirds of overall demand.
In 2021, both China and India are expected to see a record high in coal-fired electricity generation, with 9% growth in China and 12% in India as their economies recover from Covid-19-induced slumps.
While coal is perhaps the least loved commodity because of carbon emissions, it has been in the spotlight this year amid the global energy shortage.
A benchmark coal price in Asia hit a record high of US$269.5 per ton in early October. Currently, prices are hovering around US$168 per ton — more than doubled the US$81 at the start of the year.
Heavy rainfall disrupted production and shipments in major coal-producing and exporting countries such as India and Indonesia. While supply was limited, global coal demand rose as economies emerged from the pandemic.
The steep rise in natural gas prices has also increased demand for coal power by making it more cost-competitive in Europe as well.
The coal shortage directly affected the electricity supply in China and India, with the power crunch disrupting manufacturing activities in a wide range of industries leading to a rise in the price of other commodities including aluminium and magnesium, the production of which consumes a large amount of electricity. The crisis prompted China to ramp up domestic coal production.
IEA forecasts that global coal production will reach an all-time high in 2022 then plateau as demand flattens.
Coal is often called the single largest source of global carbon emissions. Reducing its use plays a vital role in reaching net-zero emissions targets.
China looks to phase down coal use from 2026 as part of efforts to slash greenhouse gas emissions, meaning that the country’s consumption should peak in 2025 and start to fall thereafter.
In addition, Chinese President Xi Jinping has pledged that China’s emissions will peak before 2030 and that the country will be “carbon neutral” by 2060.
Indian Prime Minister Narendra Modi said during the recently concluded COP26 climate summit that his country will reach net zero emissions by 2070.
However, experts say rising coal demand is a threat to the goals.
“This year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline toward net-zero,” warned IEA Executive Director Fatih Birol in a news release.
“Without strong and immediate actions by governments to tackle coal emissions — in a way that is fair, affordable and secure for those affected — we will have little chance, if any at all, of limiting global warming to 1.5°C.”
The implications for coal as regards the international community’s net-zero aspirations are “not yet visible” in the near term, reflecting the major gap between ambitions and action, the report says.