Global coal usage is on track to an all-time high, according to the International Energy Agency, underlining the significance of coal as the main source of energy for economies, emerging and advanced, despite pledges to cut down on fossil fuels.
Primarily owing to economic recovery following the pandemic-related restrictions, global power generation from coal is expected to jump nine percent in 2021 to a record 10,350 terawatt-hours, according to IEA’s Coal 2021 report (pdf). The rapid increase in consumer demand has outpaced power generation from low-carbon sources, leading to an increase in coal usage. Natural gas, one of the main alternative energy sources, faced a price hike leading producers back to coal.
“The amount of electricity generated worldwide from coal is surging towards a new annual record in 2021, undermining efforts to reduce greenhouse gas emissions and potentially putting global coal demand on course for an all-time high next year, the International Energy Agency said in its latest annual market report,” said the press release published Friday.
Coal demand throughout the world is projected for an increase of six percent this year, including usages beyond power generation. This is not expected to overtake records reached in 2013–2014, but based on the current trajectory, a new high could be reached as soon as 2022.
“Coal is the single largest source of global carbon emissions, and 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 towards net zero,” said IEA Executive Director Fatih Birol in the statement.
Half of the world’s coal-fired electricity generation happens in China, where dependence on the energy source is anticipated to grow by nine percent this year. “China’s influence on coal markets is difficult to overstate. China’s power generation, including district heating, accounts for one-third of global coal consumption,” from the report.
Neighboring India follows with a 12 percent growth forecast. The emerging economy’s requirement for the energy source will add approximately 130 million tons to global coal demand between 2021 and 2024. Besides, there aren’t any other alternative technologies that can replace coal in industrial usage, like in the production of iron and steel.
“Asia dominates the global coal market, with China and India accounting for two-thirds of overall demand. These two economies—dependent on coal and with a combined population of almost 3 billion people—hold the key to future coal demand,” said Keisuke Sadamori, Director of Energy Markets and Security at the IEA.
While developed economies like the United States and European Union are set to increase usage by around 20 percent, this is considered temporary and the number is expected to go down next year with slower demand growth and a rise in renewable sources.
In Q2 2020, the price for a ton of coal was $50. The rapid increase in demand this year, mainly in the Chinese market, coupled with supply chain constraints and higher-priced natural gas, resulted in increased prices.
As of mid-December, the price of coal in Europe is below $150 per ton. Imported thermal coal in Europe surged briefly to $298 per ton in October, before China’s policy intervention led to a decrease in prices.
“China is also the world’s largest coal producer and importer, with domestic price swings from supply-demand imbalances immediately impacting international markets,” said the IEA report.
The total coal consumption in 2021 by China is 4,130 metric tons (mt), while, in the United States, it is 508 mt, and 632 mt in Europe. The total coal exports this year were led by Indonesia with 440 mt, followed by Australia and Russia at 376 mt and 226 mt, while the U.S. exported 80 mt.
According to the report, “Coal is the largest source of electricity generation, the second-largest source of primary energy and the largest source of energy-related CO2 emissions.”