International Energy Agency’s Coal 2023 Report

The International Energy Agency’s (IEA) annual coal market report predicts a significant shift in the trajectory of global coal demand, hinting at a structural decline by 2026.

• This anticipated transformation is influenced by various factors, including the expansion ofrenewable energy and a rise in nuclear generation in key regions.

What are the Key Highlights of the Report?

• Global Coal Demand Trends:
  • Global coal demand reached a record high in 2022 amid the global energy crisis, rising by 4% year-on-year to 8.42 billion tonnes (Bt).
  • Asia remains the primary driver of coal demand growth in both power and non-power sectors.
• China experienced a demand rise of 4.6%, equivalent to 200 million tonnes (Mt) of coal.
  • India saw a substantial increase of 9%, amounting to 97 Mt.
  • Indonesia witnessed a remarkable surge of 32%, reaching 49 Mt, driven by nickel smelters.
• The United States faced an 8% decline in coal demand, totalling 37 Mt, the most significant drop among major markets.
• Europe, despite a 4.3% increase in consumption, exhibited more restrained growth than anticipated.
  • Subdued hydropower and nuclear electricity generation in certain European countries.
  • A weak economy and mild winter in Europe contributed to the restrained impact of natural gas price spikes.
• Future Projections and Uncertainties:
  • Anticipated decline in coal demand in most advanced economies during 2023.
  • Overall, global coal consumption in 2026 is projected to be 2.3% lower than in 2023.
    • Despite the expected decline, global coal consumption is projected to remain above 8 billion tonnes through 2026, highlighting its continued role as a significant source of carbon dioxide emissions.
  • China, India, and Indonesia, the three largest coal producers globally,are expected to break output records in 2023, pushing global production to a new high in 2023. These three countries now account for more than 70% of the world’s coal production.
    • In China and India, in particular, rising coal consumption is driven by robust growth in demand for electricity and low hydropower
  • Factors Influencing Decline in Coal Demand:
    • The decline in coal demand is attributed to a global shift towards renewable energy
    • The IEA links the expected decline to changes in global climate, with El Ninoconditions transitioning to La Nina, potentially leading to increased hydropower output.
    • The report highlights a significant upward trend in low-costsolar photovoltaic deployment, contributing to the growth of renewable power generation.
    • Nuclear generationis expected to see moderate increases, particularly in China, India, and the European Union, further influencing coal-fired generation.
  • China's Dominance in Coal Markets:
    • China's coal consumption is expected to fall in 2024 and remain steady through 2026.
      • Hydropower output is set to recover, while electricity generation from solar PV and wind is expected to increase significantly in China.
    • The pace of economic growth in China and its coal use is uncertain,as the country undergoes major structural changes.
    • India, Indonesia, and other emerging economies are expected to rely on coal for economic growth, despite commitments to deploy renewables.
    • Efforts to reduce the use of 'unabated' coal,in line with the 28^th Conference of Parties (COP28) are deemed essential for meeting international climate targets, aiming for a nearly 95% reduction in coal emissions between 2020-2050.