Published: 21st Dec, 2023
Context
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 28th Conference of Parties (COP28) are deemed essential for meeting international climate targets, aiming for a nearly 95% reduction in coal emissions between 2020-2050.
- China's coal consumption is expected to fall in 2024 and remain steady through 2026.
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