As the global moves towards cleaner energy due to economics and climate change, consumption of coal will likely peak by the end of the year. But, there are a few unknowns that could affect how long the dirtiest fossil fuel is used. In each of the previous two years, coal power generation surged as China and India struggled with electricity shortages and Europe sought to replace Russian natural gas. In two scenarios predicted by BNEF, demand increases to a record level in 2019 before falling as a result of policies aimed at achieving net zero emissions by 2050.
Under both scenarios there are several wild cards that could affect how slowly or rapidly use of the
fossil fuel declines. These include stronger-than expected power demand, social backlash against the loss of mining jobs and lobbying from plant owners. China’s clean energy policies, economic support for poorer nations’ energy transitions and prices are other key factors. Even under strict net zero rules, where demand in the power sector would decrease by nearly 70% from its peak in 2024 to 1.5 billion tonnes annually and necessitate the installation of carbon capture devices in plants, coal use would continue into the middle of the century. That would necessitate significant investments in the technology, which has struggled to demonstrate its viability in large-scale commercial operations. For the past two years, demand for coal has outpaced supply as main producers China and India increased output to help combat power shortages. By the end of 2022, inventories had increased significantly, particularly in China.
The research also emphasises that the seaborne thermal coal trade faces several difficulties. China and India saw a surge in production for internal use, while miners in countries that export, like Australia and the US, have scaled back expenditures to avoid being left with stranded assets. That can result in a supply shortage if demand increases in the nations that import. A supply shortage in the market for seaborne thermal coal might push up coal costs, reduce its competitiveness in the power sector in coal-importing nations, and therefore hasten the global decline in coal use.
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