An unprecedented slump in global coal demand is on the horizon, as forecasted by the latest International Energy Agency’s (IEA) annual coal market report. This marks the first instance where the report foresees a decline in global coal consumption over its forecast period
Diverse Trends in 2023
‘Coal 2023’, the report, anticipates a 1.4% surge in global coal demand this year, surpassing 8.5 billion tonnes. This rise masks considerable regional variations. Advanced economies are bracing for steep declines, with the European Union and the United States each facing about 20% reduction. Contrastingly, robust demand persists in emerging and developing countries, particularly in India and China, driven by an uptick in electricity requirements and lower hydropower generation.
Predicted Reduction by 2026
Contrary to these immediate increases, IEA’s projections point to a 2.3% drop in global coal demand by 2026 compared to 2023 levels. Remarkably, this decrease is expected without new, stringent clean energy and climate policies from governments. The main driver is the significant growth in renewable energy capacity, especially in China, the dominant coal consumer globally.
China’s Crucial Influence
Over half of the upcoming global renewable capacity expansion is poised to take place in China. As a result, a dip in China’s coal demand is foreseen from 2024, stabilizing through 2026. This trajectory will depend on the speed of clean energy adoption, weather trends, and shifts in China’s economy.
Potential Historic Shift
The projected drop in global coal demand could signal a major shift. Presently, coal stands as the top energy source for several key industries and the primary cause of CO2 emissions from human activities. While the forecast indicates global consumption remaining above 8 billion tonnes until 2026, a steeper decline in unabated coal usage is vital to align with the Paris Agreement targets.
Insights from the IEA Director
Keisuke Sadamori, IEA Director of Energy Markets and Security, remarks that past dips in global coal demand were temporary, linked to specific events like the Soviet Union’s collapse or the Covid-19 crisis. The current trend is structurally different, underpinned by a strong and sustained push towards clean energy. Sadamori highlights that the future of coal hinges on renewable energy’s growth in major Asian economies and stresses the urgency for enhanced actions to achieve global climate goals.
Asia’s Escalating Role
This year, the report notes, China, India, and Southeast Asia will account for three-quarters of global coal consumption, a steep climb from one-quarter in 1990. Southeast Asia’s consumption is set to exceed that of both the United States and the European Union. China, India, and Indonesia, the top three coal producers, are likely to break production records in 2023, commanding over 70% of the world’s coal production.
Coal Trade Dynamics
Global coal trade is projected to shrink with diminishing demand, yet it will hit a record high in 2023 due to Asia’s robust growth. Chinese imports are expected to surpass 450 million tonnes, breaking previous records, and Indonesian exports are likely to approach 500 million tonnes.
The global coal market is approaching a critical juncture, the coming years will be crucial in determining the pace and extent of the transition towards renewable energy and the consequent impact on global coal consumption.
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