U.S. President Barack Obama may be engaging in a “war on coal” with carbon regulations intended to shrink coal’s share of energy production, but worldwide, coal is in its strongest position in decades. In 2013, enough coal was burned to meet 30.1 percent of the world’s energy demands — its highest share since 1970, according to new data from BP’s Statistical Review of World Energy.
The findings are striking because of trends that appear to be pushing coal to the sidelines: An abundance of natural gas in the United States has utilities switching away from coal; Europe’s efforts to reduce greenhouse gas emissions have led to a high penetration of renewables in electricity markets; and China leads the world in annual installations of solar and wind.
But despite those headlines, coal still dominates. In 2013, coal consumption increased by 3 percent, making it the fastest growing fossil fuel. A large reason for its success is its low cost – coal markets have experienced several years of declines in prices. Also, coal is relatively abundant and found around the world.
And despite the inroads made by natural gas and renewables, coal demand continues to climb in China, India and other fast growing developing countries. Coal has also seen a bit of resurgence in the U.S. and Europe, although its duration is likely to be brief.
But the data shows how tough it will be to replace coal. All the efforts at reducing pollution and finding cleaner alternatives could be overwhelmed by the inexorable growth of the developing world.
For now, coal remains behind oil in terms of its share of global energy demand, capturing 30.1 percent compared to oil’s 32.9 percent. But that could change. In a December 2012 report, the International Energy Agency predicted that by 2017, coal would become the world’s top source of energy. Between 2012 and 2017, annual global coal consumption is expected to jump by 1.2 billion tons, which is equivalent of adding the coal consumption of Russia and the U.S. combined.
Still, the future is not entirely rosy for coal and there is nothing inevitable about IEA’s prediction.
Its 2013 growth rate of 3 percent is below its 10-year average of 3.9 percent. And despite the IEA’s projection that coal will move into first place as the world’s top choice for energy, much depends on the determination by major consumers to reduce greenhouse gases. New government regulations in the U.S., for example, will lead to the shuttering of dozens of coal plants.
But, as with most energy issues, coal’s prospects hinge on what happens in China, which accounts for nearly half of global coal consumption alone.
In China, while demand is still growing, it is doing so at a much slower rate than previously; the 2013 annual increase in coal burning hit its lowest level in China since 2008. In fact, coal only made up 67.5 percent of total energy demand, still a colossal market share, but the lowest on record.
That’s due to China’s efforts to rein in pollution and increase the consumption of natural gas. The Chinese government has declared a “war on pollution,” in considerably stronger language than it has used before to describe efforts to reduce smog.
Since China last year accounted for two-thirds of demand growth in coal consumption worldwide, its energy policies have significant impact. If President Xi Jingping succeeds in putting a dent in the rate at which China burns coal, it will have a major effect on global coal markets.
By Nick Cunningham of Oilprice.com
