Five graphs that tell the future story of coal
International demand for coal is only going in one direction: up. Radical action to stall the growth of coal and curb the growth in greenhouse gas emissions is off-track, according to the International Energy Agency (IEA).
The IEA’s latest five-year outlook predicts coal consumption will grow at an average 2.3 per cent per year. The world will burn almost nine billion tonnes of coal per year by 2018, the agency predicts.
Despite efforts from the Chinese government to encourage more efficient use of energy and more power from renewables, China will account for nearly 60 per cent of the predicted growth.
China: the centre of the coal world
Coal demand grew by 170 megatonnes around the world in 2012, according to the report, or 2.3 per cent of annual consumption. China accounted for 97 per cent of that increase.
China is now importing roughly as much seaborne coal as the rest of the world combined – and its coal consumption is expected to grow by another 17 per cent over the next five years. Overall, China alone will account for half the expected growth in coal demand to 2018, as this chart shows:
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Source: IEA presentation
Even that startling growth is a slight downgrade from previous predictions. The country’s government is making efforts to reduce its dependency on coal and use energy more efficiently – for example by introducing new carbon trading systems in seven separate regions.
But the IEA says these efforts are likely to be at least partially offset by the growth of China’s middle class, which is demanding more and more power. So while coal demand will grow a bit slower, it’s still going up.
Demand flat in the rich world
The European Union experienced a significant – and well-publicised – increase in coal consumption in 2012/13. But the IEA says the spike is only the temporary.
Overall, coal consumption in the EU will decline over the next five years, it says. Sluggish economic growth projections, more power production from renewables, and efficiency gains – including replacing old coal power stations with new ones – will all shrink demand.
Elsewhere in the rich world it’s a different story, however. Japan is closing down nuclear power stations in the wake of the Fukushima disaster – with the result that it is expected to be more dependent on coal over the next five years. Meanwhile in Korea, new coal plants are coming online.
As a result, demand for coal across the OECD is expected to remain broadly flat:
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Change in coal demand across the Organisation for Economic Co-operation and Development (OECD). The OECD is made up 34 high income countries. OECD Asia Oceania comprises Australia, Israel, Japan, Korea and New Zealand.
Per capita consumption tells a different story
It’s easy to lay the blame for increasing coal-fired generation at China’s door – or to a lesser extent other Asian countries. But that doesn’t tell the whole story, as the following graph of coal consumption per capita demonstrates:
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In 2011, China, India and Indonesia’s coal consumption for power generation alone was higher than the entire OECD coal demand.
But China still uses about the same amount of coal per head as Germany and Denmark – and it uses about half as much coal per person as the USA. In India, each person still uses about an eighth of the amount of electricity than someone living within the OECD. Given vast coal availability, the IEA says that it’s not surprising that the governments of China, India, Indonesia and Vietnam will rely on coal to provide their population with electricity.
Who’s exporting where
Coal is largely a domestic energy source, according to the IEA. Less than 17 per cent of global demand is traded internationally, with the rest being produced at home.
But the amount of coal that’s traded around the world is increasing – it’s doubled in the last five years. Over the next five years, the IEA predicts that it will increase even more, and that more coal will be imported from west to east:
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What does all this mean for climate change?
All this isn’t good news for the world’s ability to reduce greenhouse gas emissions and prevent climate change reaching dangerous levels. Coal-fired generation is the biggest single source of carbon dioxide emissions – and more than three-fifths of the rise in global emissions since 2000 is due to coal burning.
The IEA’s chief executive Maria van der Hoeven says that if it’s not curtailed, the growth of coal “will have enormous and tragic consequences”. The IEA projects that if it continues, the world could see a four degrees Celsius temperature rise.
There are potential solutions – but they are not being implemented. Carbon capture and storage (CCS) technology is “effectively stalled”, according to the IEA. The lack of large-scale demonstration plants around the world means that CCS hasn’t been tested properly yet.
The agency also highlights that the majority of the coal power stations being built around the world are less efficient than they could be. If India and other South-East Asian countries switched to more efficient coal plants, that could save as much emissions as all the wind turbines in Europe, according to the IEA.
An effective carbon price could change the economics of coal – forcing power utilities to develop CCS and use more efficient coal power plants. But that isn’t happening yet either. For example, that a carbon price of about $150 would be needed to persuade energy companies in Asia to switch from coal to gas power, the IEA says:
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At the moment, there isn’t any carbon price at all in India – and Europe’s Emissions Trading Scheme has created a carbon price of about five euros.
The IEA says radical action is needed to curb greenhouse gas emissions. It adds calmly and in a slight understatement that “radical action is disappointingly absent.” Greenhouse gas emissions are projected to keep rising, and the growth in coal is an important part of that story.