Coal demand has seen its biggest drop since World War II. But it’s not all good news

A perfect storm of renewables growth, cheap natural gas prices and growing awareness of the urgent need to cut emissions, not to mention stilted energy demand caused by the COVID-19 pandemic, could signal the end of rising coal demand in the US and Europe.

But this emissions-heavy fossil fuel’s day isn’t over yet.

Demand from some of the burgeoning economies of Asia could fill the void left by those nations switching away from coal, and Asia could be where the future of coal is decided.

Demand change

Globally, demand for coal looks set to fall by 5% in 2020 – the largest decline since World War II, according to the International Energy Agency’s (IEA) Coal 2020 report, which looks at historical trends in the coal industry and projects how these will play out over the coming five years. A forecasted rebound in 2021 could be short-lived, with no further increases in demand expected between 2021 to 2025, provided the economic recovery from the pandemic continues and policy initiatives remain unchanged.

Although the global picture shows static demand over the next few years, there are regional imbalances, with economies like China and India offsetting declines in the United States, the European Union and other regions.

China is the world’s biggest producer, importer and consumer of coal – accounting for more than half of global coal consumption (65%). China and some Southeast Asian nations were alone in increasing their coal-consumption in 2019, while most regions saw a decline that year.

Coal remains a cornerstone of electricity generation in China, India and other Asian nations, which together account for around 75% of global coal demand. As more players in the EU and US switch away from coal, their behaviour will have less of an impact on the coal industry’s future. Left unchecked, Asia’s coal consumption growth could have serious implications for the planet.

Energy infrastructure needs to change

Coal is the single largest source of global energy-related CO2 emissions. Which means that curbing emissions from new energy projects alone would not be sufficient to meet climate targets.

If existing energy infrastructure – power plants, industrial plants, buildings, vehicles and more – continue to operate as they have in the past, with similar lifespans, this alone will push global temperatures to 1.65C above pre-industrial levels, according to the IEA’s World Energy Outlook 2020.

These legacy assets must also be decarbonized, especially heavy polluters like coal-fired plants. The IEA’s Sustainable Development Scenario outlines the need to either retrofit, repurpose or retire existing coal-fired power plants to halve coal-fired emissions by 2030.

The UK plans to phase out coal-fired power stations by 2024, while Drax, the country’s largest power station, has pledged to stop using coal by March 2021.