Although climate and environmental concerns have resulted in an energy policy that shies away from fossil fuels, demand for coal remains prevalent in many parts of the world, XMP Consulting senior coal analyst Xavier Prévost has said.

Speaking during the Coal Industry Day 2021 conference, which was hosted virtually on July 27, he noted that coal consumption decreased by 6.2 exajoules, or 4.2%, year-on-year in 2020, led by lower demand in India and the US.

Coal consumption fell to its lowest levels on record, as analysed by the Organisation for Economic Cooperation and Development since 1965. 

This while global coal production was down 8.5 exajoules, led by output declines in the US, Indonesia and Colombia.

These supply constraints, coupled with logistical challenges in some regions, have bolstered coal prices and mineral sales are soaring, including in South Africa, which recorded a 22% year-on-year rise in coal production and an 88% year-on-year rise in mineral sales in May.

This year, Prévost expects recovering economic activity to reverse 2020’s decline in coal demand, and the rapid increase in coal-fired power generation in Asia, particularly, will see that region accounting for the majority of demand rebound this year.

He highlighted how Asian Energy Ministers have mentioned their preference for coal in the energy mix, owing to its affordability and accessibility.

Coal prices and demand have also been supported by Chinese coal output coming under strain amid heavy flooding being experienced from rains on and off since June 2020.

This while China’s power demand rose by 9.8% year-on-year in June this year, to 703 TWh.

CLIMATE AGENDA

Prévost said the current global climate conversation embodies two blatantly contradictory claims, one being that promised climate policies will be economically crippling, and the other being that every nation will rush to embrace near-utopia net-zero climate schemes.

The International Energy Agency, for one, acknowledges that achieving net-zero in 2050 will likely be the greatest challenge humankind has ever faced, surpassing the Second World War, the black plague and Covid-19.

Prévost cited data finding that emissions reductions of 55% by 2030 will cost at least €1.4-trillion, with every euro spent avoiding just €0.06 of climate damages.

He said coal would remain a key source for global energy and that demand would rise despite net zero pledges.

For example, Japan is facing challenges in reducing its coal-fired power generation to 20% of its energy mix by 2030 and will likely only reach a 26% ratio. The country has acknowledged that cutting coal-fired power more rapidly would erode the international competitiveness of its manufactures.

“If you have a problem, you should invest in the problem, not take money away from the problem, in hopes that it solves itself,” Prévost concluded.