In this week’s EconMinute, we’re talking about global demand for coal.
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Coal is one of the highest emitting of the major fossil fuel sources, emitting about twice as much CO2 when burned as natural gas. However, in spite of efforts around the world to reduce greenhouse gas emissions (GHGs), global demand for coal has never been higher.
According to the International Energy Agency (IEA), after rising by 6% in 2021, global coal consumption further increased by an estimated 1.2% in 2022 to reach a new all-time high of 8,025Mt. The growth was driven by India, the EU and China.
A combination of factors are keeping demand for coal strong. These include:
- high natural gas prices and supply shortfalls, which are making coal more attractive from an affordability standpoint;
- extreme heat and droughts in some parts of the world, which are reducing hydroelectric capacity; and
- concerns about energy security and reliability, especially in countries like China and India.
Today’s EconMinute explores global trends and short-term forecasts for coal consumption:
- Global coal demand is expected to hit another record in 2023 before leveling off through to 2025. Increased consumption in Asia is expected to offset falling demand in North America and the EU.
- Global investment in coal production was up 20% in 2022 (reaching $135 billion) and is expected to rise by another 10% this year (reaching $150 billion).
- 40 GW of new coal-fired electricity capacity was approved for construction in 2023, the highest level since 2016. Almost all of these were in China, which is investing heavily in both coal and renewables to address looming power shortages.
- Coal-fired power generation in China is expected to rise by 2.3% per year through to 2025.
Longer-term forecasts expect global coal demand to eventually fall, but the short-term trend is not promising, especially given the need to bend the curve on global GHG emissions.