Its Coal 2020 report shows there is little sign that the world’s coal consumption is set to decline substantially in the coming years, with rising demand in some Asian economies offsetting declines elsewhere
A global economic recovery in 2021 is expected to drive a “short-lived” rebound in coal demand following the major drop this year triggered by the coronavirus pandemic.
That is according to a new report from the International Energy Agency (IEA), which shows there is little sign that the world’s coal consumption is set to decline substantially in the coming years, with rising demand in some Asian economies offsetting declines elsewhere.
As coal is by far the single-largest source of global energy-related carbon emissions, the IEA believes the trends outlined in its Coal 2020 report pose a “major challenge” to efforts to put those emissions on a path compatible with reaching climate and sustainable energy goals.
Past two years have seen historic falls in global coal demand
The report highlights that the past two years have seen historic falls in global coal demand, led by “unprecedented drops” in the US and Europe.
A 1.8% decline in coal demand in 2019 resulted mainly from weak growth in electricity demand and low natural gas prices. Latest estimates from the IEA suggest coal demand will have plunged by a further 5% in 2020 on the economic fallout from Covid-19.
Keisuke Sadamori, the IEA’s director of energy markets and security, said: “The Covid-19 crisis has completely reshaped global coal markets.
“Before the pandemic, we expected a small rebound in coal demand in 2020, but we have since witnessed the largest drop in coal consumption since the Second World War.
“The decline would have been even steeper without the strong economic rebound in China – the world’s largest coal consumer – in the second half of the year.”
IEA forecasts 2.6% rise in global coal demand in 2021
Based on the assumption of a recovery in the world economy, the IEA report forecasts a 2.6% rise in global coal demand in 2021, driven by “higher electricity demand and industrial output”.
China, India and Southeast Asian economies account for most of the growth, although the US and Europe may also both see their first increases in coal consumption in nearly a decade.
But global coal demand in 2021 is still forecast to remain below 2019 levels and could be even lower if the report’s assumptions for the economic recovery, electricity demand or natural gas prices are not met.
The analysis notes that the rebound in coal demand next year is set to be “short-lived”, with usage forecast to flatten out by 2025 at about 7.4 billion tonnes. This would make 2013, when global demand reached eight billion tonnes, coal’s all-time peak.
But while the fossil fuel’s share in both the electricity mix and the overall energy mix are in steady decline, coal use in absolute terms is “not set for a rapid decline in the immediate future”, according to the IEA.
Sadamori added: “Renewables are on track to surpass coal as the largest source of electricity in the world by 2025. And by that time, natural gas will likely have taken over coal as the second-largest source of primary energy after oil.
“But with coal demand still expected to remain steady or to grow in key Asian economies, there is no sign that coal is going to fade away quickly.”
The report claims the future of coal will “largely be decided in Asia”. Today, China and India account for 65% of global coal demand. With Japan, Korea, Taiwan and Southeast Asia included, that share rises to 75%. China, which currently accounts for half of the world’s coal consumption, is expected to be “especially influential”.
By 2025, the IEA projects that the EU and US will account for less than 10% of global coal demand, down from 37% in 2000. It said this will make the impacts of any further changes in demand in these markets “very limited”.