COAL’S DECLINE BIGGEST YET: IEA

15% IN 2016

SUNNY FREEMAN Global demand for the world’s most controversial energy source, coal, dropped by 15 per cent this year in the industry’s largest-to-date annual decline, according to the latest analysis released Monday by the International Energy Agency.

In Coal: Medium-Term Market Report for 2016, the IEA said coal demand was likely lower this year than it was in 2013, continuing a path of declining consumption after it fell in 2015 for the first time this century.

“While this has happened before, most recently in the 1990s, it is a notable change from the four-per-cent annual growth seen over 2000 to 2013,” the IEA said.

“Yet it is too early to say that coal is dead.”

Weaker demand in the U.S. and China, the engines of the global economy, is not being offset by increasing demand in emerging economies such as India, Indonesia and Vietnam.

Coal production decreased for the second year in a row as its use is rapidly declining in western nations as stronger climate policies, such as the Paris Climate Agreement, carbon-pricing regimes are implemented and alternative energy becomes more affordable. Canada’s federal government announced in November that it plans to phase out coal altogether by 2030.

“In this environment — defined by the United States and Western Europe — new coal power plants are rare and the existing aging fleet is steadily disappearing,” it said.

“But there is another picture to consider, that of emerging economies with growing populations and prospects of robust economic growth.”

Some emerging economies continue to deal with frequent blackouts or are unable to provide electricity for everyone. For those countries, coal is an affordable and secure alternative.

India — which has surpassed the U.S. as the world’s second-largest coal consumer — along with Pakistan, Bangladesh and Indonesia accounts for more than a quarter of the world’s population, but only seven per cent of energy use.

If they tap into their significant coal reserves, it could severely increase carbon dioxide emissions. Coal is responsible for about 45 per cent of the world’s energy-related carbon dioxide emissions.

“Yet it could also help in bringing modern energy services to millions of people. This is the contradiction of coal,” the IEA said.

“And this is why we need to find ways to make the use of coal more environmentally sustainable by ensuring that all countries that decide to use coal-fired power plants only build the latest ultra-supercritical technologies and plan for carbon capture and storage in the future.”

The result of this global divergence in coal policy could lead to a geographical east-west divide — which could make the fossil fuel even more controversial and complicate discussions on global carbon emission reductions.

Coal prices strongly rebounded in 2016 after a four-year long decline, with steam coal prices more than doubling to US$90 per tonne from around US$45 per tonne in January and coking coal prices quadrupling to US$300 per tonne in November.

Overall, the world is burning more coal than ever and the IEA expects slight increases in consumption, projecting slight annual increases in its use to reach 2014 levels again in 2021 — depending largely on China’s consumption.

Coal use in that country has likely peaked due to China’s commitment to cut coal output and will below 2013 levels by 2021, the report said.

However, it added, China will continue to be the largest coal consumer by far over the five-year projection period.

As more countries move away from fossil fuels toward renewables, coal likely reached its peak as a percentage of the global energy mix in 2011.

The IEA projected coal’s share of the mix to drop from 41 per cent in 2013 to 36 per cent by 2021.

The IEA said carbon capture and storage will be key for countries to fulfil the goals of the Paris Climate Agreement: Without such technology, coal will have to be virtually eliminated to meet the stated targets.