Coal alone is responsible for over 0.3 degree Celsius of the 1 degree Celsius increase in global average temperature, which makes it the single largest source of global temperature rise. Global carbon dioxide emission from coal reached to 40 per cent in 2021 to the highest level in history, but it failed to teach any lesson. The latest IEA report Coal 2022 has said that the global coal demand was set to rise in 2022 by 1.2 per cent, reaching all-time high and surpassing 8 billion tonnes for the first time.

Since Russia’s invasion of Ukraine has sharply altered the dynamics of coal trade, price levels, sand supply and demand patters in 2022. Hence the global coal demand might well reach a new peak in 2023.

Fossil fuel prices have risen substantially in 2022, with natural gas showing the sharpest increase. This has prompted a wave of fuel switching away from gas, pushing up demand for more price-competitive options, including coal, says the IEA report. Droughts and heat waves in China had accelerated coal burning to meet a surge in power demand for air conditioning. Coal used in electricity generation, the largest coal consuming sector, was expected to grow by over 2 per cent in 2022.

Amid economic crisis, the world is witnessing a fall in iron and steel production due to which coal consumption was set to fall by over 1 per cent. However, global coal power generation rose to record levels. High natural gas prices led to significant switching to coal in electricity generation in Europe, although both gas and coal generation increased as the growth of wind and solar was insufficient to fully offset lower hydro and nuclear power output.

China is the biggest carbon dioxide emitter or the world. Coal power generation in China have increased significantly in 2022. In August, it increased around 15 per cent. This monthly level of generation is higher than the total annual coal power generation of any other country, except India and the United States.

In India and China, where coal is the backbone of electricity systems and gas accounts for just a fraction of power generation, the impact of steeper gas prices on coal demand has been limited.

IEA has estimated that coal power generation was set to rise to a new record in 2022, surpassing its 2021 levels. It is driven by robust coal power growth in India and the European Union (EU) and by a small increase in China – and it comes despite a decline in the United States. Europe has made a U-turn on coal, since it has been one of the hardest hit region by the ongoing energy crisis due to Russia-Ukraine war. Germany has reversed it coal usage significantly. In the entire European Union, coal power generation are to remain at the higher levels for some time, which may return to downward trajectory only in 2024 or thereafter.

IEA forecast says that global coal demand would plateau around the 2022 level of 8 billion tonnes through 2025, but it also points out to the uncertainties the present energy crisis triggered by the Russia-Ukraine war. The uncertainties would also depend on the changes in global economic activities, weather conditions, fuel prices, or government policies – among many other potential variables.

Developments in China may well have the largest impact on the outlook for global coal demand, since it accounts for more than half of it. China’s power sector alone accounts for one-third of global coal consumption. Coal consumption in China grew strongly in 2021, but growth is expected to remain relatively stagnant at an average of 0.7 per cent a year to 2025.

Meanwhile, India’s coal consumption has doubled since 2007 at an annual growth rate of 6 per cent – and it is set to continue to be the growth engine of global coal demand.

China and India are the world’s largest coal consumers, the biggest producers, and the top importers. In response to price rises and supply shortage of oil and gas, Chana and to a lesser extent India, pushed up domestic coal production after summer 2021.

In March 2022, Chinese production reached a new monthly high and it is set to rise to a new annual record with expected growth of 8 per cent for the full year, reducing the need for imports and replenishing stocks.

In India, the government has tried to increase production for a long time to reduce imports. In 2021, coal production reached 800 million tonnes for the first time. IEA forecast says that India’s production would surpass 1 billion tonnes by 2025.

Indonesia is the world’s third-largest coal producer. It was also expected by IEA to expand production to reach a new high in 2022 with exports playing a more important role than domestic demand. With minor growth in the United States and Europe global coal production would rise to its highest level ever above 8 billion tonnes in 2022. Coal prices have been rising and also reached record levels in the year 2022. (IPA Service)