According to the International Energy Agency’s (IEA) annual coal market report, the global demand for coal is expected to decline significantly by 2026. This trend is driven by various factors, including the expansion of renewable energy and a rise in nuclear generation across key regions.
In 2022, amid the global energy crisis, the world witnessed a record high in global coal demand, rising by 4% year-on-year to 8.42 billion tonnes (Bt). Asia was the primary driver of this growth with China experiencing a demand rise of 4.6%, equivalent to 200 million tonnes (Mt) of coal. India also saw a substantial increase of 9%, amounting to 97 Mt.
However, the United States witnessed an 8% decline in coal demand, the most significant drop among major markets. Europe’s consumption increased by 4.3%, more restrained growth than anticipated due to subdued hydropower, nuclear electricity generation, and mild winter.
Future Projections and Uncertainties in Global Coal Demand
The IEA anticipates that most advanced economies will witness a decline in coal demand during 2023. Overall, global coal consumption in 2026 is projected to be 2.3% lower than in 2023. Despite this expected decline, global coal consumption is projected to remain above 8 billion tonnes through 2026, underlining its continued role as a significant source of carbon dioxide emissions.
China, India, and Indonesia, which account for over 70% of the world’s coal production, are set to break output records in 2023. In China and India, this trend is driven by robust growth in demand for electricity and low hydropower output.
Driving Factors Behind the Decline in Coal Demand
The IEA attributes the decline in coal demand to a global shift towards renewable energy sources. Changes in global climate conditions, potentially leading to increased hydropower output, are also expected to influence this trend. The report further points out the significant upward trend in low-cost solar photovoltaic deployment contributing to the growth of renewable power generation.
Furthermore, nuclear generation is expected to see moderate increases, especially in China, India, and the European Union, which could further influence coal-fired generation.
China’s Coal Demand and Consumption
China’s coal consumption is expected to decrease in 2024 and remain stable through 2026. This projection is based on forecasts of recovering hydropower output and significant increases in electricity generation from solar PV and wind. However, the pace of economic growth in China and its coal use remains uncertain due to major structural changes within the country.
India, Indonesia and other emerging economies continue to rely on coal for economic growth, despite commitments to deploy renewables. Efforts to reduce ‘unabated’ coal usage, in line with the 28th Conference of Parties (COP28), are deemed essential for meeting international climate targets.
Dynamics of Coal Industry and Pricing
Over the past two years, coal prices have surged unexpectedly, impacting consumers and industry dynamics. Despite escalating costs, coal mining companies have managed to maintain strong profit margins, enabling them to reinvest coal profits in other commodities in anticipation of demand surges linked to the energy transition.
About the International Energy Agency
Established in 1974, the International Energy Agency (IEA) in Paris, France, serves as an autonomous agency set up by OECD member countries in response to the mid-1970s oil crisis. The IEA focuses on energy policies, including economic development, energy security, and environmental protection, while also playing a vital role in providing information related to the international oil market and addressing any physical disruptions in the supply of oil. The IEA consists of 31 member countries, 13 association countries including India, and 4 accession countries.
Last Modified: February 22, 2024