Based on current policies, the latest IEA market report sees lower coal demand by 2026, but stronger actions are needed to drive a steeper decline towards meeting international climate goals
Coal demand is expected to peak this year and then decline a further 2.3% by 2026, according to the latest edition of the International Energy Agency’s (IEA) annual coal market report. This is the first time that the report has predicted a drop in global coal consumption over its forecast period.
According to the ‘Coal 2023 Analysis and forecast to 2026’, global demand for coal is rising by 1.4% in 2023, surpassing 8.5 billion tonnes for the first time. The global increase marks stark differences among regions. Consumption is on course to decline sharply in most advanced economies in 2023, including record drops in the European Union and United States of around 20% each. Demand in emerging and developing economies, meanwhile, remains very strong, increasing by 8% in India and by 5% in China in 2023 due to rising demand for electricity and weak hydropower output.
However, the report said that global coal demand is expected to fall by 2.3% by 2026 compared with 2023 levels, even in the absence of governments announcing and implementing stronger clean energy and climate policies. This decline is set to be driven by the major expansion of renewable energy capacity coming online in the three years to 2026.
Renewables replacing coal
More than half of this global renewable capacity expansion is set to occur in China, which currently accounts for over half of the world’s demand for coal. As a result, Chinese coal demand is expected to fall in 2024 and plateau through 2026. That said, the outlook for coal in China will be significantly affected in the coming years by the pace of clean energy deployment, weather conditions, and structural shifts in the Chinese economy.
The projected decline in global demand for coal—which is currently the largest energy source for electricity generation, steelmaking and cement production, but also the largest source of CO2 emissions from human activity—could mark a historic turning point.
However, global consumption is forecasted to remain well over 8 billion tonnes through 2026, added the report. To drive down emissions at a rate consistent with the goals of the Paris Agreement, the use of unabated coal would need to fall significantly faster.
‘’We have seen declines in global coal demand a few times, but they were brief and caused by extraordinary events such as the collapse of the Soviet Union or the Covid-19 crisis. This time appears different, as the decline is more structural, driven by the formidable and sustained expansion of clean energy technologies,” said Keisuke Sadamori, IEA director of energy markets and security. “A turning point for coal is clearly on the horizon, though the pace at which renewables expand in key Asian economies will dictate what happens next, and much greater efforts are needed to meet international climate targets.”
Asia: Coal use and production on rise
The report found that the shift in coal demand and production in Asia is accelerating. This year, China, India and Southeast Asia are set to account for three-quarters of global consumption, up from only about one-quarter in 1990. Consumption in Southeast Asia is expected to exceed for the first time that of the United States and that of the European Union in 2023.
Through 2026, India and Southeast Asia are the only regions where coal consumption is poised to grow significantly. In advanced economies, the expansion of renewables amid weak electricity demand growth is set to continue driving the structural decline of coal consumption.
Meanwhile, China, India and Indonesia— the three largest coal producers globally— are expected to break output records in 2023, pushing global production to a new high in 2023. These three countries now account for more than 70% of the world’s coal production.
Global coal trade is expected to contract as demand declines in the years ahead. However, trade will reach a new high in 2023, driven by strong growth in Asia. Chinese imports are on track to reach 450 million tonnes, which is more than 100 million tonnes above the previous global record set by the country in 2013, while Indonesia’s exports in 2023 will be close to 500 million tonnes—also a global record.
About The Author
You may also like
Amid China’s slowdown, India’s to be the key market for oil and gas: Report
Coal-based steelmaking a risk to India’s net-zero target: Report
Australia pledges to not open new coal plants at COP29
Shell wins appeal against historic climate ruling
Human-caused air pollution led to 1.6 million deaths in 2021 in India: Lancet report
