Coal Markets in Motion

10th Apr 2015

In mid-March, the Energy Security and Climate Initiative at Brookings Institution launched a major research programme: ‘Coal in the 21st Century’. The project aims to provide policymakers with an “unbiased assessment of how to deal with coal moving forward, both domestically and internationally".

A Coal Task Force, comprising of members of the private sector, academics and government officials has been assembled by the Institute to inform research, and an Issue Brief has been published as part of the programme launch. The briefing paper identifies where the research programme is likely to focus, providing a synopsis of the advantages, compromises and challenges that come with coal use. The report also features a high-level forecast of coal's position in the future energy mix, paying particular attention to the USA, and briefly explores technology.

The paper recognises coal as an important tool in poverty alleviation, employment and meeting energy demand, whilst also taking into account some of the challenges it faces.

Global Coal Market

The Institute cites the International Energy Agency’s (IEA) World Energy Outlook 2014, which suggests that while coal's overall share in the energy mix could decline, total demand by 2040 will actually rise by 15%. This will, of course, vary from region to region with non-OECD states, primarily in Southeast Asia, Africa, India and Brazil generating most of the demand.

Asia

As the report highlights, without doubt over the coming decades coal production and pricing trends will be led by Asia. By 2040, China, India, Indonesia and Australia will account for 70% of global production. The report says that despite recent trends, in China, demand for coal will remain strong and attempts to expand the role of gas at the expense of coal will not succeed. Gas, renewables and nuclear energy will all contribute to the Asian mix; however, the scale of coal use for electricity generation is fundamental.

India’s economic development, similar to China’s before it, is founded on coal. Coal accounts for 68% of India’s electricity generation and the country’s Planning Commission projects that two billion tonnes of coal will be required by 2031 to meet energy demands. However, the report identifies several challenges which must be addressed in order to meet this target:

  1. Indian coal is overwhelmingly lignite, a lower quality coal.
  2. Coal is a major employer, frustrating restructuring efforts.
  3. Coal is located far from the country’s demand centres and in politically sensitive states.
  4. Finally, in addition to transiting on an out of date rail network, coal is used to subsidise other rail freight.
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Other Emerging Markets

The figure ‘90-90-70’ is used in the report to highlight the future global energy market, and coal's role within it. By 2030, 90% of global population growth, 90% of total energy demand increase and 70% of economic output will occur in developing economies. These figures will lead to a significant demand for energy - a demand which the credentials of coal will play a vital role in satisfying.

Technology

The report highlights the importance of carbon capture and storage (CCS) technology in limiting global average temperatures to 2 degrees above pre-industrial levels, but also identifies some key challenges before large-scale adoption. Cost is the primary obstacle. CCS is also under pressure from falling government financial support. This is something that clearly points to the need for more international public investment in cleaner coal technologies, particularly CCS.

Importantly, the report says  efficiency of coal-powered plants will improve over the coming years. Many developing countries are deploying supercritical and ultra-supercritical technology, thereby resolving many of the environmental challenges identified in the paper. It will be critical to make sure this trend continues, which is why WCA has launched our PACE initiative.

A copy of the paper can be downloaded on the Brookings Institution website