Global demand for coal continues to surge, driven by economic growth and a lack of adequate renewable energy infrastructure in major consuming countries like China and India. This trend poses a significant challenge to global climate goals.
U.S. coal exports have been steadily increasing to meet the growing global demand for this dirtiest fossil fuel, even as domestic coal consumption declines. This global shift away from coal remains challenging, largely driven by rising demand in Asia, while Europe and the U.S. see significant reductions in coal consumption.
Dorothy Mei, project manager for Global Energy Monitor's Global Coal Mine Tracker, states that 'The global shift away from coal remains challenging, largely driven by rising demand in Asia, even as Europe and the U.S. see significant declines in coal consumption.'Global coal demand is projected to reach another record high of 8.77 billion tonnes in 2024 and stay at similar levels until 2027. China, the world's second-largest economy and the largest coal consumer globally, accounts for over 56% of global demand in 2023. Mei explains that China's record-high coal stockpiling strategy is primarily aimed at preparing the country for potential power shortages caused by extreme weather events. When hydropower output decreases due to insufficient rainfall, the Chinese government often relies on coal power to ensure energy security.Another significant barrier, Mei adds, is not the lack of renewable energy infrastructure but the difficulty of transmitting solar and wind power across provinces. She states that coal will continue to be a 'critical energy backbone' in China until grid integration and management are fully developed nationwide. In India, climate-induced extreme heat has led to a surge in energy demand for cooling, and clean energy sources are not being built fast enough to meet the country's growing power needs. India's focus on economic and infrastructure development has also boosted the consumption of cement and steel, industries heavily reliant on coal, according to analysts who spoke to CNBC. The South Asian nation's demand for steel is expected to grow by 8-9% in 2025, outpacing other economies, driven by a rise in steel-intensive construction in the infrastructure and residential sectors. However, India is not neglecting its renewable energy targets. The country has set an ambitious goal of achieving net-zero emissions by 2070.Beyond China and India, other leading countries constructing new coal plants include Bangladesh, Indonesia, and Vietnam, Global Energy Monitor noted. Despite efforts to reduce reliance on coal, other countries are seeing an increase in coal consumption. The Philippines' coal consumption rose to approximately 831 million tons last year, reaching a new high, according to data from the country's Ministry of Energy and Mineral Resources. Furthermore, the share of coal in the Philippines' electricity mix surpassed that of China in 2023, making it Southeast Asia's most coal-dependent country, as reported by Ember Energy. Dave Jones, an electricity analyst at energy think tank Ember Energy, highlights that 'There is little focus on using energy efficiently, when coal is so cheap.' The surge in gas prices since Russia's invasion of Ukraine has contributed to the strong coal demand in Asia. Several major thermal coal importers, including China, India, and Vietnam, have scaled back plans for gas-based power projects due to the high gas prices that followed, according to Ian Roper, commodity strategist at Astris Advisory Japan KK. The need for energy is increasing globally, and it's needed now, emphasizing the role of reliable energy sources. Rob Thummel, senior portfolio manager at Tortoise Capital, states, 'The world needs more energy, and it needs it now.' He argues that 'For the global economy to grow, it needs efficient, cost-effective, and reliable energy supply sources.' The rise of artificial intelligence has further accelerated the world's energy needs. Reports indicate that power requirements driven by data centers worldwide will also prolong the demand for coal. Tim Winter, portfolio manager at Gabelli Funds, points out that 'The U.S., China, and the world are in a race for AI superiority.' He explains that AI data centers are significant power users, making it harder to phase out a reliable and affordable energy source like coal. By 2030, electricity demand from data centers could exceed 35 GW, more than double the 17 GW recorded in 2022.With global electricity demand rising at a faster pace, other industry observers are echoing the IEA's forecasts of coal demand remaining at record highs. Eric Nuttall, senior portfolio manager at Ninepoint Partners, states, 'There can be no transition when the demand for oil, for natural gas, for coal, continues to hit record highs.' This ongoing high demand for coal presents a significant challenge to global climate goals. The Paris Agreement aims to limit global heating to well below 2 degrees Celsius and to pursue efforts to limit the temperature rise to 1.5 degrees Celsius. To prevent global warming from exceeding 1.5 degrees Celsius, a rapid and substantial reduction in coal consumption is essential.
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