Coal is always, due to its high carbon intensity, the main focus of climate-related policies in the power sector, as the CO2 emissions made from coal are the leading contributor to climate change. In 2017, 38% of global power generation came from coal, but coal-related CO2 emissions represent more than 70% of power sector emissions. Coal-fired power plants are also the leading source of all primary air pollutants within the power sector, causing respiratory diseases and premature deaths.
Ongoing structural changes are reshaping the global electricity markets, whereby a key driver is the fast deployment of renewable energy sources and their falling costs, making renewables increasingly competitive with coal. With gas prices falling, coal is also becoming less competitive than other sources of electricity in several regions. The rising cost of the carbon price and higher coal import prices are also contributing to this energy shift. Moreover, pressures against investment in coal activities increasingly create challenges for financing coal projects. Global coal power investment has passed an all-time high and has contracted over the past two years and investment in greenfield coal mines is also at a standstill in all major coal exporting countries.
But even though the future of coal looks dark, 2017 has been a good year for the sector. World coal production increased after three consecutive years of decline. Global coal demand and international trade rose again, and high coal prices (above $80/tone since summer 2016) boosted the financial results of coal-mining companies. As a result of growing fossil fuel demand, global energy-related CO2 emissions rose again in 2017. These short-term results do not call into question global decarbonization trends but demonstrate that current efforts are insufficient to meet the objectives of the Paris Agreement.
The world is still divided about the future role of coal. The Paris Agreement that came in 2015 was a major change, which prompted many nations across the world to accelerate their efforts to reduce their coal consumption. Since then, several governments and power utilities have decided to phase out coal from their electricity mixes and joined the “Powering Past Coal Alliance”. Coal reduction or phase-out policies are being adopted or considered by more and more countries, and the reduction in the share of coal power generation goes faster than expected in several coal-consuming countries.
But South and Southeast Asia remains a region for short to medium term growth in coal demand and Africa is a potential area for new growth. In this, new coal markets can also develop thanks to the support of countries eager to export their coal combustion technologies, led by China and Japan, and by the desire of coal exporters to find new outlets. Moving on from 2017 and onwards, even despite this growth and relative good performance of the coal sector in 2017, the sustainability of coal as a primary energy supply is still far from certain.
‚Coal Exit or Coal Expansion? A Review of Coal Market Trends and Policies in 2017‘ – Policy Paper by Sylvie Cornot-Gandolphe – Institut français des relations internationales / IFRI.