BusinessDay

Global coal demand set to hit new high stirring fresh climate concerns

One month after the world pledged to abandon coal at COP 26, global demand for the commodity is set to hit an all-time high next year driven by emerging economies, the International Energy Agency has said in a new report.

Coal is set to revert to the pattern seen over the previous decade and hit new highs as declines in advanced economies are offset by growth in some emerging and developing economies.

The Paris-based think tank that advises Western Countries on their energy policies said coal decline in the advanced economies is mostly driven by the power sector where slow electricity demand growth and rapid expansion of wind and solar PV are eating into coal power generation.

It also said recent efforts to switch from natural gas to coal will reverse as gas prices retreat from their highs.

However, China and India principally will buck this trend. Both countries account for two-thirds of global coal consumption and are set to add new capacity next year.

In China, coal demand growth is expected to average less than 1 percent per year between 2022 and 2024 and in India, stronger economic growth and increasing electrification are forecast to drive coal demand growth of 4 percent per year, the IEA said.

India’s growing appetite for coal is set to add 130 million tonnes (Mt) to coal demand between 2021 and 2024.

“For most industrial purposes where coal is used, such as iron and steel production, there are not many technologies that can replace it in the short term. Based on current trends, global coal demand is set to rise to 8 025 Mt in 2022, the highest level ever seen, and to remain there through 2024,” the IEA said.

The report said coal production is forecast to reach an all-time high in 2022 and then plateau as demand flattens.

In November During COP 26 held in Scotland, at least 23 countries made new commitments to phase out coal power, including China and India and other top coal power-using countries.

Twenty-five countries and public finance institutions committed to ending international public support for the unabated fossil fuel energy sector by the end of 2022. Major global banks have also said they would no longer fund coal projects.

Read also: COP26: Countries reach climate deal, refuse support for world’s poorest

The United Nations hailed the agreement and called it significant because it could shift an estimated $17.8bn a year in public support out of fossil fuels and into the clean energy transition.

However, the pledges to reach net-zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action, the IEA said.

The think tank on a hopeful note said new commitments during COP26, such as the Global Coal to Clean Power Transition Statement to accelerate the transition from unabated coal power generation, put additional pressure on coal. The decision by China, South Korea, and others not to build new power plants abroad could also dent demand.

It said the coal power generation rebound in the United States and Europe in 2021 was a “blip”, and coal demand will resume its decline in both regions.

However, Asia dominates the global coal market, with China accounting for more than half of global demand, or two-thirds if India is added. It said the two economies with 3 billion hold the key to the future of coal

“The fate of coal depends on how quickly and effectively countries move to implement their net-zero commitments. And the level of coal demand in a net-zero carbon economy will depend on how successful efforts are to deploy carbon capture, utilization, and storage (CCUS) technologies,” the report said.

What it means for Nigeria

Some experts say Nigeria holds over 2.8 billion tonnes of coal but proven reserves were put at 379m tonnes by the Ministry of Solid Minerals, making it the world’s 44th largest proven reserves. Large swaths of coal deposits can be found in Nasarawa, Enugu, Gombe, Kogi and in 15 other states, much of which may never be tapped.

Nigeria has drawn up plans to use coal to generate power but has not leveraged on its vast coal reserves as some Asian countries. The abundance of gas resources, seen as cleaner and more viable for industrial and electricity use, has tipped investment decisions in favour of gas.

With the commitments made at COP 26, Nigeria’s vast coal resources may not only be untapped as countries including China say they would not fund coal development abroad.

Unlike South Africa who could negotiate financial support to shift away from coal, Nigeria will get nothing from abandoning the energy resources as it has not made significant investment exploiting its coal.

To persuade coal-dependent countries to join the plan to phase out the commodity, rich nations led by the United Kingdom promised a raft of financial support.

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