Coal – a blessing and a curse
The history of coal is a history of energy transitions. Firstly, coal emerged as the enabler of the industrial revolution in the 19th century. Clearly a blessing for mankind, but also a curse due to local pollution and lethal accidents. Coal was then the dominant fuel in transportation and for home heating until World War II, when petroleum quickly seized a dominant position in these markets. It took less than 15 years to reduce coal consumption for these applications by 95%, as oil proved to be a far more convenient and cost competitive fuel. More recently, coal was the engine behind the “Chinese wonder” – the remarkable economic growth of the world’s most populous nation from 2000 to 2020. This was clearly a blessing for China, lifting its GDP six-fold, from $3 trillion to a staggering $18 trillion, but also a curse due to the vast air pollution, health problems, accidents and climate impacts.
Today coal represents 24% of the world’s energy supplies and is responsible for 40% of global CO2 emissions. Replacing fossil fuel with renewables has been at the top of the global agenda to combat climate change, but these initiatives also focus on replacing coal with natural gas in power generation during the transition period, since coal has twice the emissions per kWh versus natural gas.
However, with Russia’s invasion of Ukraine and the natural gas crises that followed, coal could be a blessing for energy security in Europe in the short term, protecting Europe from 2023 winter blackouts. Coal imports and local production can be ramped up more quickly than natural gas, and we already see the highest coal import and stock levels in years in parts of Europe. With the EUs recent agreement to reduce gas consumption by 15%, coal’s share of the energy mix is poised to grow considerably in 2022 and 2023. We might also see increased coal consumption and production in China this year due to high international gas and coal prices. However, China’s imports of coal have fallen so far due to high coal prices and Covid-19 lockdowns.
Will the current energy crisis cause climate ambitions to be lowered? We believe that despite a short-term increase in emissions due to gas-to-coal switching, the net effect of the crisis will be an accelerated reduction of climate emissions in the longer term. Both the EU and China have increased their ambitions for the pace of the green energy shift. Seen in this light, coal stands as a blessing for energy security in the short term. Meanwhile, the negative sentiments about a ramp-up of coal consumption might in fact speed up structural shifts in the longer run – which would be a blessing for the climate.
For more details on the implications of the current energy crisis, please tune in to the upcoming Rystad Talks Energy in July focusing on China’s role and Europe’s efforts to navigate its way through the energy crisis in the short and longer term.