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Introduction

While both coal demand and prices declined after 2014, prices started to rebound in 2016 and coal demand made a comeback in 2017.

In Europe and North America, coal demand remains under pressure due to low electricity demand growth, strong uptake of renewables-based capacity and, in the United States, the availability of inexpensive natural gas. Nonetheless, elsewhere coal demand could be more resilient than some expect, especially among developing economies in Asia.

Outlook by scenario

Coal demand by region and scenario, 2017-2040

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Coal production by region and scenario, 2017-2040

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Coal demand in 2040 in the New Policies Scenario (NPS) has been revised down by some 3% compared with last year’s outlook. Downward revisions have been made for industrial coal use, as the shift from coal to alternative fuels in industry speeds up, and in the buildings sector where coal use almost disappears. Overall coal demand for power generation declines slightly in the NPS as moderate growth in coal-fired generation is offset by improvements in plant efficiencies. Modest growth in industrial coal consumption is due in part to rising use of coal as a feedstock for a range of conversion processes, notably coal-to-gas and coal-to-liquids projects in China. Overall coal consumption flattens around 5 400 million tonnes of coal equivalent (Mtce) and does not regain the peak seen in 2014.

The supply projections in the NPS mirror trends on the demand side, implying that global coal production peaked in 2014. However, there are stark regional differences in coal production prospects to 2040. Coal production in China, by far the world’s largest coal producer, declines at an average rate of 0.4% per year over the outlook period. India overtakes Australia and the United States in the early 2020s to become the world’s second-largest coal producer behind China. US coal production is projected to drop by 30% over the period to 2040, reflecting declining domestic demand and limited opportunities to tap into export markets.

In the Sustainable Development Scenario (SDS), coal consumption decreases steeply (-3.6% per year) and coal’s share in primary energy falls below 12% by 2040. Unabated coal generation is incompatible with the long-term emissions requirements of the SDS. CCUS provides a technology option to reduce emissions of the existing coal-fired power plant fleet through retrofits in the SDS. Some 210 gigawatts (GW) of coal plants are fitted with carbon removal technology by 2040, of which 170 GW are retrofits to existing plants.

Highlights

Change in global coal demand in selected regions and by scenario, 2017-2040

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In the NPS, falling consumption in China, European Union and United States is balanced by rising demand in India and Southeast Asia.

Shares of global primary energy by scenario, 2017 and 2040

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In the NPS, the share of coal in global primary energy demand declines from 27% today to 22% in 2040, falling behind gas in the late 2020s. In the SDS, coal consumption decreases steeply by 3.6% per year and coal’s share in primary energy falls below 12% by 2040.

Major coal exporters in the New Policies Scenario, 1990-2040

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Many coal exporters have emerged leaner and fitter from the recent coal market downturn, and competition promises to be strong in the uncertain import demand environment of the NPS, in which overall coal trade remains largely flat. Australia, the world’s largest exporter continues to be well positioned while Indonesian exports decline in the NPS due to increasing domestic coal demand in power generation. The fundamentals suggest that Russia has the potential to expand market share; it becomes the second-largest coal exporter in our projections, overtaking Indonesia by the mid-2030s.

Global coal production by type in the New Policies Scenario, 2015-2040

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Coal prices have soared since early 2016 due to strong import demand and efforts to limit and restructure supply in China. Despite the resulting boost in profits for mining companies, investment in coal mining remains subdued, particularly among export-oriented companies. The New Policies Scenario implies $1 trillion of investment to offset decreasing production from existing mines and to build new coal infrastructure, the majority of which is in China and India.
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