World Energy Outlook 2019

Weo

Coal

Introduction

Global coal use rose for the second straight year in 2018, although it remained below the peak level of 2014, and this rise mainly came from China, India, Indonesia and some other countries in South and Southeast Asia. In Asia, demand for electricity has continued to grow and coal remains the largest source of generated electricity.

Coal is meanwhile being steadily squeezed out of the energy mix in many advanced economies by a mix of environmental policies and competitive pressures from increasingly cost-competitive renewables and, in some markets, from natural gas.

There is a stark variation in the coal outlook between the Stated Policies Scenario, in which global coal demand is essentially flat, and the Sustainable Development Scenario, in which it falls rapidly. What happens in Asia will be pivotal, given the region’s large coal supply industry and the young average age of the coal-fired fleet. Large-scale deployment of CCUS technologies could yet allow to make a distinction between coal use and the emissions from its combustion, and this is an important feature of the Sustainable Development Scenario, alongside a major reduction in overall coal demand.

Outlook by scenario

Coal production by region and scenario, 2018-2040

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Coal demand by region and scenario, 2018-2040

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Flat global coal demand in an expanding energy system means that the share of coal in the global energy mix in the Stated Policies Scenario declines from 27% in 2018 to 21% in 2040, falling behind natural gas in the process. Overall coal use in power generation decreases slightly, while its industrial use grows modestly.

There are strong regional disparities in the outlook for coal. In many advanced economies coal demand for power is in deep structural decline, hastened by specific phase-out commitments, the continued rise of renewables, competition from natural gas in the United States and higher CO2 prices in the European Union. Coal demand drops too in China – by far the world’s largest coal consumer – due in large part to a strong policy push to improve air quality. However, in other parts of developing Asia countries look to increase their use of coal to satisfy fast-rising demand for electricity and for industrial development.

The outlook for coal is very different in the Sustainable Development Scenario. With a much more stringent focus on reducing emissions, global coal use decreases steeply at an annual rate of 4.2%. By 2040, world coal use is 60% lower than in the Stated Policies Scenario and coal’s share in the primary energy mix falls towards 10%.

A crucial variable for the future of coal is the extent to which carbon capture, utilisation and storage (CCUS) technologies are deployed in power generation and industry. CCUS can provide a cost-competitive decarbonisation option for key industrial processes. The current pipeline of projects however is far short of what is required under the Sustainable Development Scenario to abate emissions from key industrial sectors of the economy.

Highlights

Energy mix in industry in selected regions, 2018

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Coal is the largest fuel in the global industrial energy mix, but there are marked regional differences. Coal is by far the main fuel used in industry in China and India. Outside Asia, natural gas tends to take larger shares in the industrial energy mix, in particular outside the iron and steel sector.

Final energy consumption in industry by scenario, 1990-2040

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Industrial use, which today accounts for around one-third of global coal demand, increases by some 225 Mtce over the period in the Stated Policies Scenario. Coal remains the backbone of the iron and steel, and cement sub-sectors and its use in the chemical sub-sector keeps rising, particularly in China. In the Sustainable Development Scenario, industrial coal use decreases, but coal remains an important fuel, reflecting the difficulty and expense of finding substitutes for coal in these industrial processes.

Coal supply investment, 2010-2018

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The headwinds facing new coal supply projects start with uncertainties over future demand. Climate policies, air pollution policies and phase-out policies, alongside the fall in costs of renewables and natural gas prices in some markets, is raising questions about the long-term profitability of coal assets.

 

In addition, an increasing number of banks, insurance companies, institutional and private investors, utilities and mining companies are restricting, reducing or giving up investment in coal.

 

The decline in coal supply investment since the high point in 2012 - notwithstanding the slight uptick in 2018- is set to continue in our projections in both scenarios. From $80 billion in 2018, average annual investment declines to around $60 billion in the Stated Policies Scenario by the 2020s (averaged for the decade as a whole) and to around a third of this in the Sustainable Development Scenario.

 

Investment in coal supply increasingly bifurcates into two worlds – one in which financing constraints start to bite and the other in which financing does not yet appear to be such a hard constraint. Most of the projected coal supply investment is concentrated in the latter.

Indirect CO2 and methane emissions, and emissions intensities for the ten-largest coal producing countries, 2018

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Discussions of energy-related methane emissions have focused on oil and natural gas operations, but coal mining also releases methane. We estimate that global emissions of coal mine methane (CMM), the methane naturally contained in coal seams, were around 40 million tonnes in 2018, equal to around 1 200 million tonnes of CO2-equivalent (Mt CO2-eq).

 

In the Stated Policies Scenario, there are very few policies in place globally that aim to reduce the emissions intensity of coal production and so CMM emissions therefore remain broadly constant at around 40 Mt to 2040. In the Sustainable Development Scenario, the 60% decline in coal demand to 2040 is the primary factor in reducing CMM, but there are also some broader efforts to reduce emissions from mines, and total methane emissions fall to less than 15 Mt in 2040.