World Economy

Coal to Stay, for Now

Coal to Stay, for NowCoal to Stay, for Now

Coal: Can't live with it and can't live without it–at least not yet.

It is the biggest source of heat-trapping greenhouse gases that negotiators around the world hope to limit in an agreement to be thrashed out in Paris next month, AP reported.

Demand for coal is leveling off, but it will remain a key energy source for decades, no matter how many billions of dollars of investment go into cleaner energy like wind and solar. Too much of the world depends on it now for heating and power generation to suddenly live without it.

There are vast parts of the developing world that will continue to see growth in demand for electricity, driven by sales of televisions, refrigerators and the construction of highways and malls as incomes increase, said Xizhou Zhou, the China chief for energy consultants IHS Energy. "The cheapest way to provide electricity in many of these places is still coal-based," Zhou said.

This underlines the challenge facing negotiators who will convene in Paris Nov. 30 to agree on how to limit emissions of fossil fuels. Scientists say coal, oil and gas emissions, including carbon dioxide and methane, are key drivers of rising temperatures that could lead to intense droughts or flooding of island nations.

Abundant and cheap, coal emits not only soot but double the greenhouse gas emissions per unit of energy of natural gas.

Demand Rises

In recent years, slowing economic growth, gains in energy efficiency and advances in renewable-energy production have dampened demand for coal in key markets. Stricter air emissions regulations in Europe, the production of shale gas in the US and the restructuring of the Chinese economy away from heavily polluting industries are all weighing down on demand.

An analysis released Monday by the Institute for Energy Economics and Financial Analysis suggests coal consumption peaked globally in 2013 and is set to decline a further 2 to 4% in 2015 because of declining consumption by China and other big coal consumers.

Consumption to Grow

Still, coal provides more than 40% of the world's electricity and 29% of its energy supply, second only to oil at 31%, according to the Paris-based International Energy Agency. The agency projects coal consumption to continue growing somewhat in coming years, largely owing to increased coal demand in India and Southeast Asia.

Coal's future is closely tied to China, the world's biggest coal user, producer and importer. It burns 4 billion tons of coal a year, four times as much as the United States.

Coal accounts for nearly two-thirds of China's energy, but in 2014 its coal consumption fell 2.9% year-on-year according to official statistics, or 2.6% according to the IEEFA report–the first annual decrease in 15 years.

Beijing is trying to reduce dependency on coal to ease air pollution by switching to natural gas in major cities.

Competitive Cost

The cost of renewable energy is becoming more competitive every year, while coal-fired power plants are increasingly expensive as air pollution controls grow more stringent.

"You have got a wave of new technologies and investments coming where historically power grids were heavily reliant on coal," said Tim Buckley, a Sydney-based energy analyst with the Institute for Energy Economics and Financial Analysis.

The continued development of wind, solar and hydropower is good for combating global warming, "but that's almost an ancillary benefit–the key drivers are economics, technology, leadership and energy security and air and water pollution," Buckley said.

India, the nation with the third-highest carbon emissions after China and the US, is at a point where both clean and dirty energy are being scaled up. About a fifth of its more than 1.2 billion people still lack electricity.

India plans a five-fold boost in renewable energy capacity in the next five years to 175 gigawatts, yet it is also planning to expand coal power. Coal-fired plants account for about 60 percent of India's installed power capacity.

Ultimately, the world needs to decide how much energy from fossil fuels is "reasonable" considering the consumption patterns and development stages of different countries, he said.