Coal use set to surpass oil in a decade: IEA

Dec. 18, 2012

While Obama devastates personal and business finances throughout America by bankrupting big coal, the rest of the world is using it to prosper...

AFP - Coal is set to surpass oil as the world's top fuel within a decade, driven by growth in emerging market giants China and India, with even Europe finding it hard to cut use despite pollution concerns, according to a report published Tuesday.

"Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st century," said Maria van der Hoeven, head of the International Energy Agency.

Economic growth is expected to push up further coal's share of the global energy mix, "and if no changes are made to current policies, coal will catch oil within a decade," she said in a statement.

The latest IEA projections see coal consumption nearly catching oil consumption in four years time, rising to 4.32 billion tonnes of oil equivalent in 2017 against 4.4 billion tonnes for oil.

That has consequences for climate change as coal produces far more carbon emissions responsible for global warming than other fuels.

But the IEA report on coal found that even countries which have committed themselves to reducing carbon emissions are finding it difficult to resist the renewed allure of coal.

A number of European countries have seen their use of coal for electricity consumption jump at the beginning of this year, including by 65 percent in Spain, 35 percent in Britain and 8 percent in Germany.

The shale gas boom in the United States has led to a slump in coal prices there and subsequently on the market in Europe, where natural gas remains expensive.

This gave a price advantage to coal beginning last year, with the low price of polluting in Europe's emission trading scheme also a contributing factor.

"...low coal prices, supported by a low (emissions) price resulted in a significant gas-to-coal switch in Europe," said the report.

European countries have been slow to exploit shale gas deposits, concerned about possible environmental damage, but the IEA pointed out that the US experience shows that tapping it can bring benefits from lower coal use as well as lower electricity costs.

"Europe, China and other regions should take note," said van der Hoeven.

Moreover, the IEA report doesn't foresee within the next five years the widespread take-up of technology to capture and store underground carbon emissions from burning coal.

Van der Hoeven warned that unless there is technological progress or a replication of the US experience "...coal faces the risk of a potential climate policy backlash."

The IEA, the energy advisory arm of the Organisation for Economic Cooperation and Development of 34 industrialised nations, sees non-OECD developing countries as driving the increase in coal consumption due to population growth and rising electricity consumption as their economies grow and modernise.

In its baseline scenario, the IEA sees rapid increases in power generation making India the second-largest coal consumer in 2017, displacing the United States where the shale gas boom makes coal uncompetitive.

Chinese coal consumption is forecast to account for more than half of global demand by 2014, with the country also displacing the United States as the biggest coal polluter on a per-capita basis.

The IEA sees China's coal demand increasing by an average of 3.7 percent per year to 3,190 million tonnes of coal equivalent in 2017.

Even in the case of a slowdown in the breakneck growth in the Chinese economy the IEA sees the country's use of coal growing by 2 percent per year, as well as the overall coal market growing.

The agency said that given its position developments in the Chinese market would largely determine the course of the global coal market, saying: "China is coal. Coal is China."

The IEA believes that current mining and port expansion projects are sufficient to meet China's rising needs, but expressed concern if the current low prices and uncertainties about the economic outlook make investors overly cautious.

Cancellations or a slowdown in "...development projects might lead to tightened international coal markets" in the next five years, the IEA warned.

The report sees only the United States making reductions on coal-based carbon emissions on per capita and per economic output measures thanks to cheap gas displacing coal.

Increased coal use pushes up China's emissions on a per capita basis, displacing the United States as the top polluter.

However. China is also seen as making the most gains in emissions efficiency, followed by the United States.

Neither the Europe nor India are forecast to make considerable gains in emissions efficiency.