A long goodbye to coal in China and India is a climate headache

More than two years after climate negotiators first tried to consign coal to history, the dirty fossil fuel is having a moment.

China's energy insecurity — which has pushed Beijing back to more reliable power sources — and rising Indian demand, the continuing fallout from the war in Ukraine and the faltering of international plans to wean developing economies off fossil fuels, have seen coal prove remarkably resilient.

Output hit a record last year, and producers are preparing for a future that will take decades more to break even with renewable energy.

Prices are also going up. While thermal coal is trading at a fraction of the highs reached in 2022, prices are still above historical norms after Russia invaded its neighbor. Benchmark Newcastle coal futures are trading at less than $130 a tonne, a quarter of the peak but higher than any level between 2011 and 2020.

Most of this second wind blows towards Asia. In 2000, the International Energy Agency estimated that advanced economies accounted for roughly half of coal consumption. By 2026, China and India alone will account for more than 70 percent.

Those two heavyweights, Indonesia, commissioned 59 gigawatts of new coal-fired power plants last year and launched or renewed plans for 131 gigawatts — 93 percent of the world total. Global Energy Monitor.

„You look at Asia, the demand and build-up of coal-fired power plants, especially in India — coal isn't going anywhere anytime soon,” Rob Bishop, CEO of Australian miner New Hope Corp., said in an interview.

The extended final act would be a vindication for fossil fuel executives, who have long argued against the prospect of a rapid transition away from carbon-intensive power, pointing to advantages in terms of reliability and cost. A reference to coal's flotation earned Saudi Aramco CEO Amin Nasser a standing ovation at a major energy conference in Houston last week.

This is less good news for efforts to curb carbon emissions and meet global climate goals.

For years, analysts have expected coal production to plateau after hitting a record in 2013. Then came 2021, and power shortages in China put Beijing on track to order more mines to ensure energy security.

In 2022, Russia's invasion of Ukraine and a blackout during a heat wave in India further boosted coal demand. Last year, production rose to a record 8.7 billion tonnes, according to the IEA.

That number is expected to drop this year. But the agency expects it to level off by 2026 — in line with industry predictions of a longer bye.

All these are visible on the ground. In China, which produces and uses half the world's coal, miners are struggling to keep up with growth after boosting production by 21 percent to 4.7 billion tons in the past three years. Low-cost reserves have largely been tapped, leading companies to dig deeper, more expensive mines. Deaths have also started to rise after years of decline.

With record amounts of new solar panels and wind turbines, hydropower and steadily growing nuclear generation, low-carbon energy will outpace growth in electricity consumption, according to the Center for Energy and Clean Air Research.

But that clean energy will also be coal's lifeline, said Zhang Hong, deputy secretary-general of the China National Coal Association. Renewable electricity is only generated when the weather permits, so even as other baseload options emerge, cheap and reliable coal will still play a role.

„The next 10 to 15 years will be an important strategic window,” Zhang said.

India is the only country predicted by the IEA to increase coal production this year, with production reaching 1 billion tonnes for the first time. Prime Minister Narendra Modi needs to meet rising energy demand by reducing reliance on expensive imports. Yet even after the rise of renewables, nuclear, hydropower and other baseload options have dwindled – so coal is expected to remain the dominant power until the end of this decade.

Meanwhile, Indonesia, the world's leading thermal coal exporter, expects production to remain stable for the next two years. Even if lower prices eventually dampen enthusiasm, it is partly feeding domestic demand from a growing, energy-hungry nickel processing industry.

But it's also a testament to the difficulty of accelerating coal's end in an economy with new plants, rising energy demand and an urgent need to create jobs. In 2022, Jakarta agreed to a $20 billion green deal with wealthy governments and financial institutions that would, among other things, shut down coal-fired power plants early. However, coal extraction is more challenging than expected. Major deals are on the negotiating table.

Coal's days are surely numbered. Advances in solar and wind have made those technologies much cheaper than coal power in most parts of the world, and similar gains for batteries and energy storage systems will eventually change the energy mix enough to make 24-hour renewable power affordable.

But for now, the shift is testing multi-year expectations of rapid peaks and subsequent steep declines.

„We see the world needing more operators to mine coal and support the transition coming in the decades ahead,” said New Hope's Bishop.