Russia’s War Is Turbocharging the World’s Addiction to Coal - Economygalaxy

Russia’s War Is Turbocharging the World’s Addiction to Coal - Economygalaxy

In Germany and Italy, coal-fired power plants that were once decommissioned are now being considered for a second life. In South Africa, more coal-laden ships are embarking on what’s typically a quiet route around the Cape of Good Hope toward Europe.

Coal-burning in the U.S. is in the midst of its biggest revival in a decade, while China is reopening shuttered mines and planning new ones. The world’s addiction to coal, a fuel many thought would soon be on the way out, is now stronger than ever.

Demand has been on the rise since last year amid a natural gas shortage and as electricity use surged after pandemic restrictions were rolled back. But Russia’s invasion of Ukraine turbocharged the coal market, setting off a domino effect that’s leaving power producers scrambling for supply and pushing prices to record levels.

The boom in the world's dirtiest fossil fuel has huge implications for the global economy.

The higher prices will continue to feed into rising inflation. But even with the recent surge, analysts say that coal is still one of the relatively cheapest fuels. That’s making it more critical for power supplies at a time when coal-burning also remains the biggest single obstacle in the battle against climate change.

Meanwhile, miners are struggling to dig up any additional tons as utilities around the world keep demanding more, setting the stage for the next phase of the global energy crisis.

“When you’re trying to balance decarbonization and energy security, everyone knows which one wins: Keeping the lights on,” said Steve Hulton, senior vice president for coal markets at market-research company Rystad Energy in Sydney. “That’s what keeps people in power, and stops people from rioting in the streets.”

In 2021, the world generated more electricity from coal than ever before, with an increase of 9% from the previous year, according to the International Energy Agency.

By 2022, total coal consumption — for generating power, making steel, and other industrial uses — is expected to rise by almost 2% to a record of just above 8 billion metric tons and remain there through at least 2024.

“All evidence indicates a widening gap between political ambitions and targets on one side and the realities of the current energy system on the other,” the IEA said, estimating that carbon-dioxide emissions from coal in 2024 will be at least 3 billion tons higher than in a scenario reaching net-zero by 2050.

Coal’s story is inextricably linked with natural gas, often promoted as the cleaner-burning alternative.

Europe’s Energy Crisis and the Coal Comeback

As the world began to emerge from the pandemic in mid-2021, power demand surged as stores and factories reopened. But Europe, which had been leading the global charge away from coal, faced an unprecedented crunch for electricity and a shortage of natural gas.

At the same time, renewable power was tight in the region and in some other parts of the world. The confluence of events sparked blackouts in some regions and sent gas prices to extremes around the world, ushering in the energy crisis.

Suddenly, coal was back in vogue as a less-expensive alternative. Thermal coal, the type burned by power plants, is one of the cheapest fuel sources “on the planet,” with costs at about $15 per million British thermal units, according to a report dated April 1 from Bank of America. That compares with about $25 for crude oil and the global price of $35 for natural gas, the report said.

The European Union, which has some of the world’s most ambitious climate targets, saw its coal use jump 12% last year, the first increase since 2017 — albeit, that gain was from low 2020 levels.

Coal consumption climbed 17% in the U.S., and also rose in Asia, Africa and Latin America. India and China, which dominate global markets, were also big drivers for increasing world demand.

Just a few months ago, negotiators arrived in Glasgow for the COP26 climate conference optimistic they could “consign coal to history.”

Instead, the climate talks ended in November with a watering down of the language on the use of coal. China, the U.S. and India are the three biggest polluters, and all three have now pledged to zero out their emissions in the decades ahead.

Yet India and China pursued last-ditch interventions to soften language on coal usage, and the U.S. played a role in accepting that weaker position, calling into question the nations’ short-term commitment to curb coal. And that was all before the recent further revival of the market.

The IEA issued its annual demand outlook back in December. The agency now plans to issue a mid-year revision in July — its first time ever to do so — to analyze the impact of the war.

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In all likelihood, demand will be higher than the December forecast as Russia’s invasion of Ukraine sets off a chain reaction in the global energy markets that further thrusts coal into the spotlight. Source: Yahoofinance


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