2023 Coal Demand to Remain at Record Levels

by | Aug 1, 2023


(Credit: IEA)

Despite decreased coal demand in North America and Europe, the industry’s continued growth in Asian economies has contributed to a new all-time high of global coal consumption in 2022, according to the International Energy Agency. These record levels are expected to remain this year as coal continues to be used in power generation and industrial applications.

In 2022, coal consumption rose by 3%, to 8.3 billion tons according to the International Energy Agency’s Coal Market Update. The report also predicts small declines in coal-fired power generation that will likely be offset by increased industrial use of the fossil fuel.

Global consumption of coal is regionally lopsided as developed countries in Europe and North America have been phasing out coal plants to reduce emissions. Meanwhile, China, India, and Southwest Asia combined account for 3 of every 4 tons of coal consumption worldwide this year. Further, demand for coal fell in the U.S. by 24% and in the EU by 16%, but demand in China and India grew by more than 5% during the same time period.

“Coal is the largest single source of carbon emissions from the energy sector, and in Europe and the United States, the growth of clean energy has put coal use into structural decline,” said IEA Director of Energy Markets and Security Keisuke Sadamori. “But demand remains stubbornly high in Asia, even as many of those economies have significantly ramped up renewable energy sources. We need greater policy efforts and investments – backed by stronger international cooperation – to drive a massive surge in clean energy and energy efficiency to reduce coal demand in economies where energy needs are growing fast.”

Why Coal Remains Prevalent in Asian Economies

Although it remains clear that phasing out the use of coal is crucial in meeting international emission reduction targets, coal transitions are complicated by the relatively young coal industry in the Asian region. On average, coal plants in the U.S. are around 40 years old, while Asian coal plants are only about 15.

Clean energy sources will need to be upscaled in the region, and this will require international collaboration, government incentives, and solutions that will bring clean energy jobs to traditionally coal-dependent areas. While favorable economics for clean energy will certainly help, public funding is needed to help asset owners adapt to a transition away from coal dependency.

After price increases during the pandemic and Russia’s invasion of Ukraine, coal prices have lowered, making imports more attractive for price-sensitive buyers. Chinese imports have almost doubled during the first half of this year, and global coal trade is expected to increase by over 7%. The shielding of coal plants from market competition ensures the industry’s continued prosperity.

Multiple reports emphasize the need for developed countries to take the lead on financing the clean energy transition in less developed areas of the world. Investment in clean energy must be made economically attractive in comparison to cheaper, yet more environmentally destructive, energy sources.

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