The world is not close to being free of coal - In some countries, demand for it is increasing!
The world will not be able to give up coal anytime soon. “Nothing can destroy coal,” US President Donald Trump said at the recent World Economic Forum. “Not the weather, not a bomb.” US coal exports have been steadily increasing to meet growing global demand for the world’s dirtiest fossil fuel, even as its domestic consumption has declined.
Moreover, the world's coal capacity reached a new record of nearly 2,175 gigawatts in 2024, data from Global Energy Monitor showed on February 6. Coal capacity is the total power output that can be generated by coal-fired power plants.
“The global coal transition remains challenging, driven largely by rising demand in Asia, although Europe and the US are seeing significant declines in coal consumption,” said Dorothy Mei, project manager for Global Energy Monitor’s Global Coal Mine Tracker. Global coal demand is also expected to have broken another new record of 8.77 billion tonnes in 2024 and remain at similar levels through 2027, the International Energy Agency predicted.
The main culprits?
China recently reported that its coal imports rose 14.4% to a record high in 2024, reaching 542.7 million metric tons compared to 474.42 million tons a year earlier. The world's second-largest economy is also the largest consumer of coal globally, accounting for more than 56% of global demand in 2023, the latest figures from the IEA showed.
China's record coal reserve strategy is largely geared toward preparing the country for potential power shortages caused by extreme weather events, Mei said. There is little focus on efficient energy use when coal is so cheap.
Hydropower, wind and solar power will account for almost 30% of China's electricity mix by 2023, data from energy think tank Ember Energy showed. When hydropower output falls due to insufficient rainfall, the Chinese government often relies on coal power to ensure energy security, Mei added.
"In addition, another major obstacle is not the availability of renewable energy infrastructure, but the difficulty of transmitting solar and wind power across provinces," she said, adding that coal will continue to be a "critical energy pillar" in China until grid integration and management are fully developed across the country.
In India, extreme heat caused by climate change has led to increased demand for cooling energy, and clean energy sources are not being built fast enough to meet the country's growing energy demand, Mei said. India's focus on economic and infrastructure development has also increased consumption of cement and steel, industries that rely heavily on coal, according to analysts CNBC spoke to.
The South Asian nation's demand for steel is set to grow by 8-9% in 2025, outpacing that of other economies, due to rising steel-intensive construction in the infrastructure and housing sectors, data from consulting firm Crisil showed. Last December, India extended its directive that imported coal-fired power plants operate at full capacity until February 28.
But that doesn’t mean India has abandoned its renewable energy goals. The country has set an ambitious target of meeting 50% of its electricity needs through renewable energy by 2030. And it has made progress. And as of last October, renewable sources account for more than 46.3% of the country’s electricity generation capacity, according to India’s Ministry of New and Renewable Energy.
Outside of India and China, the other major countries building new coal plants are Bangladesh, Indonesia and Vietnam, Global Energy Monitor noted. Vietnam is expected to overtake Taiwan as the world's fifth-largest coal importer, after the country's coal imports hit a record high in more than a decade last year.
Indonesia’s coal production rose to about 831 million tonnes to hit a new high last year, data from the country’s Ministry of Energy and Mineral Resources showed. And coal’s share of the Philippines’ electricity mix is set to surpass China’s by 2023, making it Southeast Asia’s most coal-dependent country, Ember Energy reported. “There’s little focus on using energy efficiently when coal is so cheap,” said Dave Jones, a power analyst at energy think tank Ember Energy.
Strong coal demand in Asia across the board is also partly a result of rising gas prices since Russia's invasion of Ukraine, given that a number of major thermal coal importers such as China, India and Vietnam had scaled back plans to build gas-fired power following the high gas prices that followed, said Ian Roper, commodities strategist at KK Advis in Japan.
Global electricity consumption is expected to continue to grow through 2025, the IEA said. “The world needs more energy, and it needs it now,” said Rob Thummel, senior portfolio manager at Tortoise Capital. “For the global economy to grow, it needs efficient, cost-effective and reliable sources of energy supply,” he told CNBC. Artificial intelligence has also accelerated the world’s need for energy. Reports have shown that energy needs driven by data centers around the world will also prolong demand for coal.
“The US, China and the world are in a race for AI supremacy,” said Tim Winter, portfolio manager at Gabelli Funds. AI data centers are big power users, making it harder to retire a reliable and affordable energy source like coal, he explained. By 2030, electricity demand from data centers could exceed 35 GW, more than double the 17 GW recorded in 2022, a report by Moody’s Ratings showed.
Is the energy transition still possible?
With global electricity demand growing faster than ever, other industry watchers are beginning to echo the IEA’s predictions that coal demand will remain at all-time highs. “There can’t be a transition when demand for oil, for natural gas, for coal, continues to reach record levels,” said Eric Nuttall, senior portfolio manager at Ninepoint Partners.
Governments agreed in the 2015 Paris climate agreement to limit global warming to well below 2 degrees Celsius and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius. To prevent global warming from exceeding 1.5 degrees Celsius, it is estimated that emissions need to be cut by 45% by 2030 and reach net zero by 2050. Others are less pessimistic, although they recognize the challenge of achieving these targets on time.
A continued commitment to renewables, along with a potential increase in global LNG supply, could ensure that coal imports continue to weaken in some coal-importing markets, said Roper, who noted that coal consumption has fallen in Europe and Northeast Asia in recent years. Moreover, if countries stick to their pledges to triple renewables by 2030, coal could start to see a significant decline this decade, said Ember Energy’s Jones.
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