Coal demand set to hit a 'historic turning point', IEA says

Consumption will surpass 8.5 billion tonnes this year before falling and plateauing to 2026

A major expansion of renewable energy capacity will lower coal consumption over the next three years, the IEA says. Bloomberg

Global coal demand is set to drop next year and “plateau” through 2026, according to the International Energy Agency, which hailed the shift as a “historic turning point”.

Coal consumption, which will reach a record high this year, is projected to fall by 2.3 per cent in 2026, driven by a major expansion of renewable energy capacity in the next three years, the agency said in its annual coal market report on Friday.

‘’We have seen declines in global coal demand a few times, but they were brief and caused by extraordinary events such as the collapse of the Soviet Union or the Covid-19 crisis,” said Keisuke Sadamori, IEA director of energy markets and security.

“This time appears different, as the decline is more structural, driven by the formidable and sustained expansion of clean energy technologies,” Mr Sadamori said.

Global demand for coal will rise by 1.4 per cent this year, surpassing 8.5 billion tonnes for the first time.

The increase is driven by “strong” demand in emerging and developing economies, offsetting record drops in demand in the EU and the US, the IEA said.

Through 2026, more than half of global renewable capacity expansion is set to occur in China, which currently accounts for more than half of the world’s demand for coal.

Coal demand in the world’s second-largest economy is also projected to drop next year and “plateau” through 2026, the agency said.

The IEA said the projected decline in coal consumption – the largest energy source for power generation – could mark a “historic” turning point, but added that demand would stay well above 8 billion tonnes after three years.

To drive down emissions at a rate consistent with the Paris Agreement goals, the use of unabated coal would need to fall “significantly faster”, the agency added.

“A turning point for coal is clearly on the horizon – though the pace at which renewables expand in key Asian economies will dictate what happens next, and much greater efforts are needed to meet international climate targets,” Mr Sadamori said.

The report comes after countries reached a historic deal at the Cop28 climate conference to transition away from fossil fuels by 2050.

The global stocktake calls for the speeding up of efforts towards the “phase-down of unabated coal power” and “phasing out inefficient fossil fuel subsidies”.

Meanwhile, China, India and Indonesia – who collectively account for 70 per cent of global coal production – are expected to break output records in 2023, the report said.

Last year, high natural gas prices brought on by Russia’s invasion of Ukraine, coupled with extreme weather events, led many regions to turn to coal to secure electricity supplies.

Carbon dioxide emissions from burning fossil fuels are expected to hit a record high this year amid higher emissions driven by India and China, according to the Global Carbon Budget report.