Global coal-generated power demand is expected to hit record highs this year, threatening the world's net-zero targets aimed at cutting greenhouse gas emissions, the International Energy Agency (IEA) said.
Power generation from coal globally is expected to jump by 9 per cent in 2021 to an all-time high of 10,350 terawatt-hours, driven by rapid economic recovery that has pushed up electricity demand much faster than low-carbon supplies can keep up, the IEA said in its latest annual market report.
Overall, coal demand worldwide – including uses beyond power generation, such as cement and steel production – is forecast to grow six per cent this year, according to the IEA's Coal 2021 report.
Depending on weather patterns and economic growth, overall coal demand could reach new all-time highs as soon as 2022 and remain at that level for the following two years, underscoring the need for "fast and strong" policy action, the agency said.
“Coal is the single largest source of global carbon emissions, and this year’s historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero,” Fatih Birol, executive director of IEA, said. “Without strong and immediate actions by governments to tackle coal emissions – in a way that is fair, affordable and secure for those affected – we will have little chance, if any at all, of limiting global warming to 1.5 °C.”
In China, where more than half of global coal-fired electricity generation takes place, coal power is expected to grow by 9 per cent in 2021, the IEA said.
In India, it is forecast to grow 12 per cent this year. This would set new all-time highs in both countries, even as they roll out significant amounts of solar and wind capacity.
“The pledges to reach net zero emissions made by many countries, including China and India, should have very strong implications for coal – but these are not yet visible in our near-term forecast, reflecting the major gap between ambitions and action,” Keisuke Sadamori, director of energy markets and security at IEA, said.
Asia is dominating the global coal market, with China and India accounting for two-thirds of overall demand, Mr Sadamori said. These two economies – dependent on coal and with a combined population of almost 3 billion people – hold the key to future coal demand, he added.
In 2020, global coal demand fell 4.4 per cent, the largest decline in decades but much smaller than the annual drop that was initially expected at the height of the lockdowns early in the pandemic, the report showed.
Coal prices have been on a rollercoaster ride over the past two years. After falling to $50 per tonne in the second quarter of 2020, they started to climb towards the end of the year, with supply cutbacks balancing the market before rebounds in economic activity and coal demand in China started pushing prices up.
In 2021, prices were lifted further by demand outstripping supply in China – the global coal price setter – as well as by supply disruptions and higher natural gas prices globally.
Coal prices reached all-time highs in early October 2021, with imported thermal coal in Europe, for example, hitting $298 per tonne.
Quick policy intervention by the Chinese government to balance the market had a fast effect on prices. As of mid-December, European prices were back below $150 per tonne.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
A list of the animal rescue organisations in the UAE
Know your Camel lingo
The bairaq is a competition for the best herd of 50 camels, named for the banner its winner takes home
Namoos - a word of congratulations reserved for falconry competitions, camel races and camel pageants. It best translates as 'the pride of victory' - and for competitors, it is priceless
Asayel camels - sleek, short-haired hound-like racers
Majahim - chocolate-brown camels that can grow to weigh two tonnes. They were only valued for milk until camel pageantry took off in the 1990s
Millions Street - the thoroughfare where camels are led and where white 4x4s throng throughout the festival
