Global coal demand expected to decline by 2026: IEA report

While coal demand in the U.S. and EU is likely to fall by 20% each, it is expected to rise 8% in India and 5% in China by end of 2023

Coal from the ship being loaded on to a barge to be taken to the Cuddalore port. | Photo Credit: C. Venkatachalapathy

Despite reaching an all-time high in production this year, global coal demand is expected to decline by 2026, said a report by the International Energy Agency (IEA). While this decline is expected to be due to a shift towards renewables and plateauing demand from China, India would remain the “driving force” for the fuel until that year.

The report, released on December 15, sees the global demand for coal rising by 1.4% in 2023, surpassing 8.5 billion tonnes for the first time. This increase however masks stark differences among regions. While demand in the European Union and United States is expected to drop 20% each, it is expected to rise 8% in India and 5% in China in 2023 due to demand for electricity and diminished electrical generation from hydropower.

The IEA’s expectations of a decline in coal demand is premised not only on a rise in renewable energy capacity but also a change in global climate. The current El Nino conditions, usually linked with drier monsoons in Asia, are expected to turn to La Nina and generally linked to better rainfall during 2024-2026. This will presumably translate to greater hydropower output.

Moreover, a steep upward trend in low-cost solar photovoltaic deployment is expected to aid renewable power generation. “Further to that, nuclear generation is set to see moderate increases, especially in China, India, and the European Union. Against this background, coal-fired generation is likely to be pushed into a downward trajectory from 2024,” the report notes.

Currently, a little over half the world’s coal demand comes from China. With a major expansion of renewable energy expected, coal demand in the country is expected to fall in 2024 and plateau in 2026. Overall, this will result in a 2.3% fall in global call demand by 2026.

Coal, the most important energy source for electricity generation, steel-making, and cement production, is also the largest source of carbon dioxide (CO2) emissions from human activity. Despite forecasts of a fall, global consumption is expected to remain well over 8 billion tonnes through 2026, according to the market report.

‘’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. This time appears different, as the decline is more structural, driven by the formidable and sustained expansion of clean energy technologies,” Keisuke Sadamori, IEA Director of Energy Markets and Security, said in a statement. “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.”

Reducing use of ‘unabated’ coal, or coal-burning without technologies to capture carbon, is among the explicit agreements of countries signatory to the United Nations Framework Convention on Climate Change, the world’s biggest influencer of climate policy. To have a chance at keeping temperatures from rising beyond 1.5° Celsius by the end of the century, coal emissions must decline nearly 95% between 2020-2050.

Meanwhile, China, India, and Indonesia – the three largest coal producers globally – are expected to break output records in 2023, pushing global production to a new high in 2023. These three countries now account for more than 70% of the world’s coal production.