Asia will slow down the decline in global coal consumption
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The consumption of thermal and coking coal will increase by 2030, and only then will demand decline by 2050, follows from a study by the consulting company Yakov and Partners. These estimates are higher than the conservative forecasts of the International Energy Agency (IEA), which expects demand to begin to decline as early as 2025. According to analysts, Asian countries are far from the peak of energy consumption, which will support the demand for coal as the most affordable fuel.
Global consumption of all types of coal in 2030 and 2050 will be above the most conservative (that is, optimistic for coal) forecasts of the International Energy Agency, according to a study by the consulting company Yakov and Partners (formerly McKinsey). The IEA expects the start of a reduction in global coal consumption around 2025. “We explain the discrepancy by the fact that the forecasts of international agencies are largely motivational. We focused primarily on detailed forecasts for individual countries and on their own plans to meet their energy needs,” says Dmitry Vasyukov, partner at Yakov & Partners.
The study assumes three scenarios for the development of the global coal market: “basic”, “accelerated transition” and “recession”.
The most likely, according to the authors of the study, is the baseline scenario, when there is no trade in Russian coal with the EU, with Japan and Korea it stops from 2026, and the existing restrictions on coal supplies from Australia to China are lifted. Additional conditions are the preservation of GDP growth rates in developing countries and stagnation in developed ones. If the baseline scenario is implemented, global thermal coal consumption will grow by 3% by 2030, from 6.8 billion tons in 2021 to 7 billion tons. However, then coal consumption will begin to decline and by 2050 will fall by 38%, to 4.2 billion tons. Under the accelerated transition scenario, demand will fall to 3.3 billion tons by 2050 (minus 52% by 2021), under the recession scenario, to 5 billion tons (minus 27% by 2021).
By contrast, global coking coal consumption will grow throughout the period under any scenario, driven by strong growth in demand in India and other developing Asian countries. By 2050, it will reach 1.1 billion tons (an increase of 18%) in the base scenario, 1 billion tons in the recession scenario and 1.2 billion tons in the accelerated transition scenario.
As a result, according to the baseline scenario, the total demand for thermal and coking coal by 2030 will increase by 3%, to 7.9 billion tons. But by 2050 it will drop by almost a third, to 5.3 billion tons.
Demand growth will be in India and other developing countries in Asia and Africa. China will show the most significant decline in coal consumption (where consumption will fall sharply after 2035), followed by the EU, North America and the developed economies of the Asia-Pacific region.
The Russian expert community agrees that global demand for coal will decline. Thus, the analytical center of the fuel and energy complex of the Ministry of Energy expects that under a moderate scenario, global demand for coal will decrease from 8 billion tons in 2022 to 6 billion tons by 2040. In the event of an accelerated energy transition, demand will fall to 2.8 billion tons (see Kommersant of May 15).
It remains an open question how much one can hope for a rapid transition to renewable energy sources in the case of China and India, said Boris Krasnozhenov from Alfa Bank. Coal accounts for more than 60% of China’s energy mix, and the country is implementing a number of large-scale initiatives, including the One Belt, One Road and the Dual Circulation strategy, which envisages moving about 500 million people from rural to metropolitan areas over the next 15 years. These initiatives include a large number of energy-intensive projects and are expected to increase industrial production in China and Southeast Asia. Therefore, it is now difficult to say when China will reach the peak of energy consumption and industrial production, Mr. Krasnozhenov notes.
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