The year King Coal took back his energy crown
It is a supreme irony that, despite the vocal calls of environmental activists for the complete abandonment of coal as a source of power generation, 2021 will go down as the year King Coal resumed his throne in the global energy markets.
The amount of electricity generated by coal jumped to all-time highs this year, according to the International Energy Agency. After falling in the previous two years — because of environmental factors in 2019 and economic recession in 2020 — coal-fired generation rose by 9 per cent in 2021. Overall use of coal, includingareas such as cement and steel production, is expected to stay at these historically high levels over the next two years.
The irony could not be more stark. While environmentalists at the COP26 gathering in Glasgow called loudly for the “phasing out” of coal, governments and energy executives from Shanghai to Washington were bowing to the inevitable.
The world still needs coal in big quantities, especially with global economic growth resuming as the pandemic recedes. In these circumstances, even the diluted COP26 commitment to “phase down” coal production looks impractical.
Since coal-fired power accounts for about 37 per cent of global electricity, and is the single largest source of polluting carbon dioxide emissions — responsible for about half the world’s greenhouse gases — reducing it is a key challenge in the transition to cleaner forms of energy necessary to achieve the goals of the Paris Agreement by 2050.
At the center of the issue are the energy demands of China and India, the two biggest consumers. More than half of China’s domestic energy needs are satisfied by coal; in India it is a staggering 70 per cent, and growing.
Both countries put up stern resistance to the “phase out” calls in Glasgow, and with some justification. It is hypocritical for Western economic policymakers to deny them the use of the resource that Europe and America used for more than two centuries to fuel their economic development. That both the US and Europe still burn coal in enormous quantities makes the hypocrisy all the more brazen.
Many European countries have had strict policies for years to limit coal use, and it is true that it has declined significantly as a fuel source. But as soon as gas prices began to soar last year, governments from London to Warsaw showed no hesitation in returning to coal. Faced with a choice between freezing voters or a few more tons of CO2 in the atmosphere, European energy policymakers took the pragmatic view.
In the US, under an explicitly anti-coal stance by the Biden administration, the power that coal retains in some parts of the country was demonstrated by the ability of Senator Joe Manchin, from the home of US coal in West Virginia, to eviscerate and finally block Biden’s “Build Back Better” legislation. Manchin, like European governments, has decided that the interests of his voters are of greater importance than the battle against global warming. And who can blame him?
The Gulf countries, as the biggest exporters of oil in the world, have historically been fairly detached observers in the great global debate about coal. Some years ago Dubai took the decision to build a coal-fired power plant at Hassyan in the UAE for an eye-watering $3.4 billion.
The emirate’s energy policymakers were worried then about over-reliance on gas imports, and it is debatable whether they would take the same decision today.
In Riyadh and Abu Dhabi, where the energy experts want to keep on top of global trends, the resurgence of coal has some important implications. India and China are important oil importers, and their increased coal usage could reduce their demand for oil-fired power.
The flip side, however, is that demand for oil for purposes other than power generation — such aspetrochemicals and other non-fuel processes — could be enhanced, which has been a long-term strategy of the regional oil producers.
But above all, the return of coal demonstrates the sheer complexity of the energy transition, and the need to factor in all ingredients of the future energy mix, rather than mouthing simplistic “phase out” slogans about fossil fuels.
- Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai