The Asian Coal Age

The 2021 United Nations Climate Change Conference (COP26) took place in Glasgow, Scotland and marked the 26th annual summit on climate change. The conference faced a renewed sense of urgency and purpose. It required consensus by one hundred and ninety world leaders, supported by tens of thousands of negotiators, government representatives, businesses, and citizens over twelve days of talks to come to meaningful agreements. The scope and complexity of the challenge are far too great to cover in a short article; suffice it to say that whatever one’s position, whatever the industry, nation, or ideology, COP26 will have an impact on the trajectory of economies and industry.

Coal is one of the core industries at the centre of this, and previous summits. Most of us don’t actually come across coal in our daily lives, except perhaps for the occasional charcoal barbecue. However, that is not the case everywhere. In fact, many developing economies, including China and India, rely heavily on coal—from household cooking to steel mills and power plants. 

But just how great is this reliance and how much coal are we talking about?

As of October 6, 2021, 80 percent of Indian coal-powered plants had fewer than eight days of supply.1 By October 8, India faced an electricity crisis as coal supplies dwindled to three days’ worth.2 The shortages threaten to cause widespread potential blackouts in parts of India where 70 percent of power is generated from coal.3 Both India and China would come to a standstill with even partial shortfalls in their coal supplies. Coal remains critical to the economic stability of much of Asia.

According to the International Energy Agency (IEA), global coal consumption grew by 1 percent per year to reach 7.6 billion tonnes between 2009 and 2019.4 China in 2000 accounted for 85 percent of the global growth in coal consumption. Coal reliance extends far beyond India’s massive dependence. 

According to the IEA, coal companies in China are going through a major process of consolidation, creating the China Energy Investment Corporation (the merger of Shenhua Group and Guodian Technology & Environment Group), and two new giant corporations launched in 2020 that combined different enterprises in Shandong (Shandong Energy Group) and in Shanxi (Jinneng Holding Group). The four largest coal producers in the world today are these three Chinese state-owned companies and Coal India.5 

Just how much coal do China and India consume? In 2009, the U.S. and the European Union accounted for 22 percent of global coal consumption. In 2019, their share was 12 percent and has declined further since. By contrast, China, India, and Southeast Asia together went from 58 percent of global consumption in 2009 to 69 percent in 2019.6

China, India, Indonesia, Pakistan, Bangladesh, the Philippines, and Vietnam together constitute 70 percent of global coal consumption. China alone consumes 50 percent of the world’s coal production.7

India, Pakistan, Bangladesh, and Southeast Asian countries consume the same amount of electricity annually for a population of 2.4 billion people as the EU does for a population of 450 million.8 China uses half of the world’s coal production to power most of its industries and supply power to 1.4 billion citizens. The challenge is obvious—as these consumers advance, an increasing proportion of their populations will demand more electric power. The potential for growth and demand is enormous and increasing rapidly.

Meeting that demand through alternative sources is the big challenge. However, the existing power plants and coal-based industries have lengthy operational lives remaining. Coal dependency is deeply ingrained and not about to disappear soon. 

So who has the most at stake? That depends on one’s perspective. Ten countries account for 90 percent of coal reserves. Here are the top six:9

• The U.S. has 24 percent of proven reserves, with 250.2 billion tonnes (bt), and is the third largest producer of coal.
• Russia has 15.2 percent of proven reserves (160.3 bt) and is the sixth largest producer and consumer of coal, and third largest exporter.
• Australia holds 14 percent of proven reserves (147.4 bt).
• China holds 13 percent of global reserves (138.8 bt). China is the largest producer and consumer of coal—46.7 percent of global production and 50 percent of global consumption. China is also the largest importer of coal.
• India holds 9 percent of reserves (101.3 bt). India is the second largest producer of coal, consumes 12 percent of global production, and is the second largest importer.
• Indonesia holds 3.5 percent of global reserves (37 bt) and is the largest exporter of coal.

Canada is ranked thirteenth in global reserves. In 2019, Canada produced fifty-seven million tonnes, representing approximately 1 percent of global production. Canada remains the fourth largest exporter of metallurgical coal after Australia, the U.S., and Russia.10  Canada has remarkably reduced its coal-fired electric demand from 50.7 million tonnes in 2008 to twenty-six million tonnes in 2018, a 49 percent reduction.

Countries were asked to meet ambitious emissions reduction targets at COP26 and are expected to deliver on phasing out coal use and instituting investment in renewables, curtailing deforestation, and speeding up the switch to electric vehicles.

The challenges, however, are significant; they are in fact gargantuan. Not only do China, India, Indonesia, Pakistan, Bangladesh, the Philippines, and Vietnam together constitute 70 percent of global coal consumption, too many remain far behind the development curve to transition to alternative fuels. More than six hundred and sixty million people in India continue to rely on biomass, mainly firewood, as cooking fuels. India’s cities are among the most polluted, and even now India is the third largest energy-consuming nation. 

According to the IEA’s analysis, energy consumption in India has doubled since 2000, with 80 percent of demand still being met by coal, oil, and solid biomass.11 This, combined with an expanding economy, population, urbanization, and industrialization mean that India and China will continue to see increases in energy demand for several decades.

There is good news, however. India’s 9 percent of reserves (101.3 bt) cannot fuel its demands for as long as China’s reserves can. India today consumes 12 percent of global production and is already the second largest importer of coal. India is therefore more incentivized than China to find alternatives. India is already showing leadership in the development of clean energy technologies and expanding its markets for solar power, wind turbines, and lithium-ion batteries. It has been estimated that one of every seven dollars spent worldwide on these types of equipment by 2040 will be in India, compared to one in twenty today.12

While targets are important, they must translate into action, but it is really up to China, India, Indonesia, Pakistan, Bangladesh, the Philippines, and Vietnam, who together constitute 70 percent of global coal consumption, to institute alternatives, to phase out coal power, and commit to not opening any new coal-fired power stations.

Anil Anand is a research associate with the Frontier Centre for Public Policy. 

Photo by Dexter Fernandes from Pexels.

[show_more more=”SeeEndnotes” less=”Close Endnotes”]

1. Saheli Roy Choudhury, “China Isn’t the Only Huge Asian Economy with a Coal Shortage Now,” CNBC Asia Economy, October 11, 2021. https://www.cnbc.com/2021/10/12/coal-shortage-india-could-soon-be-on-the-brink-of-a-power-crisis.html.
2. Krutika Pathi, “India Faces Electricity Crisis as Coal Supplies Dwindle to 3 Days’ Worth,” October 8, 2021, https://time.com/6105226/india-coal-energy-crisis/.
3. Ibid.
4. Carlos Fernández Alvarez and Fabian Arnold, “What the Past Decade Can Tell us about the Future of Coal,” International Energy Agency, December 2, 2020, https://www.iea.org/commentaries/what-the-past-decade-can-tell-us-about-the-future-of-coal.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Mining Technology, “Countries with the Biggest Coal Reserves,” January 6, 2020, https://www.mining-technology.com/features/feature-the-worlds-biggest-coal-reserves-by-country/.
10. Government of Canada, “Coal Facts,” March 22, 2021,  https://www.nrcan.gc.ca/science-and-data/data-and-analysis/energy-data-and-analysis/energy-facts/coal-facts/20071.
11. Fernández Alvarez and Arnold.  
12. Ibid.

[/show_more]