The International Energy Agency recently released its latest report, which shows that the use of coal globally will hit new highs this year as demand in developing and emerging economies continues to grow. The report comes just days after the end of the COP28 United Nations Climate Summit, which was held in Dubai. The final agreement at the summit centered on accelerating efforts toward phasing out of coal for power generation.
Despite campaigns to adopt cleaner energy sources, however, coal remains the largest source of power generation globally. This fossil fuel is the primary source of power for industries such as cement and steel. Figures show that this year, coal demand is growing by 1.4%, which exceeds 8.5 billion metric tons. This can be attributed to demand from China and India primarily, whose coal use has grown by 5% and 8% respectively as a result of weak output of hydropower and increasing demand for power.
Globally, the use of this fossil fuel isn’t expected to decline until 2026.
It is expected that in the next three years, renewable energy capacity will have grown significantly, which could help reduce the use of coal by 2.3% in comparison to current levels. Despite this, forecasts show that coal consumption globally will remain more than eight billion metric tons in 2026. Those levels will make it harder to achieve the goals set in the Paris Agreement, which call for the reduction of emissions and the acceleration of clean-energy use.
The report highlighted that one-half of the coal used worldwide came from China, which meant that coal’s outlook will be impacted considerably in the coming years by structural shifts, weather conditions and the rate at which clean energy is being deployed in China’s economy. Projections indicate that looking forward, India, China and southeast Asia are expected to make up more than one-half of the worldwide consumption of coal. This is quite an increase, with southeast Asia’s consumption expected to eclipse the European Union and the United States in 2023.
The report shows that in the U.S. and EU, the use of coal will decline by about 20% respectively.
Up until 2026, southeast Asia and India are the main regions where the consumption of coal is expected to significantly grow. This underscores just how vital coal producers such as Alliance Resource Partners LP (NASDAQ: ARLP) still are in the global energy mix despite the current push to phase out coal.
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