As much of the world aims to keep fossil fuels in the ground, an increase in demand is stoking international prices ©Adobe Stock
As much of the world aims to keep fossil fuels in the ground, an increase in demand is stoking international prices ©Adobe Stock

Coal costs rise

12 October 2018

Retirement of old plants is outpacing China's demand for power

A recent rise in coal consumption in China is pushing up prices internationally, with European coal hovering near the $100 a tonne mark, a figure not seen since 2013.

Almost 200 countries were part of the Paris Climate Accord to cut greenhouse gas emissions from 2016. And while these reductions may still not be enough to achieve the Accord’s target, the pace of retirement of older coal plants is leaving a shortfall in energy supply.

Since 2016, China, the world’s biggest producer and consumer of coal, has restricted construction of new plants, while increasing approvals of renewables projects. It also set a target to reduce coal in its power generation mix to 34% by 2050 – from almost double that in 2017. Yet it expects its consumption of coal to continue to rise until 2030.  

By January 2018, new construction of coal-fired plants in China and India had fallen by 62% year on year, according to the global coal plant pipeline report Boom and Bust 2018, produced by Greenpeace and other organisations. As China’s surging economy has led to a greater demand for power, it has been increasing its coal imports from Europe to make up for the shortfall in its own country.

Meanwhile, the cost of carbon permits in the EU, payable by carbon emitters, has risen from around €5/tonne in 2017 to almost €18 this August, according to Bloomberg. This was caused by both EU reforms increasing the cost to encourage renewables, and Europe’s unusually hot weather precipitating an increased energy demand to run air conditioning and fans.

While coal costs are expected to stay high to 2020, DNV GL predicts global energy demand will peak by the mid-2030s, with fossil fuel declining from 81% now to 50% mid-century. 

 

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