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IEA’s ‘Stagnant’ Future May Be An Unwarranted Hope for Coal

December 19, 2017
Reading time: 4 minutes

Koshy Koshy/Wikipedia

Koshy Koshy/Wikipedia

 

The world’s use of coal will be “stagnant” for at least the next half decade, the International Energy Agency projected in a report this week. And even that assessment may be too generous about the prospects for the dirtiest of fossil fuels.

The IEA projected that after dropping for two years in 2015 and 2016, global coal demand will inch up again this year, as its use to generate electricity grows by an average of 1.2% per year through 2022.

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The international agency, supported by 29 member states, forecasts total demand will reach 5.5 billion tonnes in 2022, “which is only marginally higher than current levels, meaning that coal use all but stagnates for around a decade.”

While coal-fired power generation will increase in a few countries, mainly in India, Pakistan, and elsewhere in Asia, the fuel’s overall share of humanity’s primary energy supply will slip slightly from 27 to 26% as other energy sources expand more quickly, the IEA forecasts. “Coal demand declines in Europe, Canada, and China” over the next five years, as well as in the United States, despite efforts by that country to revive the fuel’s use at home and abroad.

And even that assessment may be too bright for coal.

Within days of the IEA’s pronouncement, India’s Adani group reported it had cancelled a US$1.5-billion contract with a service company to develop its proposed, but deeply troubled, Carmichael mega-coalmine in Northwestern Australia. The company said it remained committed to the mine, but would now develop it itself, the Financial Times reports. That, however, seemed less and less likely, as the company has so far failed to find financing for the giant project.

Its persistence is also something of an anomaly, Bloomberg reports, under the headline “investors double down on flight from coal”. Citing a string of recent divestments and withdrawals from coal financing, the news agency cites the Carmichael project as almost the industry’s sole bright point—while conceding that the project is struggling. Adani’s fate, Bloomberg suggests, may constitute “today’s canary in the coal mine”.

Such contrary real-world evidence did little to bolster the IEA’s credibility among critics.

“Since 2011, the IEA has consistently forecast rising coal demand, even as it has repeatedly adjusted its figures downwards in light of lower-than-expected growth,” Carbon Brief notes. “For example, its 2011 forecast overestimated global coal use in 2016 by 827 Mtce (15%), which is equivalent to today’s demand in the U.S. and EU combined.”

A graph accompanying the post makes the seven-year streak of irrational IEA exuberance for coal conspicuous.

Last month, Oil Change International Senior Adviser Greg Muttitt charged the influential advisor to governments had failed to incorporate their Paris agreement commitments into its forecast scenarios. Earlier in November, the IEA projected that global demand for oil would rise another 30% between now and 2040, an outlook not compatible with achieving the Paris targets, and one being rapidly undermined by the electrification of transportation.

A particular wild card in the agency’s latest estimates is India, with its effort to extend electricity access to millions of people who still lack it. The IEA expects that country’s demand for coal-fired generation to underwrite its marginal growth forecast into the next decade.

“In contrast,” Carbon Brief writes, a “recent IEEFA analysis suggests the country’s power stations could peak [coal] demand by 2027.” As one NGO observer said, “at least 31 coal-fired power plants under construction at 13 locations in India remain on hold, most often due to lack of financing as investment money shifts to cheaper renewables.”

Which suggests that, as a driver of future demand for coal, demand from India may turn out to be as ephemeral as the rest of the IEA’s forecast coal booms over the last seven years.



in Energy / Carbon Pricing & Economics

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