Coal demand to soar in short term, but longer outlook is dim

Written by Reuters | London | Updated: Nov 13 2012, 09:59am hrs
Global coal demand will rise in the short-term as emerging markets rely on it to power economic expansion, but its share in primary energy demand will fall by three percent to under 25% by 2035, two reports published on Monday said.

The International Energy Agency (IEA) said in its World Energy Outlook that although coal would remain the worlds leading fuel for power generation in the next two decades, its share would drop, mainly losing out to rising demand for natural gas and renewables.

While coals share of global primary energy demand falls by nearly three percentage points to less than 25% in 2035, coal remains the second most important fuel behind oil and the backbone of electricity generation, the report said.

Global coal demand grows by 0.8% per year to 2035, with growth slowing sharply after 2020 as recently introduced and planned policies to curb use take effect. The IEA said that Chinas coal demand would peak around 2020, by when it would make up half of global coal demand, and would plateau at that level until 2035.

By 2025, India overtakes the US to become the second largest coal user. By contrast, almost all major OECD regions see their coal use decline, especially Europe, where demand in 2035 is 60% of the 2010 level, the report said.

The IEA said that most major coal producers, including China and the US, see their production slow or even decline. OECD coal output starts to fall around 2020 and is 10 percent lower in 2035 than in 2010, with declines in Europe and North America offsetting growth in Australia. Non-OECD production carries on rising through 2035.

In China, the worlds biggest producer, rapid output growth slows around 2020, reaching nearly 20% above the 2010 level by 2035.

Axa Investment Managers said that declining coal quality and rising environmental awareness will dent coal demand in the longer term.

The asset management arm of life insurer Axa said coal has been the clear winner of the past decade, but warned that the boom might not last long.

Coal has a bright future in the short term, but that will not last long in our view, Axa said in a report also published on Monday.

From the standpoint of energy security, coal-fired units remain a winner thanks to the widespread availability of the primary resource.