2024 is the year the world could reach peak coal use. But it's a tough habit to quit

With the COP28 climate summit now in the rearview mirror, some researchers say the moment is here when coal consumption in power plants around the world willfinally peakbefore beginning a perpetual fall.

For more than a century, coal has been used to produce electricity, and to this day remains the workhorse of the global power sector and a critical part of the world's economy.

Coal is the dirtiest, most-polluting fossil fuel, but it has proven difficult for the world to turn its back on the stalwart source of energy.

Energy research firm Wood Mackenzie is forecasting 2024 as the year when the world's consumption of coal will hita final inflection point before decreasing.

That forecast is largely based on the potential for China's economy to rebound over the next 12 months, which could drive up the use of coal in the country's power plants.

"Coal just has a lot of staying power," said Natalie Biggs, head of thermal coal markets at Wood Mackenzie.

Forecasters have been wrong about coal before. This isn't the first time Wood Mackenzie has predicted the world would reach peak coal demand; it made the same forecast in 2013.

It's been tough to quit because, generally, coal is still the cheapest and most reliable source of electricity in Asian countries, she said, with large scale solar and battery storage facilities only becoming the cheapest option more than a decade from now.

"That's really where the problem lies and why it's hard to determine peak coal because there's this huge pipeline of coal projects in China, India and Southeast Asia that is going to continue on," said Biggs.

Coal is king

At the COP28 climate summit in Dubai last month, nearly 200 countries agreed it was time to begin "transitioning away" from all fossil fuels to combat climate change.

The agreement was described as "historic" and "ground-breaking" and comes at a time when the world is consuming oil, natural gas and coal at record levels, which highlights the challenge of actually moving away from fossil fuels.

"We ought to be transitioning out of coal. There shouldn't be anymore coal-fired power plants permitted anywhere in the world," U.S. Special Presidential Envoy for Climate John Kerry on stage at COP28."The reality is that we're not doing it," he said.

Overall, global coal demand has been robust and hit a historic high in 2022.

Three years ago, a major focus of the COP26 summit in Glasgow was to "consigncoal to history" and the eventual agreement in 2021 included a commitment to "accelerating efforts towards the phase-down of unabated coal power."

However, just a year later, coal consumption hit a record high.

After Russia's invasion of Ukraine began in 2022, thermal coal prices shot up so high they even eclipsed the value of metallurgical coal, which is used in steel-making. Met coal is more scarce and higher quality, so is typically more valuable.

The latest COP agreement from last month calls for the "transitioning away from fossil fuels in energy systems."

Chinese dependence

In North America and most parts of Europe, coal consumption in the electricity sector has been declining. Ontario ended coal use for electricity in 2014, and Canada has legislated the phase-out of coal-fired electritcity by 2030 a transition happening faster than requiredin some places.

In Alberta, for instance, coal power plants produced about half of the province's electricity a decade ago, while currently only two of the facilities still operate and they are set to be converted to natural gas this year.

Those reductions have been offset by the construction of new power plants in other parts of the world, most notably in China, which consumes the majority of coal around the globe.

Those power plants are more efficient than the facilities they are replacing and in some cases, the power plants will only be used as backup when large-scale renewable energy projects aren't producing as much electricity, said Paul McConnell, executive director with the Energy and Climate Scenarios team at S&P Global Commodity Insights.

"All of the signs point towards a peak ultimately in coal demand coming within the next couple of years," he said, noting how weather patterns and the Chinese economy, among other factors, could impact that forecast.

The research firm is forecastingglobal oil demand to likely peak around 2030 and natural gas around 2040.

McConnell isn't ready to declare precisely when peak coal will be reached. It may have already happened in 2022, or could be reached in 2024 or 2025.

"The most likely outcome is for coal demand to be in a long term decline in the pretty near future," he said.

WATCH | When the world could reach peak coal in the power sector:

The moment is here for coal consumption to peak in the world's power sector

8 months ago

Duration 0:59

The Chinese economy is a major factor that will impact global coal demand, says Paul McConnell with S&P Global Commodity Insights.

India's commitment to coal

Coal consumption in China is expected to continue growing until about 2030, while it may increase in India until around 2040.

In India, coal remains the fuel of choice as power demand soars, analysts say, and there are employment issues as well to overcome in transitioning to other sources of electricity.

India and China are two of the largest coal mining countries in the world.

"Coal is a huge employer as well as an energy provider and we think that that will sustain coal demand growth in India for pretty much the foreseeable future," said McConnell.

Coal's future

Besides the jobs and cost of alternative sources of power in some countries, there can be some other challenges in transitioning away from coal.

Some countries are investing in carbon capture facilities, which are designed to collect greenhouse gas emissions from smokestacks and store the gases underground. These can help reduce the pollution of a coal power plant, but can extend the use of coal.

With the rise of electric vehicles, green steel and a general push to electrify more industries, there is going to be more demandsfor power.

"If economies are needing to grow power supply, it's going to be a hard case to start retiring coal plants," said Biggs, the analyst with Wood Mackenzie.

That's why despite the need to cut down on fossil fuels to reduce global warming, energy researchers push back against assertions that they could soon be on the wane.