The world’s dependence on coal was already growing even before the war in Ukraine, with consumption and production exploding higher following the lifting of most Covid-19 restrictions. However, the war in Europe has exacerbated a global energy crisis, causing a domino effect. Electricity producers now lack this vital raw material and prices are climbing to new records.
Germany and Italy have even resorted to considering proposals to recommission old coal-fired power plants, once considered nearly impossible to consider given the Green Party’s prominent role in Germany’s left-wing government. At the same time, more and more coal-laden ships are setting out from South Africa to serve nations across the globe, according to Czech news outlet Idnes.cz. In the U.S., coal-based energy is experiencing its biggest recovery in ten years, and China is reopening once-closed mines and planning new ones.
Interest in coal fuel has far-reaching implications for the global economy, as higher prices will continue to support inflation. However, analysts say coal is still relatively one of the cheapest energy sources, which makes it increasingly important for country’s seeking to ensure they have a stable energy supply. This new-found demand for coal comes at a time when mining companies are failing to cop with demand and generally refuse to make new investments to boost output, as they fear the overall long-term demand prospects are poor due to the UN and EU’s obsession with phasing out coal.
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According to the International Energy Agency (IEA), the world produced a record amount of electricity from coal last year. Year-on-year production has increased by 9 percent, and this year, total coal consumption is expected to increase by another 2 percent. According to a Bank of America report in early April, coal burned in power plants is one of the cheapest fuel sources, at the cost of around $15 per million British thermal units.
The European Union, notable for its unrealistic climate targets, increased coal consumption by 12 percent last year. In the U.S., consumption rose by 17 percent and was higher in Asia, Africa, and Latin America as well.
Europe struggles to replace Russian energy
Europe is desperately looking for a way to reduce its dependence on Russia, its main supplier of fossil fuels. In an effort to cut Russian gas, it is seeking to increase overall coal consumption to keep energy flowing, yet, Europe also receives much of its coal from Russia as well. The EU is therefore committed to paying more for supplies of non-Russian coal. This gamble is raising prices on world markets, fueling inflation in poorer countries, and leading to shortages nearly everywhere.
Even before Europe’s risky move, coal supplies were uncertain. Last year, a power plant in Germany was forced to shut down because it ran out of coal. The coal shortage has also caused power outages in India and China, which account for two-thirds of global coal consumption.
Japan and South Korea are also restricting Russian coal imports while countries like Indonesia and Australia are limiting exports of their own coal. This will further increase demand for alternatives to the 187 million tons of coal that Russia exported last year, and the question is whether that demand can be met without sending prices soaring even higher.