Coal to rival oil as dominant energy source by 2017

18 December 2012
By Sofia Mitra-Thakur
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A coal factory in Xinjiang, China

A coal factory in Xinjiang, China

Coal will nearly overtake oil as the dominant energy source by 2017, and only a drop in world gas prices could curb the use of the dirtier fossil fuel in the absence of high carbon prices, the International Energy Agency said.

The IEA, the energy agency for developed countries, said earlier this year that without a major shift away from coal, average global temperatures could rise by 6 degrees Celsius by 2050, leading to devastating climate change.

China will use more coal than the rest of the world put together, while India will overtake the United States as the world's second-largest consumer and become the biggest global importer, the Paris-based IEA forecast in its annual Medium-Term Coal Market Report, released this week.

"Coal's share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade,' IEA Executive Director Maria van der Hoeven said in a statement.

Use of the highly-polluting fossil fuel has surged in the past decade, mainly because of stronger demand from China and India, where cheap coal-fired electricity has helped to drive breakneck economic growth.

Coal now accounts for 28 per cent of total primary energy consumption, and demand for the fossil fuel rose 4.3 per cent in 2011 compared with 2010, the report said, underlining the world's continued addiction to a fuel source that helped turn the wheels of the 19th century industrial revolution.

The world will burn around 1.2 billion more tonnes of coal per year by 2017 than it does today, which equals the current coal consumption of Russia and the United States combined, the IEA chief said.

Global coal consumption is likely to reach 4.32 billion tonnes of oil equivalent (btoe) by 2017, compared with 4.4 btoe for oil, although the pace of growth is likely to be slower than over the past decade, the IEA forecast.

Growth in coal use in developing countries will grow 3.9 per cent a year on average over the next five years if economies such as China return to previous patterns of economic growth, the report said, while coal use in developed nations would only fall 0.7 per cent by 2017.

"Coal remains the backbone of the OECD power system throughout the outlook period," the report said.

However, U.S. demand for coal is forecast to fall by 3.7 per cent a year by 2017 due mainly to greater efficiency in industry, competition from natural gas and lower steel output.

Asian developed economies will increase their coal use by only 0.7 per cent over the next five years, with increased use of coal most likely in South Korea, the IEA added.

Western European demand is likely to rise only 0.4 per cent despite abundant supplies of cheap coal from the U.S, as older coal-fired power plants in countries such as Britain close and politicians try and engineer stronger carbon prices after the cost of permits hit a record low earlier this month.

In the outcome that carbon prices in Europe and elsewhere are low, only strong competition from low-priced gas would be effective in making meaningful cuts in coal demand, the IEA said.

"The U.S. experience suggests that a more efficient gas market, marked by flexible pricing and fueled by indigenous unconventional resources that are produced sustainability, can reduce coal use, car emissions and consumers' electricity bills, without harming energy security," Van der Hoeven said.

"Europe, China and other regions should take note," she added, referring to a boom in shale gas that has cut gas prices paid by U.S. utilities by around half of 2008 levels and prompted a major switch away from coal.

Without building new gas-fired power plants in Europe and elsewhere until new energy sources can be deployed on a large scale, "we are engaged in a dash for coal", said Dieter Helm, an energy economist with Oxford University.

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