Chinese policies to slow global coal demand to 2018: IEA

Thursday, 2 January 2014 00:00 - - {{hitsCtrl.values.hits}}

Global demand growth seen at 2.3%/yr vs. prior forecast 2.6%
China move to cleaner energy to slow global demand
Coal still second-largest primary energy source

after oilLONDON (Reuters): China’s policies to encourage improved energy efficiency and cleaner energy sources will help to slow growth in global coal demand over the next five years, the International Energy Agency (IEA) said in a report. The energy agency for developed countries said coal demand would grow at an average rate of 2.3% a year to 2018, compared to last year’s forecast of 2.6% growth to 2017 and actual growth of 3.4% a year between 2007 and 2012. Despite this, coal will remain the second-largest primary energy source after oil and the fossil fuel with the largest growth in absolute terms, the IEA’s annual medium-term coal market report showed. “Like it or not, coal is here to stay for a long time to come,” IEA Executive Director Maria van der Hoeven said in a statement. “Coal is abundant and geopolitically secure, and coal-fired plants are easily integrated into existing power systems ... But it is equally important to emphasise that coal in its current form is simply unsustainable.” China’s coal demand is projected to increase by 2.6% a year until 2018, its lowest growth rate since 2001. Coal accounts for 29% of primary energy consumption. In October, energy consultancy Wood Mackenzie said coal would surpass oil as the top global fuel by 2020 despite government efforts to reduce carbon emissions. Demand picture In the last decade, global coal consumption has largely been driven by a booming China and the country still accounted for more than half of global coal demand in 2012. But in a move to curb pollution, the Chinese government is keen to switch to cleaner fuels for power generation, such as natural gas, nuclear and renewables, which should lead to more coal plant closures and consumption cuts. A decline in forecast global demand would result in even weaker coal prices, which have recently been at three-year lows, and increase the risk that coal mines, reserves and other infrastructure are mothballed or abandoned. Slower global consumption could particularly impact Australia, where many new plants and mine expansions were planned based on high coal prices, a separate study by Oxford University showed on Monday. “If prices are low and stay that way, many of these projects will not go ahead. Prices could also drop to the point where it is in the interests of miners to cease production, resulting in stranded mines and dependent infrastructure such as railways,” the Oxford study said. European demand, which has grown over the past few years due to low coal prices, is forecast to decline from now on - by 1% a year to 2018 due to weak economic growth, more renewables generation and energy efficiency, the IEA said. Environmental regulations in the United States will also hamper the construction of new coal plants there and lead to the closure of older ones, resulting in a 0.1% decline in demand. However, some analysts say rising demand in emerging countries will help offset falling coal use in other nations. The IEA said demand in Japan and South Korea would rise by 1.3% and 3% a year respectively to 2018. Latin America’s use of coal is seen increasing by 5.4% a year and India’s by 4.8%.