Are China and India delaying the global coal phase-out?

In the era of energy transition, coal, a fossil fuel considered by many to be the most polluting or carbon-intensive, continues to power large parts of the global economy. Despite the rhetoric against its use, ironically, it is the two world leaders in renewable energy that are largely responsible for the delay in phasing out this energy: China and India.

According to the World Population Review, China still has more than 1,100 coal-fired power plants in operation while India has nearly 300. Together, the two countries account for nearly 60% of the world's electricity generation from coal.

In 2023, China approved 114 GW of coal-fired power generation capacity, a 10% increase from the previous year, according to research published by ReutersThe trend last year was worrying as it marked the fourth consecutive annual increase in approvals of new coal generation capacity in China.

Especially since it appears to be out of step with China's broader renewable energy ambitions as well as President Xi Jinping's 2021 pledge to “strictly control” and monitor new coal-fired power generation capacity.

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India is not faring any better either. The Narendra Modi administration, despite its green credentials – and its return to power after the country’s elections – currently has 28.5 GW of coal-fired power capacity under construction. according to Bloomberg.

Additionally, over 50 GW of capacity approvals are expected to be granted for construction over the next three years, which will be the biggest surge in new coal-fired power plant construction in India in nearly a decade.

Things can only get dirtier?

The need to meet growing electricity demand in both emerging economies means that coal is far from being consigned to the back burner of the energy sector. On the contrary, the International Energy Agency (IEA) paints a rather bleak picture in the short term regarding a possible coal phase-out.

Agency forecasts global coal demand is expected to remain “broadly unchanged in 2024 and 2025” as growing electricity demand in some major economies offsets the effects of a gradual recovery in hydropower and rapid expansion of solar and wind power.

Global coal consumption is set to rise by 2.6% in 2023, reaching a record high, led by the world’s two largest coal consumers, China and India. And a further major annual increase in China’s electricity demand, projected at 6.5% in 2024, makes “a decline in the country’s coal consumption unlikely,” the IEA notes.

In India, coal demand growth could slow in the second half of 2024 as weather conditions return to seasonal averages, depending on economic growth as the country's extreme heat waves ease.

However, the IEA adds: “In India, efforts to boost coal production continue, with a supply increase of around 10% expected in 2024.”

A new fight for cargo

Strong demand for electricity is also causing subtle shifts in the direction of coal shipments from a global supply perspective. As Keisuke Sadamori, Director of Energy Markets and Security at the IEA, points out: “The power sector is the main driver of global coal demand, and electricity consumption is growing very strongly in several major economies.

“Without such rapid growth in electricity demand, we would see a decline in global coal consumption this year.”

Some are instead getting into the coal import business, which has been left vacant by others. For example, World Bank notes that European coal imports are now falling and will continue to do so next year.

In fact, monthly coal imports into the European Union and the United Kingdom have now fallen to their lowest levels in the 21st century. This trend is accompanied by a relative decline in imports observed in Japan, South Korea and Taiwan, visible since 2017.

However, other countries are rapidly snapping up the available coal supply, driven by their need for greater electricity generation than renewable energy initiatives simply can meet.

With Imports to China (500 million metric tons) and India reach historic highsVietnam is set to become the world's fifth-largest coal importer by 2024, overtaking Taiwan. This proves once again that some countries are in no mood to abandon coal or simply cannot afford to do so in the near future, starting with Beijing and Delhi.