Are China And India Delaying The World’s Coal Switch-Off?

In the energy transition era, coal – a fossil fuel source considered by many to be the dirtiest or the most carbon intensive – continues to power on large swathes of the global economy. Despite the rhetoric against its use, ironically, its the planet’s two renewable energy leaders who happen to be largely behind delaying the switch-off – China and India.

According to World Population Review, China still has over 1,100 coal-fired power plants in operation while India has nearly 300. Together both nations account for nearly 60% of the world’s total coal power generation.

In 2023, China approved 114GW of coal power capacity, up 10% from a year earlier, according to research published by Reuters. The trend noted last year was a troubling one as it marked the fourth annual increase in a row of fresh coal capacity approvals in China.

More so, because its appears to be out of sync with both China’s wider renewable energy ambitions as well as President Xi Jinping’s pledge, in 2021, to “strictly control” and monitor new coal power capacity.

India does not score any better either. The Narendra Modi administration despite promoting its green credentials – either side of its return to power following elections in the country – currently has 28.5GW of coal power capacity being built, according to Bloomberg.

Furthermore, capacity approvals of more than 50GW are due to be awarded for construction over the next three years, making it the biggest jump in new coal power plant build in India in nearly a decade.

Things Can Only Get Dirtier?

The need to service burgeoning electricity demand in both emerging economies means coal is a long way from being consigned to the energy industry’s history books. Quite the contrary, the International Energy Agency (IEA) paints a somewhat bleak near-term picture for a coal switch-off anytime soon.

The agency forecasts global coal demand to remain “broadly unchanged in both 2024 and 2025” as rising electricity demand in some major economies offsets the impacts of a gradual recovery in hydropower and the rapid expansion of solar and wind.

That’s after world’s use of coal rose by 2.6% in 2023 to reach an all-time high, driven by the two largest coal consumers globally – China and India. And another major annual increase in China’s electricity demand, forecast at 6.5% in 2024, makes a “decline in the country’s coal consumption unlikely,” the IEA notes.

For India, coal demand growth may decelerate in the second half of 2024 as weather conditions return to seasonal averages, contingent upon economic growth as the country’s extreme heatwaves subside.

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

A New Tussle For Cargoes

Surging demand for electricity is also causing subtle shifts in the direction of coal cargoes from a global supply-side perspective. As Keisuke Sadamori, Director of Energy Markets and Security at IEA, notes: “The electricity 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 be seeing a decline in global coal use this year.”

Instead some are stepping in to coal importation markets vacated by others. For instance, the World Bank notes that Europe’s coal imports are now declining, and will continue to do so next year.

In fact, monthly coal imports into the European Union and the U.K. have now declined to their lowest level of the 21st century. That’s alongside the relative decline in imports noticed in Japan, South Korea and Taiwan visible since 2017.

However, other countries are rapidly taking up available coal supply driven by their need for more electricity generation that renewable energy initiatives simply cannot keep up pace with.

With imports to China (500 million metric tons) and India heading to all-time highs, Vietnam is now set to become the world’s fifth largest coal importer in 2024 surpassing Taiwan. It offers further proof that some either aren’t in the mood for a coal switch-off or simply can’t afford to do so imminently, led by Beijing and Delhi.