India to see world’s highest rise in coal demand: IEA

India’s coal demand will see the biggest growth over next five years even as it slows down globally on lower consumption in China and the US while renewable energy sources gain ground, the International Energy Agency said on Monday.

India will see an annual average growth rate of 5 per cent by 2021 even as demand peaks in the world’s top consumer, China, the Paris-based body said in a report.

“Growth in global coal demand will stall over the next five years as the appetite for the fuel wanes and other energy sources gain ground,” according to IEA’s latest coal forecast.

But much of Asia will remain hooked on coal which, while polluting, is also affordable and widely available, IEA said. The share of coal in the power generation mix will drop to 36 per cent by 2021, from 41 per cent in 2014, IEA said in the latest Medium-Term Coal Market Report, driven by lower demand from China and the United States, along with fast growth of renewables and strong focus on energy efficiency.

China presents the greatest uncertainty because its policies can sway the market either way, IEA said. “Reasonable doubts persist on the sustainability of current prices, given that climate pressure continues and air pollution is a serious issue which will shape policies in China, India and other emerging countries,” it said.Global coal consumption declined for the first time this century in 2015, falling 2.7 per cent, while global production decreased for the second year in a row.

There will be strong growth in demand in Asian countries such as India, Vietnam and Indonesia, where “coal-based electricity is one of the preferred options to increase power generation,” IEA said.

Smaller importers like Pakistan, Turkey and Malaysia will also drive demand. Also, the Association of Southeast Asian Nations will see a 7.2 per cent jump a year. But the big unknown is China, which accounts for half of the world’s demand for coal and almost half of its production, “and more than any other country influences global coal prices”.

Coal-fired power generation in China dropped in 2015 due to sluggish power demand and a diversification policy that led to the development of new renewable and nuclear power generation capacity, IEA said.

The report also pointed out that despite last year’s Paris Agreement to fight climate change, “there is no major impetus to promote the development of carbon capture and storage technology”. 

IEA said in a sign of coal’s paradoxical position, the world is still highly dependent on coal. “While coal demand dropped in 2015 for the first time this century, the IEA forecasts that demand will not reach 2014 levels again until 2021. However such a path would depend greatly on the trajectory of China’s demand, which accounts for 50 per cent of global coal demand - and almost half of coal production - and more than any other country influences global coal prices,” it said.