Global Energy Shortages Drive Renewed Reliance on Coal
- Disruptions to oil and gas flows—especially through the Strait of Hormuz—are driving countries to fall back on coal as a fast, cheap energy source
- Asia and parts of Europe are most exposed, with several nations increasing coal use despite prior commitments to reduce emissions
- A sustained return to coal could significantly undermine global decarbonization efforts and delay the clean energy transition
Governments worldwide are racing to find a solution to contend with the severe energy shortages brought about by the war in Iran and the ongoing Middle East conflict. For some, this means accelerating the deployment of renewable energy, which is likely to be a longer-term solution. For others, it means relying on stockpiles of crude, while the oil trade remains limited. And, for many, it means using any type of energy available, including coal.
Several countries have reduced their reliance on coal in recent years in favour of oil, gas, and renewable energy sources. This has supported the beginnings of a global green transition, decreasing dependence on the highly polluting fossil fuel as the cost of the production of other energy sources, such as solar and wind energy, has fallen. However, due to energy shortages and rising fuel prices, many countries could come to rely on coal to meet their energy demand once again.
The U.S.-Israeli attack on Iran and the ongoing conflict in the Middle East have caused the biggest oil disruption in history, according to an analysis by consulting firm Rapidan Energy. A large proportion of the world’s oil supply has been disrupted for over a month, following the closure of the Strait of Hormuz – a key trade corridor connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. The strait is used to transport around 20 percent of the world’s oil when fully operational, but only a small fraction of that has passed through the waters in recent weeks.
While many governments release supplies of stockpiled crude and ask consumers and businesses to cut energy use, some are also discussing restarting coal plants to meet demand as they face energy shortages. Increasing coal production is seen as a relatively cheap and fast way to tackle the shortage and high price of oil and gas.
While several countries have decreased their reliance on gas, others have used the “dirtiest fossil fuel” to meet the growing consumer demand for energy, particularly in Southeast Asia. Global coal consumption has risen by around 1.3 billion tons since 2020, to 8.8 billion tons. This has been driven by countries such as China and India, as well as through geopolitical challenges, such as the Russian invasion of Ukraine, which led to the introduction of sanctions on Russian energy and drove Europe to stop buying Russian gas.
Even with world leaders being increasingly aware of the risks associated with coal production and use, many are still turning to the fuel when shortages arise, as the renewable energy capacity of most countries remains underdeveloped. With around 20 percent of the natural gas supply unable to move through the Strait of Hormuz, several countries in Asia and Europe are expected to increase their coal use.
Asia has been disproportionately affected by the shortages due to its heavy reliance on Middle Eastern countries for oil and gas. This has led Japan, India, Bangladesh, the Philippines, South Korea, Thailand, and Taiwan to increase their use of coal, or to consider doing so imminently. Indonesia, the world’s largest coal exporter, is currently prioritising domestic use over exports, which could contribute to tighter regional supplies and higher coal prices.
In South Korea, which has pledged to retire most coal plants by 2040 and halve its emissions by 2035, the government has been allowing most coal use when air pollution is low, a nd LNG is in short supply. The government has been forced to turn to coal at times due to the slow deployment of new renewable energy capacity, as green energy provides just 10 percent of the country’s electricity in 2024, compared to the global average of 32 percent.
Meanwhile, in Europe, where most countries have significantly reduced their coal production and usage, some countries anticipate having to use coal once again. The Italian government recently decided to postpone the closure of its coal-fired power plants for 13 years, to 2038, marking a U-turn from previous climate pledges. Meanwhile, Germany is deciding whether it will need to turn back on some of its idled coal plants. However, governments across Europe have yet to signal an imminent shift back to coal due to the Middle East conflict, suggesting that most will look for alternative solutions before returning to a reliance on coal, which would compromise their climate goals.
Nevertheless, if some countries around the globe are forced to shift reliance on coal once again, it could significantly hinder the global climate progress of recent years. Turning coal plants back on could undo much of the decarbonisation progress that has been achieved over the last decade and reduce the contribution of cleaner energy sources to the overall energy demand of several countries.
By Felicity Bradstock for Oilprice.com
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