Coal is back because the world needs energy

Supply cuts following the start of the military conflict in Ukraine have forced countries to reuse the dirtiest fossil fuels despite pledges to fight climate change


The world, faced with a shortage of energy resources, is switching to coal amid a shortage of gas and oil, exacerbated by the conflict between Russia and Ukraine.

Many of the world’s largest economies, from the US to Europe to China, are ramping up short-term coal purchases to ensure adequate supplies of electricity, despite pledges by many countries to reduce coal consumption to combat climate change.

Global competition for coal, which has also been in short supply due to declining investment in new mines and resources for several years, has led to record base prices this year. Spot coal prices in the Australian port of Newcastle, a key supplier to Asia, topped $400 a tonne for the first time last month.

Europe is also ramping up coal purchases to power homes and factories after Russia cut gas supplies to the continent. Among the countries now importing more coal is Germany, which has promised to phase out coal as a source of energy by 2030. Economics Minister Robert Habek called the growing dependence on coal unpleasant but necessary.

“A lot of people now think more coal is better than more Russia,” said Alex Msimang, partner at London-based energy law firm Vinson & Elkins LLP.

Parts of the US are stepping up their use of coal-fired power as strong electricity demand amid extreme temperatures threatens to shut down regional power grids this summer.

China, the world’s largest consumer of coal, is ramping up production of the fuel and its use for power generation, after a shortage last year that caused power outages across the country, energy experts say.

India is also heavily dependent on coal as the demand for energy grows. Rahul Tongiya, a senior fellow at the Center for Social and Economic Progress in New Delhi, said the country’s coal-fired power generation hit a record high in April.

Coal companies win

Last month, domestic coal production in China and India helped boost global investment by 10% in 2021, the International Energy Agency said. The IEA is forecasting another 10% growth this year as China and India try to avoid deficits.

This plays into the hands of mining companies such as Anglo-Swiss giant Glencore GLNCY -4.63%▼ PLC. Glencore, one of the last major miners still producing coal, said last month that it now expects a trading profit of $3.2 billion in the first half of the year, compared to $3.7 billion for all of 2021.