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Coal Market Outlook: A Structural Shift by 2026

Context:

The International Energy Agency (IEA) projects a substantial decline in global coal demand by 2026, attributing this shift to the expansion of renewable energy and increased nuclear generation in key regions.

Relevance:

GS III: Energy

Dimensions of the Article:

  1. Key Highlights of the Coal Market Report
  2. International Energy Agency (IEA)

Key Highlights of the Coal Market Report

Global Coal Demand Trends:
  • Record-high global coal demand in 2022, rising by 4% to 8.42 billion tonnes (Bt).
  • Asia, led by China, India, and Indonesia, remains the primary driver of demand growth.
  • Notable demand declines in the United States, with Europe showing restrained growth.
Anticipated Decline in Coal Demand:
  • Expected decline in most advanced economies’ coal demand in 2023.
  • Global coal consumption projected to be 2.3% lower in 2026 than in 2023.
  • China, India, and Indonesia expected to break coal output records in 2023.
Factors Influencing Decline:
  • Shift towards renewable energy contributing to the decline in coal demand.
  • Changes in global climate affecting hydropower output.
  • Significant growth in low-cost solar photovoltaic deployment.
  • Moderate increases in nuclear generation in China, India, and the European Union.
Regional Outlook:
  • China’s coal consumption expected to fall in 2024, with increased reliance on renewables.
  • Uncertainty in China’s economic growth and coal use due to structural changes.
  • India, Indonesia, and emerging economies likely to continue relying on coal for economic growth.
Climate Targets and Coal Use:
  • Efforts to reduce unabated coal use crucial for meeting international climate targets.
  • Goal of nearly 95% reduction in coal emissions between 2020-2050, aligning with COP28 commitments.
Coal Prices and Industry Dynamics:
  • Unexpected surge in coal prices impacting consumers and industry.
  • Mining companies maintaining strong profit margins despite rising costs.
  • Diversified mining firms strategically reinvesting coal profits in anticipation of energy transition demand.

International Energy Agency (IEA)

Formation and Headquarters:
  • Established in 1974 as an autonomous agency by OECD member countries.
  • Headquarters located in Paris, France.
  • Responded to the mid-1970s oil crisis.
Main Focus:
  • Primarily focuses on energy policies, addressing economic development, energy security, and environmental protection.
Role in the Oil Market:
  • Plays a crucial role in providing information on the international oil market.
  • Takes action against physical disruptions in the supply of oil.
Membership:
  • 31 member countries and 13 association countries, including India.
  • Candidate countries must be OECD member countries.
Major Reports:
  • World Energy Outlook.
  • World Energy Investment Report.
  • India Energy Outlook Report.

-Source: The Hindu


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