Renewables are “on track” to surpass coal as the largest source of global electricity generation worldwide by 2025 – but the polluting source will still be a resilient part of the world’s energy mix for years to come, according to the International Energy Agency (IEA).

A short-lived rebound in coal demand is expected in 2021 driven by a global economic recovery, following the major drop in demand triggered by the Covid-19 pandemic this year, said the Paris-based agency in its annual market report Coal 2020.

However, this rise in coal demand next year is not likely to last, with its usage forecast to flatten out by 2025 at around 7.4bn tonnes, by when the IEA expects renewables to have emerged as the largest power source globally.

“And by that time, natural gas will likely have taken over coal as the second largest source of primary energy after oil,” said Keisuke Sadamori, the IEA’s director of energy markets and security.

“But with coal demand still expected to remain steady or to grow in key Asian economies, there is no sign that coal is going to fade away quickly.”

The past two years have seen historic falls in global coal demand, led by unprecedented drops in the US and Europe, said the report. A 1.8% decline in coal demand in 2019 resulted mainly from weak growth in power demand and low gas prices. Latest estimates suggest coal demand will have plunged by a further 5% in 2020 on the economic fallout from Covid-19.

But the IEA said that there is little sign the world’s coal consumption is set to decline substantially in the coming years, with rising demand in some Asian economies offsetting falls elsewhere.

The report points out that as coal is by far the single largest source of global energy-related carbon emissions, the trends outlined pose a major challenge to efforts to put those emissions on a path compatible with reaching climate and sustainable energy goals.

Pressure is likely to build on coal next year as the UK prepares to host the COP26 climate climate summit in November in Glasgow. The UK, which proposes to phase out all unabated coal-fired power stations by 2025, has been at the forefront of a strong lobby calling on all nations to cut back on coal burning so as to see faster action to reduce greenhouse gas emissions.

Based on the assumption of a recovery in the global economy, the IEA report forecasts a 2.6% rise in global coal demand in 2021, driven by higher electricity demand and industrial output. China, India and southeast Asian economies account for most of the growth, although the US and Europe may also both see their first increases in coal consumption in nearly a decade.

However, global coal demand in 2021 is still forecast to remain below 2019 levels and could be even lower if the report’s assumptions for the economic recovery, electricity demand or gas prices are not met.

The IEA said the future of coal will largely be decided in Asia. Today, China and India account for 65% of global coal demand. With Japan, Korea, Taiwan and southeast Asia included, that share rises to 75%.

China, which currently accounts for half of the world’s coal consumption, will be especially influential. By 2025, the EU and US will account for less than 10% of global coal demand, down from 37% in 2000.

Transition

Renewables to outstrip coal by 2025 but dirty power source 'won't fade away': IEA