Coal resurgence calls undermine clean energy commitments

 
Chinese miner Chinese coal production is rising despite a massive renewable energy drive

Related Stories

Coal, the dirtiest and most polluting of all the major fossil fuels, is making a comeback.

Despite stringent carbon emissions targets in Europe designed to slow global warming and massive investment in renewable energy in China, demand for this most ancient source of energy is greater than ever.

In fact, coal was the fastest growing form of energy in the world outside renewables last year, with production up 6% on 2010, twice the rate of increase of gas and more than four times that of oil. Consumption data paints a similar picture, while figures for this year are set to tell the same story.

There are a number of drivers behind coal's renaissance, many of which may be short lived. Others will push demand ever higher for decades to come.

Cheap alternative

Coal consumption in Europe, where governments have been at the forefront of the push to curb carbon dioxide emissions, has risen sharply in recent years.

Coal hard facts

  • Coal is responsible for about 40% of the world's carbon dioxide emissions from fuels
  • Coal generates almost a half of the total amount of electricity produced in the US
  • Coal emits almost a third more carbon dioxide per unit of energy than oil, and 70% more than natural gas
  • Coal provides about a quarter of the world's energy needs and it generates almost 40% of the world's electricity
  • Almost 70% of total global steel production is also dependent on burning coal.

Why? Because it's cheap, and getting cheaper all the time. Due to the economic downturn, there has been what Paul McConnell, senior analyst at energy research group Wood Mackenzie, calls a "collapse in industrial demand for energy". This has led to an oversupply of coal, pushing the price down.

It has also led to a massive surfeit of CO2 emissions permits, pushing the price of carbon, and therefore the cost of coal production, sharply lower.

Equally important, there has been a huge influx of cheap coal from the US, where the discovery of shale gas has provided an even cheaper alternative energy source. The coal has to go somewhere, so it's exported to Europe.

Finally, higher non-shale, natural gas prices are making coal an attractive alternative.

As Laszlo Varro, head of gas, coal and power markets at the International Energy Agency (IEA), says: "All parameters favour coal."

So much so that "coal is [now] being burned as the baseload fuel across most of Europe," says Gareth Carpenter, associate editor at global energy information provider Platts.

Germany's decision to scrap all nuclear power and build more coal-fired power stations can only boost production further.

Just how long coal's resurgence lasts depends to some extent on the global economic recovery and the ability of governments to implement a system that finally delivers a meaningful carbon price.

Global energy demand mix

But, in the meantime, legislation passed more than a decade ago will severely curb coal production over the coming years, according to Mr Varro.

The full impact of the EU's Large Combustion Plant Directive, which is designed to reduce local air pollutants, but not in fact carbon dioxide, is about to be felt, meaning a number of inefficient coal plants will be decommissioned.

As a result, in five years, coal production capacity "will be considerably lower than today", says Mr Varro. The directive will do nothing, of course, to restrict cheap US imports.

Demand explosion

But whatever happens to coal production and consumption in Europe, spiralling demand for energy in Asia, in particular China, will ensure that coal production continues to rise significantly over the coming decades.

Fossil fuel reserves

Fuel Reserves Years left

Oil

1,652.6 billion barrels

54.2

Gas

208.4 trillion cubic metres

63.6

Coal

860,938 million tonnes

112

Source: BP. Reserves calculated at current price using current technologies

Population growth and the exploding middle classes will see to that - in China alone, demand for energy will triple by 2030, according to Wood Mackenzie.

China in particular is spending massive amounts of money on a renewable energy drive the likes of which the world has never seen - plans are in place to build almost 10 times the wind capacity of Germany, for example.

But even this will not be able to keep up with demand, meaning fossil fuels will continue to make up the majority of the overall energy mix for the foreseeable future.

And when it comes to fossil fuels, coal is the easy winner - it is generally easier and cheaper to mine, and easier to transport using existing infrastructure such as roads and rail, than oil or gas.

Demand for coal imports graph

Its price is also relatively stable because, as Mr Carpenter points out: "Coal mines on the whole are located in relatively stable countries free from major geopolitical tensions."

For all these reasons, Wood Mackenzie forecasts coal production in Indonesia, currently the world's fourth-biggest coal producer, to rise by 60% by 2020, while China will import more than a billion tonnes by 2030, almost five times currents levels.

By this date, it expects global demand for imported coal to more than double, helping to push the fossil fuel's proportion of the overall energy mix even higher than it is today.

Carbon capture

Cheap energy is, of course, a vital ingredient in the continued economic growth of developing countries, but the implications of rising coal production for CO2 emissions and global warming are profound.

While China is currently running half a dozen carbon capture and storage (CCS) projects - which aim to capture CO2 emissions from coal plants and bury it underground - the technology is nowhere near commercial viability.

Chinese miner Demand for energy in China will more than triple by 2030, analysts forecast

As Mr Carpenter says, despite all the hype "it looks extremely unlikely that CCS technology is going to be deployed widely in the next 10 years or so".

The inevitable end result is rising CO2 emissions. According to the IEA, emissions from fossil fuels hit a record level last year, while total energy-related emissions and are due to rise by more than 20% by 2035.

"Why we aren't developing CCS for all we're worth is a mystery to me," says Prof Myles Allen at the school of geography and the environment at the University of Oxford.

"It is viewed as just one of a basket of solutions, but it's not - it's pivotal. Without it, nothing else follows."

And CCS lends itself perfectly to coal, precisely because it is such a cheap energy source.

Renewed urgency in developing CCS globally, alongside greater strides in increasing renewable energy capacity, is desperately needed, but Europe's increasing reliance on coal without capturing emissions is undermining its status as a leader in clean energy, and therefore global efforts to reduce CO2 emissions.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +5

    Comment number 197.

    there goes the climate. No mention of quality of coal being produced i.e. energy return on energy put in to get it out the ground. The projections of energy supplied by coal then look a lot lot less impressive. Headlines and poor quality of selective facts therefore continue to hamper policy and informed debate. If we can't economically capture carbon from coal we should leave it in the ground.

  • rate this
    +18

    Comment number 189.

    Nuclear should be a large part of the solution - It is plentiful, sustainable and doesn't contribute to Greenhouse gas emissions. It is also safer than fossil fuels - even according to the most pesmissitc estimates for number of human deaths per unit of energy produced, nuclear comes out as safer than fossil fuels. The other alternatives - renewables or a dramatic cut in energy use won't happen

  • rate this
    +2

    Comment number 183.

    Makes rather a laughing stock of all the International 'Green' commitments we sign up to, or even the expensive green measures we shackle our economy to. The phrase "China's demand for energy will triple by 2030' lays the lie to all the green policies Europe adopts. We risk impoverishing our economy, and still making no difference to the greenhouse gas problem.

  • rate this
    +3

    Comment number 175.

    A pity that all the North West deep mines have been shut and capped with tons of concrete even though most were profitable!! I'm a miner's son and remember 1984/85 very well. It's the year this country finally acted in such a way that we should never use 'Great' in the title again. Coal can be the future as part of an energy strategy but too many agendas keep 'green' energy in the spotlight!

  • rate this
    +2

    Comment number 166.

    We need a transition from a carbon economy to a hydrogen economy. A true global consensus with fiscal incentive for this. The precautionary principle needs to apply regarding CO2 emissions and its affect on climate change (there is a link). Lets view the subsidies awarded to fossil fuels and then really take stock of what needs to be done. We will adapt but I doubt we will prevent CC.

 

Comments 5 of 7

 

More Business stories

RSS

BBC Business Live

  1.  
    LABOUR CONFERENCE 11:28:
    Gas

    The second day of the Labour conference is underway. Ed Balls is speaking later. The shadow chancellor is expected to say that a Labour government would stop paying the controversial winter fuel allowance to the richest 5% of pensioners. You can have a look at the full conference agenda here.

     
  2.  
    COOL BRANDS 11:20:
    People wait to buy the new Apple iPhone 6 and 6 Plus

    Apple has been voted "the coolest brand in Britain" for the third year in a row, the Guardian reports. The CoolBrands list saw Apple beat Aston Martin and Nike, which came second and third respectively. But Twitter has fallen out of the top 20, along with the BBC's very own iPlayer. Ho hum we'll get 'em next time.

     
  3.  
    DEBT 11:14:
    FCA

    Debt management firms "must raise their game" says the Financial Conduct Authority (FCA). In a release this morning the regulator says many of the firms, which target people who have "often reached rock bottom", are failing to follow the new rules brought in in April to protect customers.

     
  4.  
    UNDER EMPLOYED? 10:43: Via Twitter

    Has deputy leader of the House of Commons, Tom Brake been on holiday? His tweeting of last week's unemployment figures today seems oddly timed: "The latest unemployment figures from the ONS have been released showing a fall by 146,000, lowering total unemployment count to 2.02 million". Keep up.

     
  5.  
    AIR FRANCE 10:30:
    Passengers wait at check-in counters during Air France one-week strike

    The head of Air France-KLM, Alexandre de Juniac, has given an interview to French newspaper Le Monde saying that he was prepared to suspend until December the rollout of the Transavia low-cost operation that sparked strike action by pilots. The strike has led to severe disruption in the past week. Air France flights have been reduced to 40% of normal service.

     
  6.  
    AIR FRANCE 10:13: Breaking News

    French national airline, Air France-KLM, has announced it is putting a halt to its low-cost airline expansion plans in an attempt to end the strike by pilots that entered its second week today

     
  7.  
    TESCO PROFITS 10:10:

    Barclays Capital analyst James Anstead says although there are few details at present as to why Tesco's profits need to be restated "there is a clear implication that Tesco's previous full year trading profit guidance of £2.4bn to £2.5bn needs to be reduced. He adds: "We cannot necessarily assume that the maximum change required is £250m."

     
  8.  
    ENTREPRENEURIAL SPIRIT 09:57:

    An 18-year-old "whizzkid" with a love for the board game Monopoly is preparing an audacious bid to lead one of UK's largest retailers, according to the Daily Mail. Harris Aslam already sits on the board of Nisa Retail. He has apparently has told the group's chairman he intends to stand for election as its next chief executive.

     
  9.  
    TESCO PROFITS 09:46:

    Marks and Spencer's chief financial officer (CFO) Alan Stewart was announced as the new CFO of Tesco in July but he is still on gardening leave and is not due to join Tesco until December. Laurie McIlwee resigned as CFO in April but continued in post until just over a week ago. Over the last week there has been no CFO in the Tesco head office, the company has confirmed.

     
  10.  
    TESCO PROFITS 09:39:

    Tesco says it has informed the financial regulator, the Financial Conduct Authority (FCA), about its investigation into the reporting of its profits.

     
  11.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Tesco won't confirm my revelation that Chris Bush has stepped aside. But will confirm that Robin Terrell is now doing his job!"

     
  12.  
    TESCO PROFITS 09:31:

    Tesco chairman Richard Broadbent says the retailer's investigation is focusing on the reporting of payments made to Tesco from its suppliers. It seems to be an issue of the timing of payments, rather than a "hole" in the accounts.

     
  13.  
    TESCO PROFITS 09:18:

    Dave Lewis, Tesco chief executive, will not confirm that Chris Bush the managing director is one of the four executives suspended as part of its investigation into its profits reporting. He is speaking to journalists on a conference call.

     
  14.  
    MARKET UPDATE 09:16:

    Aside from Tesco the FTSE 100 index is lower by 0.66% at 6,792 just over an hour into the trading day. Tesco is perhaps unsurprisingly the biggest faller. Meanwhile, engineering firm Petrofac is the biggest riser, up 1.72% to 1066p.

     
  15.  
    TESCO SHARES 09:11:

    Tesco's share price is beginning to stabilise a little. Having fallen 11.3% on the open to 203.5p, Tesco shares are currently trading 7.99% lower at 211.25p

     
  16.  
    TESCO PROFITS 09:01: BBC Radio 4

    James Bevan, chief investment officer at CCLA Investment Management, tells Today the profit warning from Tesco could amount to falsifying accounts. "They have decided to account for profits arising in future periods in the current period, and deferred costs that otherwise should have been recognised. That's really serious."

     
  17.  
    TESCO PROFITS 08:57: Via Email

    Richard Hunter, head of equities at Hargreaves Lansdown, says Tesco's profit warning "does not come close to jeopardising overall profitability" at the supermarket, and the market will be happy that at least the bad news is out in the open and being dealt with.

     
  18.  
    UK ECONOMY 08:44: BBC Breakfast
    Jeremy Cook

    Breakfast's Steph McGovern is down in London in the financial district talking to Jeremy Cook, chief economist at World First foreign exchange, who says we should be focusing on how strong the UK economy is following the Scottish referendum. Unemployment is down, GDP is growing - "all very very good news".

     
  19.  
    TESCO PROFITS Via Twitter

    Sean Farrell on the Guardian's City Desk tweets: "Tesco CEO Lewis: 'This is not in the ordinary course of events. This has been audited by a big reputable firm.'

     
  20.  
    HEADLINES
  21.  
    TESCO PROFITS 08:35: Radio 5 live

    Four senior Tesco executives including the UK managing director Chris Bush have been suspended, while an investigation into profits reporting is carried out, Adam Parsons says on Radio 5 live. The share price has recovered a bit but is still down more than 9%.

     
  22.  
    MINIMUM WAGE 08:21: Radio 5 live

    Shane Brennan from the Association of Convenience Stores says the minimum wage is becoming a "political football" between the main political parties, and warns a rise could hit employees negatively. "When the minimum wage goes up, small retailers cut back on the hours they offer staff," he tells Radio 5 live.

     
  23.  
    CHILD BENEFIT 08:18: Radio 5 live

    Ed Balls is talking about the minimum wage on 5 live Breakfast, but he keeps falling off the air. He was half way through explaining how the Labour party wants to extend the child benefit cap - one of those "difficult decisions" necessary to "balance the books".

     
  24.  
    TESCO SHARES 08:14:

    Tesco's shares opened down 11.3% at 203.5p - that's its lowest price since May 2003 - more than a decade ago.

     
  25.  
    TESCO SHARES 08:09: Breaking News

    Tesco's share price falls by more than 10% in the first few minutes of trading in London.

     
  26.  
    MOSS BROS PROFITS 08:04:

    Menswear retailer Moss Bros has reported a pre-tax profit of £1.95m for the six months to July. That's slightly lower than their previous guidance and reflects the number of stores that were closed for refit in the first half of this year, the company said. Like for like sales were 6.4% higher.

     
  27.  
    TESCO PROFITS Via Twitter Robert Peston Economics editor

    tweets: "Tesco! Oh my giddy aunt. Never thought it would come to this http://www.investegate.co.uk/tesco-plc--tsco-/rns/trading-update/201409220700142186S/ …

     
  28.  
    ALIBABA 07:55:
    Alibaba

    The Financial Times reports that Alibaba, the Chinese ecommerce group, has boosted the value of its IPO to $25bn (£15bn) by selling extra shares. That makes it the biggest IPO in history. Huge investor demand saw the company's share price surge 38% on its debut on the New York Stock Exchange on Friday.

     
  29.  
    TESCO PROFITS Via Twitter

    Richard Hunter from stockbrokers Hargreaves Lansdown tweets: "Profit warning on a profit warning for #Tesco likely to put further pressure on a share price already down 39% over the last year"

     
  30.  
    STOCK MARKET FLOAT 07:47:

    Other news from the stock market this morning: British bank Aldermore says it will float on the London Stock Exchange in October, aiming to raise £75m. Aldermore focuses on lending to small and medium-sized businesses and homeowners.

     
  31.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Dave Lewis initiated inquiry over weekend. Am told Philip Clarke has officially left Tesco, but remains available to talk to investigation."

     
  32.  
    PHONES 4U RESCUE 07:36:
    The Phones 4U shop sign.

    Phone network EE is to buy 58 Phones 4U stores - safeguarding 359 jobs - in a deal with administrator PricewaterhouseCoopers. The phone network was known to have entered negotiations over the weekend. On Friday Vodafone agreed to take over 140 Phones 4U shops.

     
  33.  
    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Tesco were due to report Interims next week. That has now been cancelled."

     
  34.  
    LABOUR CONFERENCE 07:26: BBC Radio 4

    Labour shadow business secretary Chuka Umanna tells Today Labour is pro-business, but says: "What we have been clear about is we can't go back to business as usual and the kind of fast buck culture we saw in some parts of the economy that helped contribute to the 2008/09 crash."

     
  35.  
    TESCO PROFITS Via Twitter

    City grandee David Buik tweets: "It never rains but it pours dear old Tesco. It appears profits have been over-stated by £250 mn - shares could be down 5% at the opening."

     
  36.  
    TESCO PROFITS 07:15:
    A group of Tesco shopping trolleys

    "We have uncovered a serious issue and have responded accordingly," said Dave Lewis, who took over as the boss of Tesco last month. "The chairman and I have acted quickly to establish a comprehensive independent investigation. The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."

     
  37.  
    TESCO PROFITS 07:11: Breaking News

    Tesco has released a statement saying it over-stated its expected profit for the six months to 23 August. In a trading statement on 29 August it said it expected half-year profits to be £1.1bn. It has now revised this down by £250m.

     
  38.  
    LISTEN AGAIN Via Twitter Adam Parsons Business Correspondent

    tweets: The #WUTM podcast. All yours: bbc.co.uk/podcasts/serie…

     
  39.  
    AIR FRANCE 07:03:
    Air France planes

    Pilots at Air France are looking ahead to a second week on strike this morning. France's transport minister Alain Vidalies says the fate of Air France is at stake in the dispute. Pilots are angry that the airline is expanding its budget carrier, which pays pilots less.

     
  40.  
    LABOUR ANTI-BUSINESS? 06:55: BBC Radio 4

    Lord Jones tells Today that Labour has not given business the credit it deserves. "Without the wealth that business creates you have no public sector, you have no taxation, you don't have one job in the country. That's how important business is," he says.

     
  41.  
    LABOUR ANTI-BUSINESS? 06:51: BBC Radio 4
    Digby Jones

    Lord Digby Jones, former head of the CBI and member of the last Labour government tells Today that Labour is casting doubt on its support for the UK business community. "Whatever the current shadow cabinet say - let's nationalise the banks, let's have a social market in energy, lets increase business taxes, whatever it may be - they are showing by their actions that they actually don't get it," he says.

     
  42.  
    DEVOLUTION 06:42: Radio 5 live

    Wake Up to Money has been discussing the prospects for more devolution across the UK in the wake of the "No" vote in Scotland. Tony Travers from the London School of Economics says the UK is one of the most centralised democracies in the world - 95% of tax revenues go straight to the exchequer.

     
  43.  
    MINIMUM WAGE 06:35: BBC Radio 4

    Is Labour leader Ed Miliband's pledge to raise the minimum wage to £8 per hour by 2020 anti-business?Simon Walker, head of the Institute of Directors, tells the Today programme he shares many of the Labour party's concerns - on energy prices, zero-hours contracts and wages. "But... we don't agree with Labour's instinct to legislate or regulate on these matters," he says.

     
  44.  
    MARKETS 06:29: BBC Breakfast
    Breakfast

    Breakfast's Steph McGovern is in the City in London before dawn this morning, talking to analysts and market traders about what's moving the markets after the "No" vote in Scotland last week. She'll be talking to a currency trader later to find out what's going to happen to the pound.

     
  45.  
    MINIMUM WAGE 06:18:

    Labour's leader Ed Miliband says Labour will put the minimum wage up to £8 an hour if they win the election next year - up from the £6.50 is due to rise to this October. The unions say that's not enough, and want £10 an hour, while the CBI warns any rise will "put jobs at risk".

     
  46.  
    LABOUR CONFERENCE 06:12:
    Labour shadow  chancellor Ed Balls

    Ed Balls is expected to say that Labour will reinstate the 50 top rate of tax in his speech to the party conference later today. That's not necessarily news. But Labour haven't been completely clear on whether they would reinstate the 50p tax band until now. The inclusion of the proposal essentially amounts to an election promise eight months out from the general election.

     
  47.  
    Phones 4U 06:02: Radio 5 live

    EE has confirmed it's looking into buy a few of those Phones 4 U shops now on the market. Judy Palmer from Begbies Traynor defends EE and Vodafone, the operators accused of helping to put the mobile retailer out of business, on Wake Up to Money calling their actions "commercial hardball".

     
  48.  
    06:01: Edwin Lane Business reporter, BBC News

    Hello all. We're also getting the latest on the fate of Phones 4U, after it went into administration last week. Get in touch with us on bizlivepage@bbc.co.uk or tweet us @BBCBusiness.

     
  49.  
    0600: Matthew West Business Reporter

    Morning folks. We start the day with news that luxury shoe brand Jimmy Choo is looking at a stock market float in London, there are also half year results from Moss Bros. The Labour party conference goes into its second full day with a speech from shadow chancellor Ed Balls. It's his last conference speech before the election so we'll bring you any nuggets from that too. Stay with us.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.