Experts believe that China and India’s rising economies would continue to drive coal demand even as they establish ambitious renewable energy targets.

While China is the world’s greatest energy consumer, India is rated third, and both countries rely heavily on coal to fuel economic growth.

According to forecasts by energy watchdog International Energy Agency, China’s share of world electricity consumption, which is 60% coal-generated, would rise to one-third by 2025, up from one-quarter in 2015.

Rob Thummel, managing director of energy investment management firm Tortoise Capital, believes India’s rapidly rising economy would result in a huge demand for energy, especially oil and natural gas.

“If India, China are still growing economically at decent rates for the next decade, we’re not going to see coal demand disappearing anytime soon, globally,” Ian Roper, commodity strategist at Astris Advisory Japan KK, said.

According to a recent IEA assessment, global coal consumption will reach a record high of 8.5 billion tonnes in 2023, driven by robust demand in growing and developing countries such as India and China.

There are no signs of a slowdown, with the IEA predicting that coal use in India and Southeast Asia will “grow significantly.”

India’s coal production increased to 893 million tonnes in the fiscal year ended March 2023, approximately 15% more than a year earlier. China’s raw coal production increased by 2.9% between January and November 2023, compared to the same period in 2022.

In comparison, the United States, the world’s second largest coal consumer, has experienced a reduction in its use of the fuel. According to the Institute for Energy Economics and Financial Analysis, the superpower’s daily coal use has dropped by 62%, from 2.8 million to 1.1 million tonnes.

Last year, global carbon emissions from fossil fuels reached all-time highs. According to the most recent Global Carbon Budget estimates, India’s emissions would increase by 8.2% in 2023, while China’s will rise by 4%.

“The bullseye is on China and India, because those two countries right now use substantially more coal. And so their carbon emissions are on the rise, not on the decline,” Thummel said.

The two countries, however, have adopted and established stringent renewable energy targets.

India has set an ambitious goal of satisfying 50% of its electricity demand through renewables by 2030, and the South Asian country has made some progress, with renewables accounting for 22% of total power generation.

Nonetheless, coal-fired power plants generate 75% of India’s electricity. According to Citibank study, inventories at Indian power plants increased by 6% in 2023 compared to the previous year. The country also plans to add 80 gigawatts of coal-based thermal capacity over the next eight years.

Similarly, coal accounts for 61% of China’s electricity generation, despite the country’s status as a clear leader in renewable energy expansion. It has been adding new projects to the grid almost as quickly as the rest of the world combined in 2022, with the goal of becoming carbon neutral by 2060.

However, due to the unreliability of renewables, coal remains a vital fallback option for both countries.

“China was suffering power shortages a couple of years ago, hydro[power’s] been very weak the last couple of years, so they’ve had to revert back to coal,” he said.

Last year, China experienced a drought for several months, reducing hydroelectric power generation in its southern provinces. To keep the lights on and businesses running, the country had to rely on coal.

The same lack of dependability may be applied to India’s renewables ecosystem.

Last October, coal accounted for 80% of electricity output, up from 73% in 2022 over the same period, as lower-than-usual monsoon rains reduced hydro generation. Coal production for that month increased by more than 18% year on year.

This means that the two countries will continue to rely on coal as their principal source of electricity generation for many years to come.

“There’s still a net growth in India’s coal consumption coming up for at least a decade, and China as well,” Roper said.

(Adapted from CNBC.com)