Peak coal: sooner than you think

By Richard Heinberg

Future scenarios for global coal consumption are cast into doubt by two recent European studies on world coal supplies. The first, Coal: Resources and Future Production (PDF 630KB), published on April 5 by the Energy Watch Group, which reports to the German Parliament, found that global coal production could peak in as few as 15 years. This astonishing conclusion was based on a careful analysis of recent reserves revisions for several nations.

The EWG study so contradicts widespread assumptions about future coal supplies that most energy analysts would probably prefer to ignore it. However, an even more recent study, The Future of Coal, by B. Kavalov and S. D. Peteves of the Institute for Energy (IFE), prepared for European Commission Joint Research Centre and not yet published, reaches similar conclusions.
Early in the paper the authors ask, “Will coal be a fuel of the future?” Their disturbing conclusion, many pages later, is that “coal might not be so abundant, widely available and reliable as an energy source in the future”. Along the way, they state “the world could run out of economically recoverable (at current economic and operating conditions) reserves of coal much earlier than widely anticipated”. The authors also highlight problems noted in the EWG study having to do with differing grades of coal and the likelihood of supply problems arising first with the highest-grade ores.

All of this translates to higher coal prices in coming years. The conclusion is repeated throughout the IFE report: “[I]t is true that historically coal has been cheaper than oil and gas on an energy content basis. This may change, however … The regional and country overview in the preceding chapter has revealed that coal recovery in most countries will incur higher production costs in future. Since international coal prices are still linked to production costs … an increase in the global price levels of coal can be expected …”

As prices for coal rise, “the relative gap between coal prices and oil and gas prices will most likely narrow”, with the result that “the future world oil, gas and coal markets will most likely become increasingly inter-related and the energy market will tend to develop into a global market of hydrocarbons”.

Taken together, the EWG and IFE reports deliver a shocking message. For a world already concerned about future oil supplies, uncertainties about coal undercut one of the primary strategies – turning supposedly abundant coal into a liquid fuel – that is being touted for maintaining global transport networks.

The sustainability of China’s economic growth, which has largely been based on a rapid surge in coal consumption, is thrown into question. And the ability of the US to maintain its coal-powered electricity grids in coming decades is also cast into doubt.

In summary, we now have two authoritative studies reaching largely consistent conclusions with devastating implications for the global economy. Surely these studies deserve follow-up reviews of the data by the International Energy Agency. If the EWG and IFE conclusions hold, the world will need to respond quickly with an enormous shift in the directions of energy conservation and development of renewable sources of electricity.

Climate concerns are already drawing some nations in these directions; however, even nations leading the efforts may not be proceeding fast enough. For China and the United States, the world’s two most coal-dependent countries, the message could not be clearer: whether or not global climate concerns are taken seriously, it is time to fundamentally revise the current energy paradigm.

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