The energy crisis has revived the coal market
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Aïda Amer/Axios
Coal prices are soaring as the global energy crisis forces power providers worldwide to boost usage of the carbon-laden mineral.
Why it matters: A renewed embrace of coal represents a turnabout from the previous global focus on cutting emissions.
Driving the news: Coal prices around the world have reached new highs in recent weeks.
- Europe's benchmark coal futures price is up roughly 90% from last year to over $320 per metric ton.
- Australia's Newcastle coal, a benchmark for the Asian market, also hit a record of more than $450 per metric ton in recent days.
- U.S. coal prices are also hitting records of nearly $200 per short ton.
The big picture: For much of the last decade, dirt cheap natural gas prices and efforts to cut carbon emissions combined to drastically reduce the usage of coal for power production.
- Now: The Ukraine war and a global drought are driving an unexpected uptake of coal.
Russia's complete cutoff of natural gas flows through its Nord Stream pipeline to Germany means more electricity will have to be generated with other fuels.
- Germany has restarted shuttered coal-fired power plants. Italy, Austria and the Netherlands have announced similar plans.
Meanwhile, Drought conditions worldwide have also driven up demand for coal.
- In China, the world's largest coal consumer, drought has sharply reduced hydroelectric power production and boosted coal usage.
- In France, the heat has left rivers too warm to properly cool its crucial fleet of nuclear plants, forcing a reduction in energy production, according to the Wall Street Journal.
- All that increased demand worldwide is helping to raise U.S. prices as well.
The impact: With production basically flat in recent years, the demand growth has generated a sizable price reaction.
- A July report from the International Energy Agency forecasts global coal consumption will rise 0.7% this year — and roughly match the all-time high for coal usage set in 2013.
What we're watching: Electricity-related carbon emissions over the coming year, as the uptick in coal usage will likely push them up from the record high level reached in 2021.
The bottom line: "That's the tradeoff that we face," says Harrison Fell, a professor of energy economics at North Carolina State University.
- "We have this alternative readily available source that's great for reliability, but at the cost of environmental outcomes."
