Sep 13, 2022 - Economy

The energy crisis has revived the coal market

Illustration of pieces of coal forming a circle similar to the EU flag.

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.

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

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.

Meanwhile, Drought conditions worldwide have also driven up demand for coal.

The impact: With production basically flat in recent years, the demand growth has generated a sizable price reaction.

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."
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