Frédéric GonandAdjunct professor of economics at University Paris-Dauphine
"Coal's future is in the hands of the emerging economies"
Today, coalCoal is ranked by its degree of transformation or maturity, increasing in carbon content from... is still the world's leading source of electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... and many emerging economies rely on it to drive their economic development. Its future in the global energy mixThe range of energy sources of a region. will partially depend on the goals of the low-carbon transition policies that will be introduced to contain global warmingGlobal warming, also called planetary warming or climate change... . Frédéric Gonand, Professor of Economics at University Paris-Dauphine, tells us more.
The economics of coal are well known. To simplify, coal comes in several grades, including ligniteRock whose properties are somewhere between peat and coal. It has a carbon content of about 70 to 75%... (used to generate electricity), bituminous coal (used to make steel) and anthraciteA type of coal that is 95% pure carbon. It is an excellent fuel. (used for heating). 69% of the world's coal is used to produce electricity. Most coal is mined and used domestically, with only 12% of production exported. Reserves are fairly well distributed around the planet, hence the geographically largest countries (like the United States, Russia, China, India and Australia) account for the most significant reserves.
Experience has shown that energy markets sometimes behave in very unexpected ways. Fifteen years ago, it seemed obvious to everyone that coal was fading away into the sunset. But since the beginning of the century, demand for coal has grown faster than for any other fuelFuel is any solid, liquid or gaseous substance or material that can be combined with an oxidant... .
Today, there are two types of long-term energy mix forecasts, the ones that see supply and demand for fossil fuels in general and coal in particular continuing to rise in the decades ahead; and the ones that, on the contrary, see supply and demand weakening under the impact of low-carbon transition policies. Knowing which of these scenarios will prevail also means, to a large extent, knowing whether the emerging economies, whose growth is now fairly closely tied to the use of coal as their primary energyAll energy sources that have not undergone any conversion process and remain in their natural state.. source, will agree to pay the cost of transitioning sooner or later to other sources of energy.
Today, it seems likely that coal demand will continue over the mid-term to decline in the western countries and increase in the emerging economies – particularly China and India, which together use 60% of the world's coal production.
Future demand for coal will also likely be influenced to a certain extent by the cost of carbon (which has a massive impact on the profitability of coal-fired powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... plants, but whose future is still highly uncertain); the price of carbon storage technologies; and the energy efficiencyIn economic terms, energy efficiency refers to the efforts made to reduce the energy consumption of a system... of coal-fired power stations, particularly in China and India. The first and the third factor would tend to weigh on demand, while the second one could lift it.
Available data therefore seem to suggest that global coal demand will generally drift down over the long term, but at a pace that is difficult to assess. In any case, coal's abundance and the probable stability of its production costs should provide significant support for demand over the long term. As a result, coal will undoubtedly remain a relatively important source of energy in the world of tomorrow.
Frédéric Gonand, 40, is an adjunct professor of economics at University Paris-Dauphine, former Commissioner of the French Energy Regulation Authority (2011-2013), visiting researcher at the King Abdullah Petroleum Studies and Research Center (Saudi Arabia) and consultant in energy issues for various consulting firms and companies.