Coal May Pass Oil As World's No. 1 Energy Source By 2017, Study Says

By Bill Chappell

Published December 18, 2012 at 2:35 PM EST

China and India are projected to propel coal's challenge of oil as the world's top energy source within the next five years, according to a new study. Here, a man rides a bicycle toward a coal-fired power station in China's Guangdong province last year.

Despite a slowdown in U.S. consumption, coal is poised to replace oil as the world's top energy source — possibly in the next five years, according to the International Energy Agency. The rise will be driven almost entirely by new energy demands in China and India, the IEA says.

"This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined," says IEA Executive Director Maria van der Hoeven.

Together, China and India will account for more than 90 percent of the rise in demand for coal over the next five years, according to the IEA.

The agency predicts that coal's growth trend will hold everywhere in the world except the United States, where it says the wide availability of cheap natural gas brought a decline in coal demand — a situation also summed up in a recent post by NPR's State Impact team, Why Coal Is on the Decline in Texas.

By 2017, the IEA also expects India to surpass the U.S. as the world's second-largest coal consumer. With that in mind, van der Hoeven says, electricity prices around the world "will depend increasingly on Chinese and Indian policy and investment decisions."

The agency's projections only change slightly if, as some predict, China will be forced to reduce its coal consumption and seek cleaner and more cost-effective ways of powering its growth. The IEA study found that even in a scenario in which China's predicted growth were halved, demand would still go up.

In China's role as the world's largest coal consumer, "net coal imports have increased by 39.5 percent so far this year, to 217 million tons," reports Coal Investing News, citing Chinese government data.

In the short term, not all of coal's growth is seen coming from large emerging markets. Europe's coal consumption is also rising.

As industry analyst Elliott Gue of Energy & Income Advisor wrote today, "In Europe, demand for coal has surged as a result of sky-high natural-gas prices in international markets and declining output from nuclear power as Germany phases out its fleet of reactors."

Faced with lower domestic demand, many U.S. coal producers have bolstered their exports to Europe and China. Despite that trend, the IEA predicts U.S. coal production will decrease over the next five years.

Even as U.S. utilities shut down older and inefficient coal-fired energy plants, large facilities are expected to be major producers for America's power grid for years to come, according to analyst Elliott Gue.

In her remarks presenting the IEA study, as well as in Huff Post's Green blog, van der Hoeven said natural gas remains the largest immediate threat to coal, which she called "the 21st century's dirty engine of growth."

Saying that "neither climate policy nor a macroeconomic slowdown stops the relentless increase of coal," van der Hoeven added, "but cheap natural gas can."