Coal

Overview

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In the IEO2011 Reference case, which does not include prospective greenhouse gas reduction policies, world coal consumption increases by 50 percent, from 139 quadrillion Btu in 2008 to 209 quadrillion Btu in 2035 (Figure 65). Although world coal consumption increases at an average rate of 1.5 percent per year from 2008 to 2035, the growth rates by region are uneven, with total coal consumption for OECD countries remaining near 2008 levels and coal consumption in non-OECD countries increasing at a pace of 2.1 percent per year. As a result, increased use of coal in non-OECD countries accounts for nearly all the growth in world coal consumption over the period.

In 2008, coal accounted for 28 percent of world energy consumption (Figure 66). Of the coal produced worldwide in 2008, 60 percent was shipped to electricity producers and 36 percent to industrial consumers, with most of the remainder going to consumers in the residential and commercial sectors. In the IEO2011 Reference case, coal's share of total world energy consumption remains relatively flat throughout the projection, declining slightly from a peak of 29 percent in 2010 to 27 percent in 2015, where it remains through 2035.

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In the electric power sector, a more rapid rate of increase in the use of other fuels, particularly renewables, leads to a decline in coal's share of total energy consumption for power generation from 43 percent in 2008 to 37 percent in 2020. After 2020, however, similar growth rates for the consumption of all fuels except liquids keep coal's share of total energy use in the electricity sector relatively stable through the remaining years of the projection.

International coal trade grows by 66 percent in the Reference case, from 21.2 quadrillion Btu in 2009 to 35.2 quadrillion Btu in 2035. The share of total world coal consumption accounted for by internationally traded coal holds steady at about 17 percent for most of the projection, up from 15 percent in 2009. The stable share of coal traded primarily reflects the ability of the world's largest coal consumers, China and India, to meet substantial portions of their future coal demand with domestic production.

World coal consumption

OECD coal consumption

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In the Reference case, OECD coal consumption declines from 46.8 quadrillion Btu in 2008 to an estimated 43.5 quadrillion Btu in 2010 and remains near that level through 2020. After 2020, OECD coal consumption increases to 46.7 quadrillion Btu in 2035, largely because of an increase in natural gas prices in the United States that allows coal—in the absence of policies or regulations to limit its use—to compete more effectively with natural gas in the electricity sector. Almost all of the increase after 2020 is attributable to coal consumption in the OECD Americas (Figure 67).

OECD Americas

Coal use in the United States totaled 22.4 quadrillion Btu in 2008—92 percent of total coal use in the OECD Americas region and 48 percent of the OECD total. U.S. coal demand rises to 24.3 quadrillion Btu in 2035 in the Reference case. Nevertheless, coal's share of total U.S. electricity generation (including electricity produced at combined heat and power plants in the industrial and commercial sectors) declines from 48 percent in 2008 to 43 percent in 2035.

Increasing use of coal for electricity generation at existing coal-fired power plants and at several new plants currently under construction, combined with the startup of several CTL plants toward the end of the projection, leads to modest growth in U.S. coal consumption, averaging 0.3 percent per year from 2008 to 2035. Although U.S. coal-fired electricity generation increases between 2008 and 2035 and accounts for 22 percent of the growth in total U.S. electricity generation, high cost estimates for new coal-fired power plants result in limited projections of new coal-fired capacity in the Reference case. Furthermore, in the near term, low natural gas prices lead to considerable displacement of coal-fired generation from existing plants in the early years of the projection period. Increased generation from natural gas accounts for 39 percent of the growth in total U.S. electricity generation from 2008 to 2035, and increased generation from renewables satisfies 32 percent of the increase. U.S. production of coal-based synthetic liquids, which is expected to commence in 2015, increases to 549,620 barrels per day in 2035.

In Canada, a projected decline in coal consumption totaling 0.2 quadrillion Btu from 2008 to 2035 results primarily from the Ontario government's plans to phase out the Province's coal-fired generating capacity by the end of 2014 [152]. In late 2010, Ontario Power Generation retired approximately 1.9 gigawatts of coal-fired generating capacity at its Nanticoke and Lambton plants, leaving the Province with 4.2 gigawatts of remaining coal-fired capacity.

In Mexico/Chile, coal consumption rises by 0.5 quadrillion Btu from 2008 to 2035, primarily because of increasing demand for electricity. In Mexico, a new 0.7-gigawatt coal-fired generating unit on the country's Pacific coast was brought on line in late 2010, and in Chile 1.7 gigawatts of new coal-fired capacity has either been completed or is nearing completion [153]. Chile's renewed interest in coal-fired generating capacity is based on substantial growth in electricity demand, coupled with a lack of reliable natural gas supplies from Argentina [154].

OECD Europe

Total coal consumption in the countries of OECD Europe declines in the IEO2011 Reference case from 12.5 quadrillion Btu in 2008 (27 percent of the OECD total) to 10.4 quadrillion Btu in 2035 (17 percent). In 2008, the electricity and industrial sectors accounted for 94 percent of the coal consumed in OECD Europe, with electricity producers using 8.7 quadrillion Btu of coal and industrial plants using 3.1 quadrillion Btu. Over the projection period, the use of coal declines in both sectors, falling at average rates of 0.9 percent per year in the industrial sector and 0.5 percent per year in the electricity sector.

Total installed coal-fired electricity generating capacity in OECD Europe declines from 200 gigawatts in 2008 to 169 gigawatts in 2035, and coal's share of total electricity generation declines from 25 percent in 2008 to 16 percent in 2035. Plans to retire aging and inefficient generating capacity are, to some extent, offset by new coal-fired capacity. Approximately 20 gigawatts of new coal-fired generating capacity currently is under construction in OECD Europe, approximately one-half of which is represented by projects in Germany [155]. In light of the recent nuclear crisis in Japan and the subsequent decision by the German government to reassess its September 2010 decision to extend the life of 21 gigawatts of nuclear generating capacity, it is possible that the planned retirement of 13 gigawatts of older coal-fired generating capacity may not occur [156]. Rather, these older coal plants may be retrofitted with environmental equipment and kept on line to replace the electricity supply lost from a shutdown of Germany's nuclear reactors.

OECD Asia

The relatively flat outlook for coal consumption in the OECD Asia region in the Reference case is the net result of two divergent trends: a decline in coal use of 0.9 quadrillion Btu for Japan and an increase of 0.8 quadrillion Btu projected for South Korea from 2008 to 2035. Japan is the region's largest coal-consuming nation, but its declining population and expected shift away from coal to alternative energy sources, including renewables and natural gas, for electricity generation lowers the demand for coal in the future.

South Korea's coal use increases by an average of 1.0 percent per year, from 2.6 quadrillion Btu in 2008 to 3.4 quadrillion Btu in 2035. Increasing use of coal in South Korea's power sector accounts for more than three-fourths of the growth in overall coal consumption, although most of the growth is expected after 2020. According to South Korea's most recent long-term power plan, generating subsidiaries for the state-controlled Korea Electric Power Corporation (KEPCO) added a total of 3.7 gigawatts of new coal-fired capacity in 2008 and 2009; however, those new builds mark the end of planned coal-fired capacity additions until after 2015 [157].

Coal consumption in Australia and New Zealand remains nearly constant through 2035. Of the two countries, Australia is by far the larger coal consumer, with 96 percent of the regional total in 2008. With substantial coal reserves (primarily in Australia), the region continues to rely on coal for much of its electricity generation, although the coal share of total generation does decline substantially over the projection period. Coal-fired power plants, which supplied 66 percent of the region's electricity generation in 2008, account for only 39 percent in 2035. Compared with coal, generation from both renewables and natural gas increases at a more rapid pace, so that those fuels capture an increasing share of Australia/New Zealand's total generation.

Non-OECD coal consumption

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In contrast to coal consumption in the OECD economies, fast-paced growth is projected for non-OECD nations, particularly among the Asian economies. Led by strong economic growth and rising energy demand in non-OECD Asia, total coal consumption in non-OECD countries increases to 162.5 quadrillion Btu in 2035, growing by 76 percent from the 2008 total of 92.2 quadrillion Btu (Figure 68). The substantial increase in non-OECD coal consumption illustrates the importance of coal in meeting the region's energy needs. Over the entire period from 2008 to 2035, coal accounts for more than one-third of total non-OECD energy consumption.

Non-OECD Asia

The countries of non-OECD Asia account for nearly all of the projected increase in world coal consumption from 2008 to 2035. Strong economic growth is expected for non-OECD Asia, averaging 5.3 percent per year from 2008 to 2035, with China's economy averaging 5.7 percent per year and India's 5.5 percent per year. In IEO2011, much of the increase in demand for energy in non-OECD Asia, particularly in the electric power and industrial sectors, is met with coal.

Coal use in China's electricity sector increases from 28.7 quadrillion Btu in 2008 to 63.4 quadrillion Btu in 2035, at an average rate of 3.0 percent per year. In comparison, coal consumption in the U.S. electricity sector grows by 0.2 percent annually, from 20.5 quadrillion Btu in 2008 to 21.6 quadrillion Btu in 2035. At the end of 2008, China had an estimated 557 gigawatts of operating coal-fired capacity. To meet increasing demand for electricity that accompanies the relatively strong outlook for China's economic growth, the IEO2011 Reference case projects a need for 485 gigawatts of coal-fired capacity additions (net of retirements) from 2008 through 2035. The substantial amount of new capacity represents, on average, 18 gigawatts of new coal-fired capacity additions per year, which is a considerably slower rate of construction than occurred during the 5-year period ending in 2008, when coal-fired capacity additions averaged 55 gigawatts per year. Coal's share of total electricity generation in China declines from 80 percent in 2008 to 66 percent in 2035 (Figure 69), as generation from nuclear, renewables, and natural gas each grows more rapidly than generation from coal.

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Approximately one-half (52 percent) of China's coal use in 2008 was in the end-use sectors, and primarily in the industrial sector. In the IEO2011 Reference case, industrial sector coal consumption in China increases by 18.8 quadrillion Btu, or 67 percent, from 2008 to 2035. Within the sector, the single largest use of coal is for production of coke, which in turn is used primarily to produce pig iron. In 2008, Chinese coke plants consumed 457 million tons of coal,²⁴ representing approximately 34 percent of total coal consumption in the industrial sector on a tonnage basis [158]. China was the world's leading producer of both steel and pig iron in 2008, accounting for 38 percent of global raw steel output and 50 percent of world pig iron production [159].

Coal remains the leading source of energy for China's industrial sector in the Reference case, although its share of industrial energy consumption declines in the projection, with electricity and other energy sources making up an increasing share of the total. Electricity's share of total industrial energy use rises from 18 percent in 2008 to 26 percent in 2035, while coal's share drops from 63 percent to 55 percent. However, with coal-fired power plants satisfying a substantial portion of China's total power generation requirements throughout the period, the increase in electricity demand in the industrial sector can, to a certain extent, be viewed as an increase in demand for coal.

In India, 54 percent of the projected growth in coal consumption is in the electric power sector and most of the remainder in the industrial sector. In 2008, India's coal-fired power plants consumed 6.7 quadrillion Btu of coal, representing 62 percent of the country's total coal demand. Coal use for electricity generation in India grows by 2.0 percent per year on average, to 11.4 quadrillion Btu in 2035, requiring an additional 72 gigawatts of coal-fired capacity (net of retirements). As a result, India's coal-fired generating capacity increases from 99 gigawatts in 2008 to 171 gigawatts in 2035. Despite an increase in coal-fired electricity generation of 107 percent over the period, growth in generation from natural gas, nuclear power, and renewable energy sources is even more rapid, and the coal share of India's total generation declines from 68 percent in 2008 to 51 percent in 2035.

In the other nations of non-OECD Asia, coal consumption grows by an average of 2.1 percent per year, from 6.3 quadrillion Btu in 2008 to 11.0 quadrillion Btu in 2035. Growing demand for energy in the region's electric power and industrial sectors drives the increase in coal use. In the electric power sector, significant growth in coal consumption is expected in Indonesia and Vietnam, where considerable amounts of new coal-fired generating capacity are expected to be built.

Non-OECD Europe and Eurasia

In the IEO2011 Reference case, coal consumption in non-OECD Europe and Eurasia declines slightly from the 2008 level of 8.9 quadrillion Btu. Russia, which used 4.5 quadrillion Btu of coal in 2008 (50 percent of the total for non-OECD Europe and Eurasia), leads the region's coal consumption. Coal met 15 percent of Russia's total energy requirements in 2008, and coal-fired power plants provided 18 percent of its electricity; in 2035 those shares are slightly lower, at 14 percent and 16 percent, respectively. In the Reference case, Russia's coal consumption increases to 4.9 quadrillion Btu in 2035. Although natural gas continues to be the leading source of electricity generation in Russia throughout the projection period, its share of total generation declines substantially, while both nuclear and renewables garner increasing shares of the total. Additional generation from nuclear and renewables, taken together, account for 82 percent of the growth in Russia's total electricity supply from 2008 to 2035, with increasing output from coal- and natural gas-fired power plants supplying 19 percent.

Coal consumption in the other countries of non-OECD Europe and Eurasia declines from 4.5 quadrillion Btu in 2008 to 3.7 quadrillion Btu in 2035. For the region as a whole, coal-fired electricity generation remains near its current level, and as a result the coal share of total generation declines from 34 percent in 2008 to 24 percent in 2035. From 2008 to 2035, nuclear and natural gas satisfy much of the additional electricity requirement for non-OECD Europe and Eurasia (excluding Russia), with increased output from nuclear plants meeting 38 percent of the growth and natural-gas-fired plants 39 percent.

Africa

Africa's coal consumption increases by 2.5 quadrillion Btu from 2008 to 2035 in the Reference case. South Africa currently accounts for 93 percent of coal consumption on the continent and is expected to continue to account for much of Africa's total coal consumption over the projection period.

Increasing demand for electricity in South Africa in recent years has led to a decision by Eskom, the country's state-owned electricity supplier, to restart three large coal-fired plants (Camden, Grootvlei, and Komati) that have been closed for more than a decade [160]. The individual units at those plants, with a combined generating capacity of 3.8 gigawatts, are scheduled to return to service by 2012. Approximately one-half of the capacity was back in service at the end of 2008. In addition, Eskom is proceeding with the construction of two new coal-fired power plants (Medupi and Kusile) with a combined generating capacity of 9.6 gigawatts. The 12 individual units at the Medupi and Kusile plants are scheduled to be fully operational by the end of 2017. In April 2010, the World Bank approved a $3.8 billion loan for Eskom to help with the financing of several energy-related projects, including $3.1 billion allocated for completion of the Medupi plant [161].

Recent power shortages and a general lack of spare generating capacity in southern Africa also have led to increased interest in new coal-fired power projects in countries other than South Africa. Of particular significance are major investments being made by several international energy companies to develop coal reserves in Mozambique and Botswana for the purpose of supplying both domestic coal-fired generating plants and international markets [162].

In the industrial sector, an increase in coal consumption of 0.6 quadrillion Btu from 2008 to 2035, representing 26 percent of the total increase for Africa, results from production of steam and process heat for industrial applications, production of coke for the steel industry, and production of coal-based synthetic liquids. Currently, two large-scale CTL plants in South Africa (Sasol II and Sasol III) can supply up to 150,000 barrels of synthetic liquids per day, accounting for about 25 percent of the country's total liquid fuel supply [163]. Approximately 25 percent of the coal consumed in South Africa is for the production of synthetic fuels [164]. In the IEO2011 Reference case, production of coal-based synthetic liquids in all of Africa increases to 274,000 barrels per day in 2035.

Central and South America

Central and South America consumed 0.8 quadrillion Btu of coal in 2008. Brazil, with the world's ninth-largest steel production in 2008, accounted for 61 percent of the region's coal demand. Colombia, Peru, Argentina, and Puerto Rico accounted for most of the remainder [165]. In the Reference case, coal consumption in Central and South America increases by 1.5 quadrillion Btu from 2008 to 2035, with most of the increase in Brazil, primarily for the production of coke for use in the steel industry. To meet increasing demand for steel in both domestic and international markets, Brazil's steel companies have plans to expand their production capacity considerably over the next several years [166]. In the near term, coal consumption in Brazil's electricity sector is set to increase with the completion of three new coal-fired power plants in 2011, 2012, and 2013. The Pecem I, Pecem II, and Itaqui plants will have a combined generating capacity of 1.4 gigawatts [167].

Middle East

Countries in the Middle East consumed 0.4 quadrillion Btu of coal in 2008. Israel accounted for 83 percent of the total and Iran most of the remainder. The region's coal use remains near the current level through 2035.

World coal production

In the IEO2011 Reference case, 67 percent of the increase in world coal production occurs in China, where output rises by 45.4 quadrillion Btu from 2008 to 2035 (Table 8 - Quadrillion Btu and Table 8 - Million Short Tons). This outlook projects that much of the demand for coal in China will continue to be met by domestic production. Other substantial increases in regional coal production from 2008 to 2035 include 6.5 quadrillion Btu in Australia/New Zealand (representing 9 percent of the increase in world coal production), 4.5 quadrillion Btu in India, 4.5 quadrillion Btu in non-OECD Asia (excluding China and India), 3.6 quadrillion Btu in Africa, 2.7 quadrillion Btu in the United States, and 2.5 quadrillion Btu in Central and South America.

Most of the growth in coal production in Australia/New Zealand and Central and South America (excluding Brazil) is based on continuing increases in coal exports, whereas production growth in Africa and non-OECD Asia (excluding China and India) is attributable to both rising levels of coal consumption and increasing exports. For the United States, growth in coal production is a result primarily of increases in domestic coal consumption.

World coal trade

International coal trade became increasingly complex and less predictable over the past decade with the rapid rise of coal demand in developing countries, supply disruptions, and the emergence of new international coal supply sources. For some countries, rising demand has contributed to less supply diversity. Some suppliers, including Australia and South Africa, have concentrated on the Chinese market, and China itself has withheld coal exports from the market. On the other hand, some countries have been able to diversify their supplies by capitalizing on expanded production from Colombia, Russia, and Indonesia among other countries. The overarching trend expected for coal trade through 2035 is an increase in trade for both steam and coking coal, a continued competitive environment among suppliers, and a tendency to diversify coal suppliers to mitigate risk associated with periodic supply disruptions.

In IEO2011, the volume of seaborne coal trade continues its long-term trend, rising through 2035 mainly in response to large increases in non-OECD coal demand—predominantly from China and India. Although both steam coal and coking coal are traded internationally, most of the trade is in steam coal, which represents 71 percent of world coal trade in 2035 (slightly lower than the 2009 level of 72 percent). In 2009, 67 percent of the world's exported steam coal was imported by Asian countries, and their share of the total increases to 71 percent in 2035. The share of coking coal imports destined for Asia increased to 73 percent in 2009—when Asian countries had largely recovered from the global economic downturn and other countries' recovery still lagged—compared with 62 percent in 2008. Asia's share of coking coal imports falls from its high in 2009 as coking coal demand recovers or grows in some countries, particularly Brazil; however, its share never falls below 66 percent in the Reference case.

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International coal trade, which accounted for about 15 percent of total world coal consumption in 2009, grows at an average annual rate of 2.0 percent in the Reference case, from about 21.2 quadrillion Btu in 2009 to 35.2 quadrillion Btu in 2035. Because the largest increases in consumption occur in non-OECD Asia—particularly India and China, which meet most of the increase in their coal demand with domestic supply rather than seaborne imports—the share of coal trade as a percentage of global coal consumption grows modestly to 17 percent in 2035.

Coal imports

Asia

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Asia remains the world's largest importer of coal in the IEO2011 Reference case, accounting for 70 percent of the growth in total world coal imports from 2009 to 2035. Asia's coal imports total 24 quadrillion Btu in 2035 (Table 9 and Figure 70).²⁵

Japan currently is Asia's largest coal importer (Figure 71). Although 2001 was the last year in which Japan produced a significant amount of coal from domestic resources, the country has continued to rely on coal to meet its energy requirements. Australia continues to provide about 60 percent of Japan's coal supply (both steam and metallurgical coal, on a tonnage basis), but its share falls to about 50 percent in 2035. Japan was previously a large importer of Chinese coal, receiving about 18 percent of its coal from China in 2002. In 2009, however, China's share of coal imports to Japan was about 4 percent. Seeking to diversify sources of coal supply for the long term, Japanese companies have pursued investments in coal production in other countries, including Russia and Canada [168]. Japan is the second-largest steel producer in the world, after China [169], and it continues to import coking coal for its steelmaking plants through 2035 in the Reference case projection.

Like Japan, South Korea and Taiwan import most of the coal they consume and continue to do so through 2035 in the Reference case. With planned increases in coal-fired generating capacity, South Korea (in OECD Asia) and Taiwan (in non-OECD Asia) maintain a combined 16-percent share of world imports in 2035, despite sizable increases in coal imports by other countries. The two countries together nearly doubled their steam coal imports in the last decade, to a total of about 3.2 quadrillion Btu (148 million tons), with the increase met primarily by coal from Indonesia and Australia. In 2010, South Korea exceeded its 2008 level of steel production and Taiwan nearly matched its 2008 level; as a result, demand for coking coal in the two countries returned to the levels recorded before the global economic slowdown [170].

China's coal imports total 6.7 quadrillion Btu in 2035 in the IEO2011 Reference case, as compared with an estimated 2.8 quadrillion Btu in 2009. China remains a net coal importer through 2035, surpassing Japan in 2015 as the world's largest importer of coal. Regardless of the substantial increase in coal imports, however, a preponderant share of the coal consumed in China continues to be supplied by its own coal mines throughout the projection.

China remains the largest source of uncertainty with respect to world coal trade projections, particularly with respect to its increasing reliance on imports of seaborne coal. As the world's largest coal consumer and producer, even small percentage shortfalls in China's domestic coal production can have a large impact on the world trade market as a whole. Since 2001 China has increased its coal consumption significantly every year, but because it also has increased domestic coal production aggressively, it has not needed large increases in imports in most years. In 2004, for instance, coal consumption in China increased by 9.1 quadrillion Btu, while imports rose by less than 0.2 quadrillion Btu. In 2007, China imported 1.1 quadrillion Btu of coal, and in 2008 imports actually declined to 0.8 quadrillion Btu. In 2009, however, its coal consumption increased by 8.7 quadrillion Btu, and its coal imports more than tripled.

In the long run, several factors may slow or reduce the growth in China's seaborne coal imports. For one, China already has implemented, or plans to implement, freight transportation improvements to support domestic coal production. In addition, strong growth in imports from Mongolia, which are likely to be moved overland rather than by sea, would lessen the need for seaborne coal imports. Efficiency gains at mining complexes and large expansions of domestic mine capacity, such as Inner Mongolia's plan to increase production capacity by 500 million metric tons by 2015, also could reduce the need for imports [171]. High international coal prices could encourage reliance on domestic sources of supply, and low steel prices could make high-priced imported coking coal—an input to the steelmaking process—less affordable. Finally, the use of minemouth plants in combination with transmission infrastructure to connect distant Chinese coal sources with electricity demand centers also would alleviate the need for imports.

India, like China, has been increasing its coal imports in recent years with expectations of additional demand. In 2035, India's coal imports in the Reference case are 2.6 times the 2009 level (on an energy basis), spurred by rising imports of both coking and steam coal. India's demand for coal continues to grow, but the country has had problems expanding its production of poor-quality (i.e., low energy content) domestic reserves. In addition, infrastructure issues have impeded the movement of domestic coal to markets. As a result, large coal-fired electricity plants planned for India's coastal areas are expected to be fueled with imported steam coal.

Difficulties in expanding India's coal production make the prospect of strong growth in coal imports more likely. In 2010, India's Environmental Ministry labeled many major Indian coalfields as "no go" production sources, refusing to permit mining in those areas because of the environmental sensitivity of the overlying land. [172] According to a representative from India's largest coal producer (the state-controlled Coal India, Ltd.), estimated shortfalls in India's domestic coal production could be as high as 220 million tons by 2015, up from an estimated 110 million tons in 2010 [173]. Preliminary data suggest that India's steam coal imports have doubled since 2008, to 83 million tons in 2010. For 2 years in a row, India has raised its coal import level by an incremental 22 million tons. Currently, Indonesia and South Africa together supply nearly all of India's imports of steam coal, and Australia supplies the vast majority of its coking coal imports.

India has had some success in recent years in expanding its port infrastructure to support increases in coal imports. Several new ports have been commissioned since 2008, including Krishnapatnam (with an expected capacity of at least 66 million tons in 2011) and Gangavaram (with an eventual capacity of 39 million tons and capable of handling capesize vessels) [174]. The new port of Dhamra, with capesize ship handling capability, received its first coal shipments in 2010. The private port of Mundra alone will have an ultimate capacity of 66 million tons, equivalent to about 60 percent of India's total coal imports in 2010 (based on preliminary data). An expansion of coal-handling capability at the port of Mormugao from 6 million tons to 19 million tons is expected to be completed by 2015, although environmental opposition could delay the project.

India has domestic resources of coking coal, but its quality is poor, and typically it is located at mining depths much greater than those for foreign-sourced coking coal. India's long-term plans include expansion of its steel industry to between 165 and 198 million tons of raw steel output by 2020, up from about 67 million tons in 2010 [175], with increased imports of coking coal supporting the expansion. India is the world's fourth largest producer of pig iron, and in 2010 its production total was 34 percent higher and in 2008. Some plans for new steelmaking capacity, such as ArcelorMittal's new coastal steel plant in Orissa, appear to have been delayed by land acquisition difficulties and environmental issues and thus are unlikely to add to India's demand for coking coal imports until after 2014. In the IEO2011 Reference case, India surpasses Japan's coal import levels, making it the second largest importer of coal after China. India continues to import most of its coking coal from Australia in the Reference case, with some growth in imports from Africa.

Europe, Middle East, and Africa

In the IEO2011 Reference case, total coal imports to Europe, the Middle East, and Africa recover from the 2009 dropoff in coal demand but remain at about the 2008 level through 2035 (Figure 70).²⁶ With most European countries placing greater emphasis on natural gas for power generation, coal becomes a less significant component of the fuel mix for electricity. Europe's demand for lower sulfur coal (from Eurasia and South America, for example) is tempered over time by the gradual addition of flue gas desulfurization equipment at existing coal-fired power plants.

Some European countries import more coal to compensate for their own dwindling coal production, offsetting some of the projected decline in coal imports to other European nations. For example, Germany's planned closure of its remaining hard coal mines by 2018 (which, as a result of the recent government announcement concerning the closure of the country's remaining nuclear power plants, might not occur) results in an increase in imports of coal for electricity generation [176]. Germany's coal imports level off over time, because no incremental coal-fired capacity is expected to be built. For Turkey, growth of electricity demand and steel industry output offsets some of the decline in Europe's coal use through 2035. Turkey has accounted for most of the growth in steam coal trade to the region over the past decade, with Russia supplying the bulk of the coal. Although Turkey is expected to add about 3 million metric tons of steelmaking capacity (which requires coking coal) from 2009 to 2015 [177], over time electric arc furnaces for steelmaking, which do not require coking coal, are assumed to gain market share. Italy's conversion of power plants from oil to coal, including the recently commissioned Torrevaldaliga North plant, also offsets some of the decline in Europe's coal demand in the IEO2011 Reference case. The Torrevaldaliga North plant alone could raise Italy's steam coal imports by 9 million tons per year in 2015 [178].

The Americas

In the United States, coal imports are expected to rise from current levels through 2035. With mine productivity declining in Central Appalachia and domestic demand for coal rising, imports are expected to remain competitive for coastal States in the East and South. South America (Colombia, in particular) is expected to be an important source of U.S. coal imports.

Most of Canada's imported coal comes from the United States, and Canada is the largest importer of U.S. steam coal. However, projected exports of U.S. steam coal to Canada in 2035 are substantially below historical levels. Canada's current coal imports are more than 50 percent below the peak volumes of the past decade, and they do not recover in the projection. In 2010, Units 3 and 4 of the Nanticoke Generation Station and Units 1 and 2 of the Lambton Generating Station were permanently shut down as part of Ontario's plan to shutter all coal plants. Accordingly, an additional 4 gigawatts of generating capacity fired with imported coal is assumed to be shut down by 2035 for environmental reasons, as legislated by the Provincial government.

Brazil's steelmaking capacity increases in the Reference case, taking advantage of its domestic resources of iron ore but requiring increased use of coking-grade coal that the country does not produce domestically [179]. The United States, Australia, Canada, and southern Africa have the potential to provide a portion of the coal needed to meet Brazil's import requirements. Overall, America's imports of coking coal—driven primarily by demand in Brazil—grow from about 0.5 quadrillion Btu in 2009 to 1.9 quadrillion Btu in 2035. Brazil and Chile account for most of the increase in imports of thermal coal to South America through 2035.

Coal exports

Most of the world's coal trade is in the form of steam coal, at nearly 15.2 quadrillion Btu (about 72 percent of total coal exports) in 2009. The top five exporters of steam coal in 2009 were Indonesia, Australia, South America (primarily Colombia), Eurasia (primarily Russia), and southern Africa (primarily South Africa). Although Indonesia currently is the world's largest exporter of steam coal and remains so for most years of the projection, Australia surpasses Indonesia toward the end of the projection. In terms of coking coal, Australia, the United States, and Canada rank as the three top exporters and are projected to remain the top three through 2035.

Australia is the world's leading exporter of steam and coking coal combined. About 78 percent of its coal production was exported in 2009. Over the projection, Australia dominates international coal trade as it continues to improve and expand its inland transportation and port infrastructure to expedite coal shipments to international markets. Australia remains the primary exporter of metallurgical coal to Asian markets in the IEO2011 Reference case, supplying about 67 percent of Asia's imports of coking coal in 2035, compared with about 72 percent in 2009. The reduction in Australia's share of Asia's coal imports is partly a result of the expected availability of new sources of coking coal in Africa, as well as growth in coking coal demand for India, whose geographic location enables it to receive supplies from a number of countries. Although Australia dominates coking coal exports, its exports did not increase at all from 2007 to 2009. However, preliminary data suggest that 2010 will show substantial increases (at least 20 million tons) in Australia's exports of coking coal.

Some of Australia's numerous infrastructure and capacity expansions have come on line in recent years or will soon become operational. Expansion of Queensland's Dalrymple Bay port from a capacity of about 75 million tons to 94 million tons was completed in 2009 [180]. The Newcastle Third Port Project, completed in 2010, added 33 million tons of additional capacity, and a new coal terminal at Kooragang Island in New South Wales will add some 66 million tons of capacity, about one-half of which is expected to be operational by 2011 [181]. Several mine expansions could add close to 100 million tons of coal production capacity by 2015, equivalent to nearly one-quarter of Australia's coal production in 2008. For coking coal alone, the Australian Bureau of Agricultural and Resources Economics and Sciences estimates that about 68 million tons of new mine capacity will be added by 2015 [182]. The primary choke point in Australia's supply chain appears to be in rail movement from mine to port, which may continue to present challenges in the future.

Indonesia, with its relatively low-cost surface mines, also has demonstrated its potential for significant growth in coal exports, with export levels approaching an estimated 330 million tons in 2010 from about 66 million tons in 2000. The Indonesian company PT Bumi Resources Tbk, the largest Indonesian coal producer, plans to increase its production to 122 million tons by 2012 from 69 million tons in 2009. Another Indonesian company, PT Adaro Energy Tbk, also plans to expand coal production by about 44 million tons from 2009 to 2014, including an expansion of its Kelanis Terminal to a planned overall annual capacity of 33 million tons [183].

Over the long term, areas of uncertainty for Indonesia's coal exports include the adequacy of its internal transportation infrastructure; the continued development of new mines; environmental concerns; the rate of growth in its domestic coal consumption; and whether domestic coal demand is given preference over coal exports. In early 2011, Indonesian government officials once again stated the government's intention to restrict coal exports under a proposed regulation that, as of 2014, would restrict exports to coal with high thermal content. Some analysts suggest that the new restriction would effectively eliminate 50 to 60 percent of Indonesia's coal exports [184]. In the Reference case, Indonesia simultaneously meets its growing domestic demand for coal and increases its coal exports, although at a slower pace than in the recent past.

South Africa's coal exports have remained flat at about 72 million tons over the past few years, primarily as a result of domestic infrastructure constraints. However, coal mining is expected to continue playing an important role in South Africa's economy. Examples of additional mine capacity projects include the Douglas Middelburg Optimisation project (11 million tons of thermal coal capacity) and Optimum Coal's Boshmannpoort and Kwangaa mines (an additional 6 million tons) [185]. Richards Bay Coal Terminal, despite the completion of its expansion to an annual capacity of 100 million tons, has been unable to reach its full potential because of incompatible rail infrastructure capacity at the port. Export levels will continue to be below 100 million tons in the short run, because rail capacity into the port is limited to about 67 million tons. Additional proposed capacity investments supporting South African coal exports include an incremental 10 million tons each at Richards Bay terminal and the Matola terminal at Maputo port in neighboring Mozambique [186].

Mozambique and Botswana play an emerging role in world coal trade in the IEO2011 Reference case. India's Tata Steel, Brazil's Companhia Vale do Rio Doce (Vale or CVRD), and Australia's Riversdale Mining all have financial stakes in mine operations in the Moatize basin of Mozambique [187]. The Moatize project ultimately will produce 9 to 14 million tons of marketable coking coal and 3 to 5 million tons of thermal coal. Initial coal exports from Moatize are expected in 2011. A rail link between Moatize coal basin and the port of Beira (Sena Railway) is being updated and should be capable of moving about 7 million tons in 2011. An expansion of the port of Beira in Mozambique to handle an annual capacity of about 20 million tons is also being explored, as well as a new railway to the northern Mozambique port of Necala [188]. Landlocked Botswana is also interested in expanding coal mining and in constructing a railroad to connect inland coal mines to an Atlantic port on the Namibian coast.

In Russia, rail bottlenecks from coal basins to port facilities appear to be the primary limitation on efforts to expand exports. Nevertheless, Russia has managed to triple its seaborne coal exports from 2000 levels to a total of 76 million tons in 2008, and in 2010 Russia was the largest exporter of seaborne coal to Europe. The Russian mining and steel production company Mechel has begun operations at Russia's Elga coking coal deposit and ultimately plans to produce 27 to 30 million tons per year [189]. Russia's coal exports to Asia will be facilitated by capacity expansion at the new Pacific port of Muchka, where SUEK (Siberia's coal energy company) has built about 13 million tons of annual export capacity. In addition, Mechel has plans for about 28 million tons of export capacity at the new Muchka Bay Terminal 2 [190]. Construction of a new terminal at Lavna on the Barents Sea to serve European and North American markets is scheduled to begin in 2012, and the terminal is expected to be operational by the end of 2014, with an initial export capacity of 7 million tons and long-term potential for 39 million tons [191]. As in 2009, in 2035 Eurasia (primarily Russia) supplies less than 10 percent of the seaborne coal traded internationally.

U.S. coal exports in the IEO2011 Reference case rise from about 1.5 quadrillion Btu in 2009 to 2.7 quadrillion Btu in 2035, buoyed by the overall increase in world coal demand. Because U.S. coal export facilities are located primarily in the east, the geographic distance to transport coal between U.S. markets and Asian markets—where much of the growth in coal demand is centered—currently places the United States at a distinct disadvantage relative to other countries with large coal reserves. The comparatively high transportation costs associated with shipping coal from the eastern United States to Asian markets historically has meant that U.S. coal exports cannot compete economically in that region. According to preliminary data, however, in 2010 the United States saw growth in its coking coal exports to Asia at levels unseen in the recent past, estimated at 13 million tons in the third quarter of 2010, compared with 4 million tons in the third quarter of 2009.

One obstacle to increasing U.S. coal exports is the lack of a large coal export terminal on the West Coast, which is closer to both Asian markets and the top U.S. steam coal-producing region in the Powder River basin. Although two prospective western port projects in Longview and Cherry Point, Washington, are being explored, environmental protests and the extensive permitting process could impede or delay those investments. Alternatively, Powder River coal producer Arch Coal has secured a deal that will allow it to export coal (about 2 million tons in the first year) through Ridley Terminal in British Colombia through 2015. On the U.S. Gulf Coast, Kinder Morgan is planning to expand its International Marine Terminal in Louisiana by 7 million tons, with an expected completion date of 2012 [192].

In the short term, low bulk rates and the expansion of the Panama Canal may improve U.S. competitiveness in coal export markets. In addition, sustained high international demand and prices and supply constraints in other coal-exporting countries support expectations of larger U.S. export volumes. On the other hand, new supplies of coal (including additional supplies of coal from Mongolia, Africa, and Australia) and the resolution of transportation bottlenecks in other supply countries could provide substantial increases in international coal supply and, as a result, reduce international coal prices. Thus, in the IEO2011 Reference case, the United States remains a marginal supplier in world coal trade despite achieving higher export levels than in the early 2000s. Brazil remains the largest importer of U.S. coking coal, and Europe remains the largest destination for U.S. coal exports overall.

Canada is an exporter of coking coal, typically supplying about 10 percent of international seaborne trade in coking coal. Despite strong international demand, Canada's exports have not grown in recent years. Some Canadian companies are positioning themselves to compete more effectively internationally. Canadian coal producer Western Coal has improved productivity, reportedly lowering costs at many of its mines, and has also poised itself to begin shipping coal in larger capesize ships in order to bring its per-unit costs down to a more competitive level. In 2011, Tech Resources secured long-term coal export capacity at Westshore Terminals [193]. On the transportation infrastructure side, Ridley Terminal in British Colombia is proposing to double its coal capacity to 24 million short tons [194]. In the Reference case, Canada holds 10 percent of the market for seaborne coking coal trade in 2035.

South America remains the world's third largest coal-exporting region in 2035, primarily as a result of continued increases in exports from Colombia. The government of Colombia expects the nation's coal production to reach 160 million tons by 2020, up from about 87 million tons in 2009 [195]. The expansion will require sizable investments in mine capacity, rail infrastructure, and port capacity. Drummond Coal is now producing from its El Descanso mine in Colombia, and it expects ultimately to attain export production of 40 million tons per year through 2032 [196]. The Cerrejon mine, jointly owned by Anglo American and BHP Billiton, also plans to boost its production by 25 percent, to 40 million tons by 2014, and eventually to expand annual production to 60 million metric tons [197]. In addition, the El Hatillo mine is planning to increase production from 1.8 million tons to about 5 million tons by 2012 [198].

Increasing coal transportation infrastructure is also a concern for Colombia. An expanded river-to-port terminal at Barranquilla, Colombia, with an annual capacity of about 39 million tons, is planned [199]. There is a proposal to build a tunnel that would expedite coal transportation via truck to Colombia's Pacific Ocean port of Buenaventura when it is completed in 2013. The Carare railway project, which was intended to facilitate coal transport from central Colombia to the Caribbean coast, may be reinitiated as it has recently attracted foreign investment interest [200]. Other expansion projects on Colombia's Caribbean coast appear to be on track, including a coal terminal at the port of Cienaga, Puerto Nuevo, ultimately handling 66 million tons per year, roughly one-half of which would be available by 2013 [201]. Brazil's MPX is planning a coal export terminal, Dibulla, along Colombia's Atlantic seaboard, with a capacity of 20 million tons per year and capable of taking larger capesize ships [202].

Many of Colombia's port expansion projects lie on the Caribbean near the eastward opening of the Panama Canal. Begun in 2008 and slated for completion by 2015, the Panama Canal expansion should enhance opportunities for coal exports from both the United States and South America traveling westward to Asian markets. The so-called "post-panamax" vessels, which are capable of holding about 20 percent more than current panamax vessels, will be able to transit the Canal. Because many ports may not be able to accommodate the larger vessels without dredging, however, some export potential could be limited.

World coal reserves

Total recoverable reserves of coal around the world are estimated at 948 billion tons—reflecting a current reserves-to-production ratio of 126 years (Table 10).²⁷ Historically, estimates of world recoverable coal reserves, although relatively stable, have declined gradually from 1,145 billion tons in 1991 to 909 billion tons in 2008. In 2009, however, the estimate increased to 948 billion tons [203]. To a large extent, the upward revision of 39 billion tons for 2009 reflects a new assessment of Germany's lignite reserves. Although the overall decline in estimated reserves from 1991 to 2009 is sizable, the large reserves-to-production ratio for world coal indicates that sufficient coal will be available to meet demand well into the future. Further, because recoverable reserves are a subset of total coal resources, recoverable reserve estimates for a number of regions with large coal resource bases—notably, China and the United States—could increase substantially as coal mining technology improves and additional geological assessments of the coal resource base are completed.

Although coal deposits are widely distributed, 79 percent of the world's recoverable reserves are located in five regions: the United States (27 percent), Russia (18 percent), China (13 percent), non-OECD Europe and Eurasia outside of Russia (11 percent), and Australia/New Zealand (9 percent). In 2008, the five regions together produced 5.4 billion tons (106.1 quadrillion Btu) of coal, representing 72 percent of total world coal production by tonnage and 75 percent on a Btu basis [204]. By rank, anthracite and bituminous coal account for 47 percent of the world's estimated recoverable coal reserves on a tonnage basis, subbituminous coal accounts for 30 percent, and lignite accounts for 23 percent.

Quality and geological characteristics of coal deposits are important parameters for coal reserves. Coal is a heterogeneous source of energy, with quality (for example, characteristics such as heat, sulfur, and ash content) varying significantly by region and even within individual coal seams. At the top end of the quality spectrum are premium-grade bituminous coals, or coking coals, used to manufacture coke for the steelmaking process. Coking coals produced in the United States have an estimated heat content of 26.3 million Btu per ton and relatively low sulfur content of approximately 0.9 percent by weight [205]. At the other end of the spectrum are reserves of low-Btu lignite. On a Btu basis, lignite reserves show considerable variation. Estimates published by the International Energy Agency for 2008 indicate that the average heat content of lignite in major producing countries varies from a low of 5.9 million Btu per ton in Greece to a high of 13.1 million Btu per ton in Canada [206].