It has been an unpredictable year for the coal industry. Devastating floods hit the Australian coal industry at the beginning of the year, squeezing supply and pushing up short-term prices. It was in Japan, however, that events of more long-term significance were played out. The tsunami and subsequent nuclear meltdown in Japan stopped the nuclear renaissance in its tracks. Although most countries with nuclear programmes have since reaffirmed their commitment to them (with the notable exception of Germany), the IEA recognises that the disaster “has raised questions about the future role of nuclear power”. Responding to this, the latest World Energy Outlook includes a Low Nuclear Case that sees nuclear capacity fall by 15% by 2035, resulting in a rise in demand for coal by 290 tce above the base scenario.
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In the political sphere, the campaign against coal continues. Although prospects for legislation to limit carbon emissions in the US are dead, the EPA continues to bring regulatory pressure on both the coal mining and coal-fired power industries. Meanwhile, Australia became one of the first large industrial economies outside of Europe to pass legislation for a carbon tax in a move that the Australian Coal Association called a “handicap” on the country’s coal industry. Further legislative pain is expected as the controversial tax on mining companies’ profits passed the Australian parliament’s lower house this month; it is expected to pass in the Senate next year.
It is the economy, however, that presents the greatest challenge ahead. The European sovereign debt crisis could yet cause the break up of the euro and plunge the world into Act 2 of the Great Financial Crisis. So far, eurozone leaders have proved unable or unwilling – or both – to take sufficient action to solve the crisis. But with Italy now engulfed and even France’s credit rated threatened, surely events cannot be allowed to further spiral out of control?
With all of this said, however, coal remains in a relatively strong position. Growth in many of the world’s fastest growing economies is still powered by coal and this will continue. The IEA predicts coal use to increase by 65% by 2035, although its overall share of the global energy mix will fall. China, the world’s largest coal producer and user, will consolidate its position as the world’s largest energy consumer by 2035, even though its per capita usage will still be less than half of that in the US. And even in climate-conscious Europe coal could make something of a comeback: in Germany, for example, the phase out of nuclear power should increase its demand for flexible coal- and gas-fired power plants to provide baseload support for renewables.
2011 has thus been a mixed bag for the coal industry, although the mood is generally positive. However, the outlook for next year could be more unpredictable still and hinges – as always – on the economy. Ironically, after all of the talk of the emerging economies, it is events in the Old World that will set the direction for 2012. Let us hope Europe’s leaders manage to find a permanent solution to their woes: that would be a present we could all celebrate.