U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
International Energy Outlook 2014
Release Date: September 9, 2014 | Next Release Date: September 2015 | Report Number: DOE/EIA-0484(2014)
In the IEO2013 Reference case, which does not include prospective greenhouse gas reduction policies, coal remains the second largest energy source worldwide. World coal consumption rises at an average rate of 1.3 percent per year, from 147 quadrillion Btu in 2010 to 180 quadrillion Btu in 2020 and 220 quadrillion Btu in 2040 (Figure 70). The near-term increase reflects significant increases in coal consumption by China, India, and other non-OECD countries. In the longer term, growth of coal consumption decelerates as policies and regulations encourage the use of cleaner energy sources, natural gas becomes more economically competitive as a result of shale gas development, and growth of industrial use of coal slows largely as a result of China's industrial activities. Consumption is dominated by China (47 percent), the United States (14 percent), and India (9 percent), with those three countries accounting for 70 percent of total world coal consumption in 2010. Their share of world coal use increases to 75 percent in 2040 in the Reference case (Figure 71).
In the non-OECD countries, coal consumption increases at an average rate of 1.8 percent per year through 2040, more than compensating for the 0.2-percent average annual rate of decline in OECD coal use. As a result, the share of world coal consumption for non-OECD countries, led by China and India, increases from 70 percent in 2010 to 81 percent in 2040. China alone contributed 88 percent of the growth in world coal consumption from 2001 to 2009, which led to a significant increase in coal's share of world total energy consumption, from 24 percent in 2001 to 29 percent in 2009. China's share of global coal consumption increases from 47 percent in 2010 to 57 percent by 2025, followed by a decline to 55 percent in 2040. The sustained rapid expansion of coal use in India allows it to surpass the United States as the second-largest coal-consuming country after 2030.
Throughout the projection period, coal contributes more than one-fourth of the world's total primary energy supply and more than one-third of the fuel used for electricity generation. The share of coal in total world energy consumption remains relatively flat in the projection at 28 percent. Electricity generators accounted for 60 percent of total coal consumption in 2010, and industrial facilities accounted for 36 percent,27, 28 with the remainder going primarily to the residential and commercial sectors. The combined share for the power and industrial sectors increases slightly over the projection period.
Despite the significant increase in coal use by non-OECD countries, the environmental impacts of mining and burning coal have driven policies and investment decisions in favor of cleaner and increasingly competitive energy sources—natural gas in particular—in many key coal-consuming regions. Worldwide, all other energy sources, except liquids, grow faster than coal. In the electric power sector, the coal-fired share of world electricity generation declines from 40 percent in 2010 to 36 percent in 2040, whereas the combined share of renewable energy, natural gas, and nuclear power resources increases from 56 percent to 63 percent. Coal's share of fuel consumption for electricity generation declines from 43 percent in 2010 to 37 percent in 2040 (Figure 72).
World coal production parallels demand, increasing from 8.0 billion tons in 2010 to 11.5 billion tons in 204029 and reflecting the same expansion in the near term followed by much slower growth in later years. Global coal production is concentrated among four countries—China, United States, India, and Australia—and in the other countries of non-OECD Asia (mainly Indonesia30) (Figure 73). Their combined share of total world coal production increases in the IEO2013 projections from 78 percent in 2010 to 81 percent in 2040. China alone accounts for 44 percent of global coal production in 2010 and 52 percent, at its peak share, in 2030. Growth in coal production is significantly different from region to region, ranging from strong growth in China to limited growth in the United States, to steady decline in OECD Europe.
International coal trade grows by 65 percent in the Reference case, from 24.0 quadrillion Btu in 2010 to 39.6 quadrillion Btu in 2040. The share of total world coal consumption accounted for by internationally traded coal remains near the 2010 level of 16 percent, increasing slightly to 17 percent in 2020 and 18 percent in 2040. The relatively stable share primarily reflects the ability of the world's largest coal consumers—China, the United States, and India—to satisfy most of their future coal demand with domestic production.
World coal consumption
OECD coal consumption
The OECD's role in world coal consumption diminishes as fuel market fundamentals and environmental regulations shift in favor of natural gas and renewables, particularly in the OECD Americas and OECD Europe regions. OECD coal consumption declines from 45 quadrillion Btu in 2010 to 41 quadrillion Btu in 2016, recovers to 42 quadrillion Btu in 2020, and remains slightly above that level through 2040. OECD Europe and the United States, which together consume almost three-quarters of the OECD total, lead the trend toward lower consumption. Coal consumption in most other OECD subregions or countries, except for the Mexico/Chile region and South Korea, also trends downward (Figure 74). The decline in OECD coal consumption—at an average rate of 0.2 percent per year— causes the coal share of the region's total primary energy consumption to fall from 19 percent in 2010 to 15 percent in 2040. In comparison, the share of OECD energy supply from renewable energy, including hydropower, increases from 10 percent in 2010 to 15 percent in 2040.
Coal consumption in the United States remains below the 2010 level through 2040 due to the strong growth in shale gas production and tightening environmental regulations, with the share of coal in total U.S. electricity generation (including electricity generated at plants in the industrial and commercial sectors) declining from 45 percent in 2010 to 35 percent in 2040. In 2010, the United States consumed 20.8 quadrillion Btu of coal, representing 92 percent of total coal use in the OECD Americas region and 46 percent of the OECD total. U.S. coal demand declined to 17.8 quadrillion Btu in 2012 as a result of weak demand for power and displacement of coal-fired generation in response to lower natural gas prices and persistently rising delivered prices for coal. The electric power sector dominates U.S. coal use, accounting for about 90 percent of total U.S. coal consumption throughout the projection.
Requirements to control emissions of nitrogen oxides, sulfur dioxide, and air toxics add to the cost of operating coal-fired power plants after 2015 and contribute to significant retirements of coal-fired generating capacity in the United States. Consequently, the U.S. coal-fired generating fleet shrinks from 317 gigawatts in 2010 to 278 gigawatts in 2040, with most of the capacity loss occurring before 2016. The overall utilization rate of the remaining coal-fired generating fleet improves steadily after 2016, as electricity demand grows and natural gas prices rise. However, because of high costs, few new additions of coal-fired generating capacity or coal-to-liquids capacity are installed. As a result, coal consumption increases only gradually, from 17.2 quadrillion Btu in 2016 to 20.4 quadrillion Btu in 2040.
Coal plays a relatively minor role in Canada's energy supply system, and it is further diminished in the long run. Driven by Canadian federal and provincial government efforts to reduce greenhouse gases, coal consumption declines by 8 percent, or 0.1 quadrillion Btu, between 2010 and 2040, and the coal share of total primary energy supply declines from 8 percent in 2010 to 6 percent in 2040. In 2010, 83 percent of the coal consumed in Canada was used to generate electricity, with most of the rest going to industrial plants. Government agencies have promulgated regulations and issued long-term plans to move away from coal-fired generation in an effort to limit greenhouse gas emissions. The Canadian federal government will enforce a strict greenhouse gas emissions standard for all coal-fired units beginning on July 1, 2015, which will encourage utilities to retire coal-fired generators . The Ontario provincial government plans to phase out coal-fired generation in the province by the end of 2014 . At the end of 2012, the province had three coal-fired power plants totaling about 3.3 gigawatts of remaining coal capacity. The provincial government-owned Ontario Power Generation Inc., plans to retire two of the plants, totaling nearly 3 gigawatts, by the end of 2013 and to retire the last remaining plant in 2014 . With the coal phaseout in Ontario, the electric power sector share of Canada's total coal consumption falls to 73 percent in 2040, and the coal share of total electricity generation declines from 14 percent in 2010 to 7 percent in 2040.
Coal consumption in Mexico/Chile was relatively minor in 2010, at 0.6 quadrillion Btu, but increases by 0.2 quadrillion Btu from 2010 to 2040 as a result of rapid economic growth. Most of the increase comes from coking coal demand in the industrial sector, with the industrial share of total coal consumption growing from 19 percent in 2010 to 34 percent in 2040. There is only minimal growth in the use of steam coal in electricity generation through 2040, due to a change in Mexico's strategies to favor the development of natural gas and renewable energy resources. In recent years, an urgent need for more electricity generation and constraints on natural gas supply in Chile have forced the construction of a few coal-fired power plants, including the 470-megawatt Angamos Power Plant, which adopted battery storage and seawater cooling tower technologies . However, environmental concerns and local opposition have resulted in delays, cancellations, and court rejections for other coal-fired power projects , and the country is shifting its focus to expansion of natural gas supplies and solar power . In the IEO2013 Reference case, the coal share of total electricity generation in the two countries decreases from 15 percent in 2010 to 6 percent in 2040.
Total coal consumption in the countries of OECD Europe declines in the Reference case from 12.2 quadrillion Btu in 2010 (27 percent of the OECD total) to 10.7 quadrillion Btu in 2040 (25 percent of the worldwide total). Although all nations in the region consume coal, 65 percent of OECD Europe's 2010 total coal consumption was concentrated in Germany, Poland, Turkey, and the United Kingdom, with Germany alone consuming 26 percent of the regional total. The electric power sector accounted for 67 percent of the region's total coal consumption in 2010, and most of the rest was consumed in the industrial sector.
Electric power demand for coal declines steadily in the region and drives the downward trend in the region's overall coal consumption. The Industrial Emissions Directive (IED), agreed to by the European Council of Ministers and the European Parliament in 2010, as well as regional climate change policy goals, drive the decline. The IED requires the use of best available technology for reduction of sulfur dioxide and nitrogen oxides, among other pollutants, beginning in 2016, and is likely to trigger retirements of some coal-fired power plants, especially in the four leading coal-consuming countries . The scale of the retirements outweighs the scale of new coal-fired capacity additions in Germany, Turkey, Poland, the Netherlands, and Italy, where new coal-fired capacity is needed to fill the supply gaps left by a nuclear power phaseout (in Germany), to replace less competitive power plants (such as oil-tocoal conversions and replacements in Italy), and to supply more power to meet demand growth (especially in Turkey) . Total installed coal-fired generating capacity in OECD Europe declines from 204 gigawatts in 2010 to 169 gigawatts in 2040, and coal's share of total electricity generation declines from 24 percent in 2010 to 15 percent in 2040.
Coal consumption in the OECD Europe industrial sector remains largely flat. The effects of energy efficiency measures in OECD European countries, such as moving away from less efficient processes like open-hearth steelmaking, are more than offset by the effect of the increase in industrial output. For example, the gross output of OECD Europe's iron and steel plants increases by 26 percent from 2010 to 2040.
The outlook for coal consumption in the OECD Asia region in the Reference case is relatively flat, as a net result of two divergent trends: declines in coal use in Japan, Australia, and New Zealand, totaling 0.9 quadrillion Btu, and an increase in coal use in South Korea, totaling 0.5 quadrillion Btu, from 2010 to 2040.
Japan is the region's largest coal consumer. Most of its coal is consumed in the electric power and industrial sectors, which share coal use almost equally. Although the nuclear power plant shutdowns after the Fukushima disaster necessitate an increase in coal use in the near term, a shift toward renewable energy and natural gas for electricity generation weaken electric power sector demand for coal in the long run. Japan is currently the world's second-largest steel producer, but its steel production declines after 2020 as its population and domestic demand both decline.
In Australia and New Zealand, 88 percent of the coal consumed in 2010 was used to generate electricity. Australia consumes 97 percent of the coal in the region. The introduction of a carbon price in Australia on July 1, 2012, encourages low-carbon energy use, which leads to a steady decline in the coal share of electricity generation in the region , from 63 percent in 2010 to 39 percent in 2040.
South Korea's coal consumption increases at a modest average rate of 0.5 percent per year through 2040, primarily for steel production in the industrial sector. In 2010, steel production accounted for 34 percent of South Korea's total coal consumption. Coal demand in the electric power sector, which accounted for 64 percent of total coal consumption in 2010, is roughly unchanged until 2030, due to the country's pre-Fukushima focus on nuclear expansion in the electric power sector .31 The lack of growth in most of the projection period leads to a decline in coal's share of total electricity generation, from 44 percent in 2010 to 27 percent in 2040.
Non-OECD coal consumption
In contrast to declines in the OECD economies, coal consumption grows significantly and rapidly in the non-OECD regions, particularly non-OECD Asia. Total non-OECD coal consumption increases by 1.8 percent per year on average, to 177 quadrillion Btu in 2040—72 percent higher than the 103 quadrillion Btu in 2010 (Figure 75). Growth in coal-fired electricity generation accounts for nearly two-thirds of the increase. Coal maintains its leading role in the non-OECD energy system and provides for more than one-third of the region's total energy demand almost throughout the projection.
Non-OECD Asia, especially China, dictates the trend in world coal consumption throughout the projection. Providing 56 percent of non-OECD Asia's energy demand in 2010, coal plays a critical role in fueling strong economic growth and meeting energy demand in the region. Coal use in the non-OECD Asia region increases by an average of 1.9 percent per year, from 88 quadrillion Btu in 2010 to 157 quadrillion Btu in 2040, and accounts for 92 percent of the growth in total non-OECD coal consumption over the period, with China and India accounting for 70 percent and 13 percent of the total increase, respectively.
China is the leading consumer of coal in the world, using more than three times as much coal in 2010 as the world's second-largest consumer, the United States. In 2010, China's electricity-sector coal use alone was 67-percent higher than total coal consumption in the United States, and China's industrial-sector coal use alone was about 50-percent higher than the U.S. total (Figure 76). Over time, the gap grows even wider because of China's rapid economic growth and the relatively low cost of coal that is sustained by the country's vast coal reserves and improving rail transportation infrastructure. In the Reference case, coal consumption in China grows by an average of 1.9 percent per year, from 69 quadrillion Btu in 2010 to 121 quadrillion Btu in 2040. The pace of growth slows gradually and coal consumption eventually begins to decline near the end of the projection period. At the peak around 2035, China consumes 123 quadrillion Btu of coal, or 57 percent of the world total.
Demand for coal in the electric power and industrial sectors drives all the growth in China's coal consumption. With the country's GDP growth rate averaging 5.7 percent per year from 2010 through 2040, its electricity demand grows by 3.7 percent per year. The gross output of China's iron and steel industry more than doubles from 2010 to 2030 before beginning to decline, and its other industrial gross output more than quadruples over the 2010-2040 projection period. Coal-fired power capacity expands by almost 530 gigawatts from 2010 to 2040, with net capacity additions averaging nearly 18 gigawatts per year, as compared with 59 gigawatts per year from 2005 to 2010. Coal consumption for electricity generation increases by an average of 2.3 percent per year, from 35 quadrillion Btu in 2010 to 69 quadrillion Btu in 2040. In the industrial sector, coal is used to produce steel and pig iron,32 heat for industrial processes, and cement and coke for exports. It is also used for methanol and ammonia production, encouraged by government policy. Total coal consumption in the country's industrial sector increases from 31 quadrillion Btu in 2010 to 53 quadrillion Btu in about 2030 before falling to 49 quadrillion Btu in 2040.
China's coal consumption is generally shifting from the industrial sector to the electric power sector along with industry electrification and the government's effort to encourage structural change in the economy toward less energy-intensive industries. Overall, nearly two-thirds of the growth in China's coal consumption comes from the electric power sector and more than one-third from the industrial sector. As a result, the electric power sector share of total coal consumption grows from 50 percent in 2010 to 57 percent in 2040, while the industrial share declines from 45 percent to 41 percent.
Central government policies are expected to mitigate the growth of China's coal consumption in the long term through efficiency improvements and a gradual shift away from coal in the energy mix. Strong policy supports and mandates, as well as economic incentives for cutting fuel costs, are expected to continue to improve the efficiency of coal use. Energy intensity, efficiency, and emission control mandates and policy goals in the central government's five-year plans have led the power, cement, and iron and steel industries to innovate and cut coal consumption per unit of output . Those efforts are expected to continue, leading to higher efficiencies of coal conversion. In particular, coal use for electricity generation becomes more efficient as China continues to modernize its fleet of coal-fired power plants. The modernization involves retirements of less efficient coal-fired plants, as evidenced by the closing of 80 gigawatts of small coal plants between 2005 and 2010, as well as the adoption of advanced coal technologies, such as supercritical and ultra-supercritical pulverized coal-fired generation in new capacity builds. The central government's current energy policy also is expected to expand nuclear power capacity and, in the long run, natural gas-fired capacity (supported by increasing imports and the development of domestic shale gas resources) as well as hydropower and other renewable capacity . As a result, the coal share of China's total energy consumption for electricity generation declines from 79 percent in 2010 to 62 percent in 2040 (Figure 77).
India, the world's third-largest coal consumer in 2010, surpasses the United States as the second-largest coal consumer over the next two decades. The growth of India's coal consumption, from 12.6 quadrillion Btu in 2010 to 22.4 quadrillion Btu in 2040, is led by the electric power sector, which accounted for 65 percent of its coal consumption in 2010. India's rapidly growing population and an average GDP growth rate of 6.1 percent per year through 2040 lead to electricity demand growth of 3.8 percent per year in the IEO2013 Reference case, which is higher than in any other IEO2013 region. India's population surpasses China's after 2020, with an expanding middle class that results in the greater use of electricity-consuming appliances. Coal fueled 68 percent of Indiaâ€™s total electricity generation in 2010, and as the country strives to provide enough electricity to meet growing demand, coal-fired generation grows by 3.1 percent per year, even as generation totals from both nuclear and renewable energy (including hydropower) grow more rapidly than in any other IEO2013 region. From 2010 to 2040, India's net coal-fired electricity generation grows by a total of 910 terawatthours, more than doubling from the 2010 total. Consequently, its coal consumption for electricity generation nearly doubles, from 8.2 quadrillion Btu in 2010 to 15.6 quadrillion Btu in 2040.
How effectively the Indian government can expedite regulatory procedures to help domestic mining and transportation infrastructure catch up with demand and to provide incentives for investment in new coal-fired power capacity will affect the growth of coal consumption in the electric power sector. In the past several years, power capacity expansion and coal consumption targets set by the government in its 11th five-year plan have been missed repeatedly. Low revenues and poor profit margins have resulted from power thefts and from misalignment between coal prices and power tariffs that have discouraged investments in additional capacity. In 2011, insufficient domestic coal production forced power producers to purchase nearly 20 percent of their coal from overseas, even as regulated power tariffs constrained the quality and amounts of imported coal that power producers could afford. Coal shortages caused by difficulties in securing supply at affordable costs forced some power producers to curtail operations, which contributed to the summer 2012 power outage in India. The outage affected 680 million people and was the world's worst power outage ever in terms of population .
In 2010, 32 percent of India's total coal consumption was in the industrial sector, for the production of iron and steel, cement, bricks, and other materials. In 2011, India was the world's fourth-largest steel producer, fifth-largest pig iron producer, and secondlargest cement producer. The government is planning to expand the nation's annual steel production capacity to 304 million tons by 2020, compared with 78 million tons in 2011, and its annual cement production capacity to 606 million tons by 2020, compared with about 330 million tons of capacity and 243 million tons of cement production in 2011 . To achieve those growth targets, industries must overcome a range of challenges that have delayed regulatory approval of several large projects in recent years. A trend of long-term growth in India's steel and cement industries is essential to support its GDP growth. In the IEO2013 Reference case, coal consumption in India's industrial sector continues to grow through 2035, after which it levels off with the stabilization of iron and steel production and energy efficiency improvements in the industrial sector.
Coal consumption in the other nations of non-OECD Asia grows by an average of 2.4 percent per year in the Reference case, from
6.4 quadrillion Btu in 2010 to 13.0 quadrillion Btu in 2040. The power and industrial sectors each accounted for 49 percent of
the region's total coal consumption in 2010. Indonesia, Taiwan, Malaysia, Thailand, and Vietnam were the major contributors to
coal consumption growth in the other non-OECD Asia countries over the past decade, with Malaysia's coal demand growing at
the fastest pace . Expansion of coal-fired generating capacity has led to growth of coal demand in the other non-OECD Asia
countries in recent years, with multiple coal-fired power plants of 1 gigawatt capacity or more entering commercial service, under
construction, or in advanced development stages. Most of the large-scale power projects are developed in Malaysia, Indonesia,
and Vietnam, where the governments encourage foreign and private investment as well as involvement of foreign developers
and equipment and service providers. In the longer term, such open-door policies are likely to continue facilitating the growth of
coal-fired power capacity and coal demand in the other non-OECD Asia countries. Demand for coal in their industrial sectors also
continues to grow in the Reference case, to meet both domestic and overseas demand for industrial sector output.
Non-OECD Europe and Eurasia
Coal accounted for 19 percent of the total primary energy supply in 2010 in non-OECD Europe and Eurasia, where natural gas use is more prevalent than other fuels. In absolute terms, coal consumption increases modestly from 9 quadrillion Btu in 2010 to 11 quadrillion Btu in 2040 in the IEO2013 Reference case, but its share of total energy consumption falls to 16 percent in 2040. Most of the region's coal consumption and its future growth are concentrated in Russia, Kazakhstan, and the Ukraine, which together accounted for 84 percent of the 2010 total, with Russia alone accounting for 52 percent. Given the region's geographic features, direct access to seaborne markets is limited, and coal is purchased primarily from domestic production or overland imports, typically via long-distance transport, which adds significantly to the cost.
In Russia, the coal share of total primary energy supply declines from 16 percent in 2010 to 14 percent in 2040. The power and the industrial sectors are responsible for 89 percent of the country's coal consumption, which was split almost evenly between the two sectors in 2010. Coal demand in the power and industrial sectors grows on average by 0.9 percent per year and 0.5 percent per year, respectively, from 2010 to 2040. Coal use in the residential and commercial sectors, primarily for space heating and water heating, accounted for the remaining 11 percent of Russia's coal consumption in 2010—more than in any other IEO2013 region. That share declines to 6 percent of total coal consumption in 2040, as the sector transitions to cleaner and more efficient energy sources for heating, such as electricity and natural gas.
Coal plays a relatively minor role in Russia's electric power sector, providing only 16 percent of total electricity generation in 2010, compared with 50 percent for natural gas. In January 2012, the government adopted a coal strategy that calls for a total of $120 billion of private and public investment in the coal industry and includes plans to expand coal use in the electric power sector . The main goal of the strategy is to increase exports, especially to Asia. The success of the strategy will depend on the future cost of long-haul inland transportation. In any event, the diversification-oriented policy is likely to spur some expansion of Russia's coal-fired generating capacity and encourage higher rates of growth in coal consumption compared with the rest of the non-OECD Europe and Eurasia region, where coal fueled 34 percent of total electricity generation in 2010. However, with natural gas supplies in the other countries of the region both abundant and less expensive than coal, their total use of coal for electricity generation grows by only 0.4 percent per year on average from 2010 to 2040 in the Reference case.
Total coal consumption in the industrial sector of non-OECD Europe and Eurasia grows by 32 percent from 2010 to 2040 in the Reference case, as long-term economic growth leads to more coal use. The high energy intensity of GDP in the region, especially in Russia, and the current inefficiency of many industrial processes, such as open-hearth steelmaking, suggest the potential for energy savings that will tend to moderate coal consumption in the long term. For example, countries such as Russia and Kazakhstan have been actively engaged in various energy efficiency initiatives, including passing comprehensive energy efficiency policies and collaborating with the United States in information sharing and the development and upgrading of domestic programs [, ].
Coal use accounts for less than one-quarter of Africa's total primary energy supply throughout the projection, despite increasing from 4.4 quadrillion Btu in 2010 to 5.2 quadrillion Btu in 2020 and 7.5 quadrillion Btu in 2040. Most of the increase in the region's coal demand is for use in the electric power and industrial sectors.
The continent's coal consumption is highly concentrated in South Africa, where coal is the most widely used fuel. In 2010, South Africa accounted for 93 percent of the continent's total coal consumption, providing 75 percent of South Africa's primary energy supply . About 70 percent of the coal consumed in South Africa is used for electricity generation and about 20 percent for production of coal-based synthetic fuels . The state-owned power company, Eskom, accounts for nearly two-thirds of South Africa's domestic coal consumption on a tonnage basis, supplying most of the country's electricity and also exporting electricity to neighboring countries. Most of Eskom's power plants burn coal, which is purchased mainly from domestic, privately owned mines under long-term supply contracts. The privately owned synfuel producer, Sasol, owns and operates the world's only commercial coal-to-liquids (CTL) plants, which use coal feedstocks from mines owned by Sasol.
South Africa's power shortage in recent years and projected strong economic growth indicate high potential for future coal consumption growth and also exposes the urgent need for infrastructure building in the country. To address the insufficiency of power supply, Eskom has laid out a significant capital investment plan for capacity expansion . Given the high costs of building nuclear power plants and a lack of sufficient natural gas and renewable resources, coal-fired power plants continue to dominate Eskom's capacity expansion plans. In the near term, two multiple-unit coal-fired power plants, Medupi and Kusile, are scheduled to come on line starting in 2013 and 2014, with all units scheduled to be fully operational by 2018. The two plants will add a total of 9.6 gigawatts of coal-fired capacity and about 30 million tons of coal consumption per year. The resulting increase in demand for coal will add to the mounting challenge already faced by Eskom in its attempts to secure sufficient supplies of highquality coal while managing the financial pressure associated with rising fuel costs. Most of the coal from domestic mines that is consumed in South Africa has high ash content and low heating value, while higher quality coal is diverted to export markets. Ensuring affordable supply to the domestic market will require significant investment in new mining and railroad transportation. Similar challenges await other African countries, such as Mozambique and Botswana, where new coal supply is coming on line and demand for power is increasing.
In addition to increasing use of coal in the electric power sector, expansion of CTL capacity may also lead to further growth in Africa's demand for coal. Sasol has proposed expanding its Secunda CTL plant by adding 30,000 barrels per day of capacity and building the 80,000-barrel-per-day Mafutha plant. The implementation of the plans hinges on trends in the commodity market, regulatory approval, and future policies to limit carbon dioxide emissions. In the IEO2013 Reference case, South Africa's CTL production is assumed to expand from 160,000 barrels per day in 2010 to about 275,000 barrels per day in 2040.
Central and South America
Coal accounts for only 3 percent of the total primary energy supply in Central and South America, where it is used mainly in the industrial sector for steel production. Brazil accounted for 54 percent of the region's 0.9 quadrillion Btu of total coal consumption in 2010. Colombia, Peru, Argentina, and Puerto Rico accounted for most of the remainder .
Demand for metallurgical coal in Brazil, the world's ninth-largest steel producer in 2011, accounts for 84 percent of the region's
coal consumption from 2010 to 2040, with demand for steel in both domestic and international markets assumed to increase
throughout the period. Coal accounted for only 2 percent of the region's electricity generation in 2010. In the near term, coal
consumption in Brazil's electricity sector is set to increase with the completion of the Pecem I, Pecem II, and Itaqui power plants between 2011 and 2013, totaling 1.4 gigawatts of generating capacity . In the long term, however, the region's electric power sector continues to rely primarily on hydropower, along with some increases in generation from natural gas and nuclear power.
Coal accounts for less than 1 percent of the total primary energy consumption in the Middle East throughout the projection period. Currently, only three countries in the region—Iran, Lebanon, and Syria—report any coal consumption. In the IEO2013 Reference case, coal consumption in the Middle East remains below 0.1 quadrillion Btu per year through 2040.
World coal production
With the exception of Japan, coal is produced in all the IEO2013 regions, including nearly 70 countries with combined total production of almost 8 billion tons in 2010 (Table 10). World coal production increases by 3.5 billion tons from 2010 to 2040, with the non-OECD countries contributing 94 percent of the growth. China and India together account for 73 percent of the growth, with production increases averaging 1.6 percent per year in both countries. Production growth in some OECD countries, mainly in Australia, is largely offset by steady declines in OECD Europe.
Most coal-producing regions face a number of common challenges, many of which have periodic, short-term impacts on production. For example, rainfall from tropical storms in the Pacific Basin regularly disrupts mining operations in Australia, Indonesia, and Colombia. Labor strife in South Africa and Colombia has caused supply disruptions in the past. Other challenges are associated with the rapid growth of coal demand, which exposes infrastructure constraints on mining, transportation, and port capacities. Those constraints are amplified by the environmental and safety impacts associated with coal mining, which increasingly are provoking opposition from environmental groups as well as regulatory scrutiny in many countries.
As the world's second-largest coal producer, the United States accounts for more than 90 percent of total coal production in the OECD Americas region. Future growth of coal production in the United States and Canada is primarily for export. The limited increase in production in Mexico and Chile is unlikely to be sufficient to meet domestic demand and the two countries continue to rely heavily on imports in the IEO2013 Reference case.
U.S. coal production declines from 1.1 billion tons in 2010 to just under 1.0 billion tons in 2016, as compliance with environmental regulations under the Clean Air Act in the electric power sector results in the retirement of coal-fired generating capacity that would be uneconomical with the costly retrofits required by the Act. After 2016, production increases gradually, to almost 1.2 billion tons in 2040, with increases in exports and consumption in the electricity sector as electricity demand grows and natural gas prices rise. The export share of total U.S. coal production increases from 8 percent in 2010 to 14 percent in 2040.
Most of the growth in U.S. coal production comes from mines in the Interior and Western coal supply regions, with lower-cost coals from the Interior supply region and the northern part of the Appalachian Basin gradually replacing more expensive coals from Central Appalachia (eastern Kentucky, southern West Virginia, Virginia, and northern Tennessee). Central Appalachian coalproduction declines in response to falling demand and higher costs as the region's coal mines become less productive. Most of the remaining production from Central Appalachian coal mines is directed to the industrial and export markets. Western coal production grows steadily after 2016, satisfying much of the additional need for fuel at U.S. coal-fired power plants and providing large amounts for coal export. Production from the Interior region grows throughout the projection, as new mines in the region tap into the substantial reserves of mid- and high-sulfur bituminous coal in Illinois, Indiana, and western Kentucky.
In Canada, coal production increases moderately, primarily to provide coking coal for export. Most of the steam coal produced in Canada is subbituminous coal and lignite. Domestic demand for this coal declines as much of the country's coal-fired generation is phased out. Most of Canada's coking coal is high-quality hard coking coal, much of which is exported to Asia. Exports of coking coal from Canada increase primarily to provide the fuel needed to meet increasing demand for iron and steel in the Asian economies. With Canada's significant reserves of coal close to the Pacific market, several firms have been investing in mine expansions and productivity improvements. A report from the Coal Association of Canada indicates that coal companies have plans to invest $2.2 billion in production between 2012 and 2014 . Several coal terminal expansion projects are also under way in British Columbia, to facilitate both Canadian and U.S. exports. In the IEO2013 Reference case, Canada's coal production increases from 75 million tons in 2010 to 93 million tons in 2040.
In OECD Europe, falling domestic demand and rising competition from imports cause indigenous coal production to decline from 620 million tons in 2010 to 504 million tons in 2040. Germany, Poland, and Turkey are the leading producers in the region, accounting for 69 percent of total production in 2010.
Coal production in Germany has been declining since the mid-1980s, from 578 million tons in 1985 to 201 million tons in 2010. In 2010, 93 percent of the country's coal production came from lignite reserves and the remainder from hard coal resources . In Germany and many other European countries, hard coal production is dependent on subsidies, because it is significantly more expensive than imported coal. The German government's decision in 2007 to end the subsidies by 2018 could virtually eliminate the country's production of hard coal . In contrast, lignite production, which has been relatively flat over the past decade, has the potential to increase in the near term for use as a bridge fuel toward an energy system with lower carbon emissions while Germany's nuclear power program is being phased out.
Poland has the largest coal resources in Europe. It is the world's ninth-largest coal producer and OECD Europe's leading hard coal producer, accounting for more than half of the region's hard coal production. Poland is also the third-largest lignite producer in the region, after Germany and Greece. However, lack of investment in the mining sector and rising mining costs at underground mines have led to significant declines in production in past decades, especially for hard coal. With Poland's government committed to reducing carbon dioxide emissions by 20 percent from 1990 levels by 2020, domestic coal demand and production decline in the longer term.
Coal production continues to increase in Turkey as a result of growth in GDP and electric power demand. The country's coal production has been increasing for several decades but has been outpaced by growing domestic demand, resulting in increased reliance on imports . Limited domestic coal resources, most of which are lignite, have been a key constraint on domestic production and will present a challenge to further expansion in the future.
Coal production growth in OECD Asia contributes 6 percent of the total increase in world coal production in the IEO2013 Reference case. Australia, the world's fourth-largest coal producer, accounted for 98 percent of the region's total production in 2010, with two-thirds of the country's 2010 production being exported. Australia is the world's largest exporter of metallurgical coal and the second-largest exporter of steam coal. With its domestic coal demand declining, demand from international markets, especially Asia, spurs the growth of Australia's coal production and drives total production in Australia and New Zealand from 473 million tons in 2010 to 685 million tons in 2040.
Key producers in Australia and investors from India and China have been working to expand mining capacity in the country's existing mining regions, such as Bowen in Queensland and Hunter Valley in New South Wales, develop new mining regions, such as Surat and Galilee in Queensland and Gunnedah in New South Wales, and expand inland transportation and port infrastructure. Collectively, existing projects33 have the potential to add nearly 200 million tons of annual production capacity by 2022, equivalent to 41 percent of Australia's 2010 coal production . Data compiled by Australia's Bureau of Resources and Energy Economics indicate that more than 65 million tons of new coal mining capacity is set to come on line in the 2013-2016 period . The economics of future projects may be affected by a mineral resource rent tax that became effective on July 1, 2012, imposing a 30-percent tax on mining profits. The tax has been challenged in Australia's highest court .
China, India, and Indonesia are the three leading producers of coal in non-OECD Asia, and they are the first-, third-, and fifth-largest producers of coal in the world, respectively, with a combined total of 4.5 billion tons of coal production in 2010, representing more than half the world total. China and India consume almost all of their coal production domestically and are focused on tapping into their vast domestic coal resources to secure long-term coal supplies at affordable cost. In contrast, Indonesia exports the vast majority of its relatively low-cost coal to Asia and other markets. In addition, new supplies from Mongolia are emerging as a potential source of supply to meet increasing demand from China.
China increases coal production by an average of 1.6 percent per year, from 3.5 billion tons in 2010 to 5.7 billion tons in 2040, to meet the increase in its domestic demand, mostly for thermal coal. Abundant coal resources, ongoing improvements in transportation and transmission infrastructure, and favorable government policies support the expansion.
Although China holds the world's third-largest recoverable coal reserves, the geographic mismatch between its coal supply and demand centers has created significant logistical problems in the recent past, leading to coal price increases. The newer thermal coal reserves are concentrated in the north and the northwest (especially Shanxi, Shaanxi, Inner Mongolia, and Xinjiang), where favorable geological conditions allow for larger, lower-cost mines with the greatest potential for future production growth. The power and industrial demand centers for coal, however, are located in southern and eastern China, where coal reserves, although of higher quality and economic value,34 typically present more difficult geological conditions for mining after decades of depletion. The mismatch between coal supply and demand centers is the key reason that imports from international suppliers can compete successfully with domestic coal supplies. Rail capacity expansion, in particular, has lagged behind the growth in demand for coal transportation in recent years, causing severe bottlenecks in the supply chain and forcing costly long-haul trucking of coal, which was a key contributor to high delivered coal prices in the coastal areas and surges in imports in 2010 and 2011.
In response to the transportation bottlenecks, China's 12th Five-Year Plan includes significant investment in rail and transmission expansions. The plan calls for rail capacity able to transport 2.9 billion tons of coal per year by 2015, compared with the 2.5 billion tons of coal transported by rail in 2011 . Some analysts expect as much as 880 million tons of rail capacity to be added between 2013 and 2018 . The 12th Five-Year Plan also includes aggressive programs to expand high-voltage power transmission, or coal-by-wire, connecting minemouth power plants with power demand centers to facilitate indirect release of stranded coal resources to the market and relieve the logistical constraints on production growth.
The 12th Five-Year Plan also suggests that the country is attempting to improve the efficiency and safety of its mining operations through industry consolidation and coal recovery standards to better enable its domestic producers to compete with international suppliers. In the past decade, staggering death tolls at small mines have prompted the government to tighten safety regulations and clamp down on small inefficient mines with poor safety measures, leading to the closure and consolidation of small mines and the formation of large state-owned mining complexes owned by domestic industry leaders, such as Shenhua and China Coal, equipped with advanced technologies that offer higher productivity, lower costs, and improved safety. The standards for coal resource development promulgated by the Ministry of Land and Resources, issued in September 2012, require rates of coal recovery higher than the current average, which are expected to lead to more closures and consolidations of small mines .
The phaseout of government intervention in the setting of thermal coal prices for electricity generators, starting in January 2013 , provides incentive for coal producers to expand production. Historically, thermal coal prices in China have been capped through annual coal contract conferences, in which coal producers were required to sell a significant portion of utilities' coal purchases at rates far below market prices. The liberalization of coal prices, together with government's effort in recent years to reduce the numerous logistical surcharges, local taxes, and fees paid by miners, is expected to improve the competitiveness of domestic producers . However, considerable uncertainty remains about how the government would react if coal prices again increased to levels unaffordable for power companies, given the misalignment of coal prices and power tariffs.
In India, coal production is projected to increase at a 1.6-percent annual rate, the same as production growth in China, from 612 million tons in 2010 to about 1 billion tons in 2040. Despite the significant increase, however, India increases its imports by 160 million tons over the projection, as growth in demand outpaces growth in production. Coal India, India's primary coal supplier, which accounts for approximately 80 percent of domestic supply, faces numerous challenges. With delays in regulatory approvals, as well as opposition based on environmental concerns, capacity expansion targets frequently have been missed in recent years. New coal mines are generally surface operations that require land acquisition, forest clearing, the meeting of pollution standards, and resettlement and rehabilitation, which can take significant time to resolve . Inefficient utilization of rail capacity also is a major issue, affecting about one-half of the coal transported within India. The issue may be addressed in part by development of the Eastern Dedicated Freight Corridor, a high-capacity rail route dedicated to freight transportation only .
Indonesia provides most of the coal production from the rest of non-OECD Asia and is a primary contributor to the region's average production growth of 1.4 percent per year, from 508 million tons in 2010 to 762 million tons in 2040. Given Indonesia's relatively low-cost surface mines, its proximity to other Asian countries, and the relatively low sulfur and ash content of its coal, most of its production has been exported to other Asian countries. In response to growing demand from both domestic and international markets, Indonesia's coal producers have enhanced their efforts to expand production at existing mines, develop new mines, and develop port infrastructure. Yet the pace of future production growth to a great extent hinges on the government's regulation of exports, as required by the country's mining law of 2009, which is intended to boost the economic value of Indonesia's coal resources and preserve a portion of coal reserves for future domestic consumption. Although recent proposals that would basically halt exports and mining activity have not advanced, some type of regulation may be instituted to meet the law's requirements .
Non-OECD Europe and Eurasia
Most of the coal production in non-OECD Europe and Eurasia comes from Russia and Kazakhstan, which accounted for 52 percent and 18 percent, respectively, of the region's total coal production in 2010. In the coming decades, coal production from the two countries, especially Russia, remains the major source of the region's relatively moderate 0.6-percent average annual production growth, from 684 million tons in 2010 to 820 million tons in 2040.
Although Russia possesses the world's second-largest coal reserves, coal production is limited by both economic and logistical challenges. Because Russia is a major natural gas producer, with abundant supply available at relatively low subsidized rates from the state-owned natural gas company, its electric power sector has favored the use of natural gas. In contrast, the privatized coal sector saw its direct subsidies eliminated during industry restructuring in the 1990s. Depletion of reserves in European (western) Russia, rising mining costs, and the high cost of transporting Siberian reserves over long inland distances further challenge the economics of Russian coal.
Over the past several years, strong export demand has boosted Russia's coal production, and exports continue to lead Russia's coal production growth in coming decades in the IEO2013 Reference case. In 2010, approximately 40 percent of Russia's coal production was exported, with one-half being shipped to consumers in Europe. Aiming to capture export opportunities for coal, and to ensure diversified fuel supplies for domestic markets in order to accommodate rising demand for natural gas exports, Russian Prime Minister Vladimir Putin announced in January 2012 an investment program for the coal sector . The program, for which Putin pledged $8.2 billion in public funds, calls for a total of $120 billion of private and public investment in coal mining capacity expansion and safety improvement.
Africa's coal production in the Reference case grows rapidly—at an average rate of 1.9 percent per year—from 286 million tons in 2010 to 501 million tons in 2040, based on growth in both domestic consumption and exports. South Africa is the largest producer in the region, accounting for 98 percent of its total coal production in 2010. Mozambique and Botswana are emerging as new suppliers, with their initial production targeted for export.
South Africa is a significant player in the global steam coal market, with an advantageous geographic location between the Atlantic and Pacific coal markets, the world's largest coal export terminal at Richards Bay, and substantial reserves of bituminous coal. In 2010, 26 percent of its production was exported. In general, the coal exported by South Africa is of better quality than the coal consumed domestically. The relatively low cost of mining in South Africa provides a competitive advantage for its coal in Europe and Asia. Growth in the country's coal production comes from basins in the north, such as Waterberg, which will require investment in the development of new mines and in railways to move coal out of the region. The pace of development will depend on whether the country can overcome hurdles such as a lack of focused policy support, a less stable political environment, bureaucratic delays, and issues with the allocation of prospecting and mining rights that have led to slower rates of infrastructure development in the past.
Central and South America
Coal production in Central and South America is projected to increase by an average of 3.0 percent per year in the Reference case, from 91 million tons in 2010 to 224 million in 2040. Only three countries in the region produce more than one million tons of coal per year—Colombia, Brazil, and Venezuela. Colombia is the region's largest producer, accounting for 82 million tons, or 90 percent, of Central and South America's total production in 2010. More than 90 percent of Colombia's production has been exported in the past decade, primarily to Europe, the Americas, and, increasingly, Asia. Brazil produces only 6 million tons of steam coal per year, almost all of which is consumed domestically. Venezuela's coal production has declined rapidly in recent years, to 2.5 million tons in 2011. Coal production in both Brazil and Venezuela remains relatively flat or decreases through 2040.
In contrast, Colombia's coal production could potentially double between 2010 and 2020, after nearly doubling from 2000 to 2010 in response to strong international demand. Inspired to capture more opportunities in the Asian market in the decades to come, the government continues to put a high priority on the resolution of labor issues, improvement of mine safety, and expansion of road, rail, and port infrastructure. The country's energy and mining minister announced in June 2012 that the government expects coal production to reach 127 million tons by 2014 and plans to invest more than $350 billion in inland transportation infrastructure to support 165 million tons of coal production by 2020 . Currently, multiple projects are underway in Colombia to expand mining, rail, barge, truck transportation, and port capacity. Moreover, the current Panama Canal expansion could result in lower international shipping costs that would lead to additional shipments of Colombian coal to Asian markets. So far, most of the coal produced in the region has been steam coal, although metallurgical coal production in Colombia has the potential to grow significantly if infrastructure investment and railway modernization materialize as currently planned .
World coal trade
Most countries that consume substantial amounts of coal have domestic coal resources. For that reason, the volume of world coal trade tends to be small relative to worldwide coal consumption. In 2010, about 14 percent of the coal consumed worldwide on a tonnage basis was imported (approximately 16 percent on a Btu basis). In the IEO2013 Reference case, seaborne coal trade grows at an average rate of 1.5 percent per year, from 1,132 million tons in 2011 to 1,757 million tons in 2040 (Table 11 and Figure 78). In the projection, the import share of world coal consumption remains near its historical level, increasing slightly to 15 percent in 2040. Almost all the projected growth in world coal trade is in response to increasing demand for coal imports in the countries of non-OECD Asia.
International coal trade typically is evaluated for two separate markets—one for steam coal, also referred to as thermal coal, and one for coking coal. Steam coal is used primarily for electricity generation and also in industrial applications for the production of steam and direct heat. Coking coal is used to produce coal coke, which in turn is used as a fuel and as a reducing agent for smelting of iron ore in blast furnaces. Steam coal has accounted for most world coal trade for many years, and its importance has grown over the past decade, with its share of total trade increasing from 66 percent in 2000 to 75 percent in 2011. From 2000 to 2011, the volume of world steam coal trade increased by 448 million tons, or 112 percent, and world coking coal trade increased by 85 million tons, or 39 percent. Although the 847 million tons of steam coal traded in 2011 represented 75 percent of total coal trade, coking coal exports have become an increasingly desirable export commodity, with prices rising sharply in recent years. In the Reference case, steam coal accounts for between 73 and 75 percent of total trade through 2040.
At the regional level, world coal trade has seen some significant shifts during the past decade. On the supply side, Indonesia has posted extraordinary gains in coal exports, satisfying more than one-half of the 529-million-ton expansion in world coal trade from 2000 to 2011 and displacing Australia as the world's leading coal exporter in 2011. Also on the supply side, China and Vietnam have emerged as major coal-exporting countries during the past decade, although China's exports are now relatively minor, and Vietnam plans to phase out exports as its own use of coal for electricity generation expands rapidly. On the demand side, China and India have emerged as major coal-importing countries, increasing their take of imported coal by more than 300 million tons from 2000 to 2011 and representing 57 percent of the growth in total international coal trade during the period . In 2011, Japan and China were essentially tied as the top two coal-importing countries in the world, and South Korea and India were tied for the third position (Figure 79).
The IEO2013 outlook for world coal trade is dominated by continuing growth in coal imports to Asia, primarily the countries of non-OECD Asia, with relatively little growth in imports expected for Europe and the Americas. Historically, however, international coal trade patterns and quantities have been difficult to predict, because they are determined by many factors, and, as a consequence, there is considerable uncertainty regarding the outlook for coal markets. Examples of some of the factors that have affected international coal trade in recent years include substantial increases in the costs of producing and transporting coal in both coalexporting and importing countries; changes in bulk rates for ocean freight; the ability of coal exporters to coordinate the necessary buildup of infrastructure, including mining, inland transportation, and port capacity; increases in the costs of building new coalfired power plants; substantial swings in the costs of competing fuels and technologies; and continuing changes in energy and environmental policies. Other factors, such as weather and labor strikes, also have affected international coal trade; and although those two factors are of a temporary nature, there are potential implications for the outlook in the longer term, such as a desire by importing countries to diversify their sources of coal and energy supplies.
Asia remains the world's largest importer of coal in the IEO2013 Reference case, accounting for 87 percent of the growth in world coal imports from 2011 to 2040. As a result, the region's share of total world coal imports rises to 77 percent in 2040 from 72 percent in 2011. Asia's coal imports increase from 814 million tons in 2011 to 1,356 million tons in 2040. Five countries—Japan, South Korea, Taiwan, China, and India—accounted for approximately 90 percent of Asia's total annual coal imports during the years 2000 through 2011, but increases in coal imports by China and India have been more substantial than for other Asian countries, and as a result their combined share of the regional total has risen from 8 percent in 2000 to 41 percent in 2011. That trend continues in the IEO2013 Reference case, with China and India accounting for slightly more than one-half of the region's coal imports in 2040.
China's seaborne coal imports double in the projection, from approximately 200 million tons in 2011 to 400 million tons in 2040. Despite that substantial increase in imports, most of the coal consumed in China in the IEO2013 Reference case continues to be supplied from domestic coal producers, with the net import share of coal consumption increasing only slightly, from 5 percent in 2011 to 7 percent in 2040. China represents a key area of uncertainty, however, with respect to world coal trade projections. As the world's largest coal consumer and producer, even relatively small imbalances between China's supply and demand can have a substantial impact on world coal markets. In addition, a substantial amount of the intracoastal coal shipments from the eastern coast of China to southern ports can shift between domestic and international coal supplies. Although domestic coal currently satisfies most of the coal demand along China's southern coast, the situation could easily shift, requiring more imported coal.
In IEO2013, a number of factors limit China's seaborne imports. One is slower growth in China's coal consumption, which should enable China's domestic coal supply chain to keep up with the increase in its coal consumption. From 2010 to 2040, coal consumption in China grows by an average of 90 million tons per year, which is considerably less than the average increase of 200 million tons per year from 2000 to 2010. In addition to slower growth in coal consumption, there are a number of major infrastructure projects and policy initiatives underway to increase domestic coal production and transport. In the area of coal transportation, China currently is working on major new rail projects to facilitate additional movements of coal from the coal-producing regions in the north and west to demand centers in the east and south . On the production side, efficiency gains at new large mining complexes and substantial expansions of domestic mine capacity in China's northern and western provinces, especially Inner Mongolia and Xinjiang, are taking place . In an effort to limit requirements for additional coal transportation infrastructure, the government also is emphasizing the buildup of new industrial centers closer to the country's major coal-producing regions. Lastly, increasing coal imports from Mongolia, which are likely to be moved overland rather than by sea, further limit the need for seaborne imports.
India, like China, has been increasing its coal imports in recent years. In the IEO2013 Reference case, India's coal imports increase from 140 million tons in 2011 to more than 300 million tons in 2040, spurred mainly by increasing imports of steam coal for electricity generation. Imports of coking coal increase as well, as India's steel industry expands, and domestic supply of coking-quality coals is limited. While India's coal consumption has increased substantially in recent years, the growth has been relatively modest in comparison with China's. India, however, has had problems expanding its coal production, and power companies have increasingly had to rely on the use of more expensive imported coal. Regulatory hurdles that have delayed the startup of mining activities on government-leased coal blocks often are cited as a reason for the increasing inability of coal supply to keep up with rising demand, although gaining approvals to increase production at existing mines is also a challenge. Difficulties in getting approvals to expand the country's rail transportation infrastructure also have contributed to the rising gap between consumption and domestic supply . In addition to domestic coal supply problems, there are new coal-fired power plants being built along India's coastline with plans to use imported coal. One example is Tata Power's 4-gigawatt Mundra plant, which imports coal from Indonesia: three of its 800-megawatt units were commissioned in 2012, and the two remaining units are scheduled to come on line in 2013 .
After China and India, a small number of countries account for nearly all the remaining increase in non-OECD Asia coal imports. The region's current major coal importers—Taiwan, Malaysia, the Philippines, and Thailand—all increase their coal imports; and Vietnam, which imported very little coal in 2011, emerges as a major new coal-importing country, based on plans to build substantial amounts of new coal-fired electric generating capacity over the next 20 years. (Coal-fired electric generating capacity in Vietnam increases from 3 gigawatts in 2010 to as much as 36 gigawatts in 2020 and 76 gigawatts in 2030(.) Much of the new electric generating capacity will be sited in the southern part of the country, far from Vietnam's major coal deposits in the north.
In the IEO2013 Reference case, total coal imports to the Europe/Other region35 increase from 246 million tons in 2011 to a peak of 297 million tons in 2015, then decline to 274 million tons in 2040. Coal becomes a less significant component of the region's fuel mix for electricity generation, with most European countries placing greater emphasis on renewable energy and natural gas for electricity generation. Other factors affecting the outlook for coal imports to Europe include environmental initiatives that further reduce emissions of sulfur dioxide, nitrogen oxide, and particulates, leading to some significant retirements of coal-fired generating capacity; the phase-out of domestic hard coal production in Germany by 2018; and Turkey's plans to increase its coal-fired generating capacity substantially . Restrictions on carbon dioxide emissions, primarily based on the European Union's Emissions Trading System, are another potential issue for European coal consumption and imports. Thus far, however, carbon dioxide emission prices have been relatively low and have not significantly affected Europe's coal demand .
Germany, the United Kingdom, Turkey, Italy, and Spain  accounted for more than 60 percent of Europe's total seaborne coal imports in 2011. The countries of OECD Europe account for more than 90 percent of total seaborne coal imports to the Europe/Other region both in 2011 and in the projection. Although there are significant amounts of overland coal trade between several countries in the non-OECD Europe and Eurasia region, only seaborne shipments of coal for Europe and Asia are represented in EIA's projections, primarily because of data availability issues and the increased complexity associated with modeling nonseaborne coal trade.
New coal-fired generating capacity in the IEO2013 Reference case contributes to rising imports through 2015, especially in Turkey and Germany. Turkey has plans to add substantial amounts of new coal-fired generating capacity, much of which will burn domestic lignite coal; however, approximately 10 gigawatts of post-2010 additions, including both planned and under construction, is likely to be fueled by imports . Germany is also adding new coal-fired generating capacity, with 8 gigawatts to be fueled by imported coal and 3 gigawatts by domestic lignite (2.1 gigawatts of new lignite capacity became operational in 2012) . The new coal-import-based capacity additions, combined with the phasing out of its hard coal production by 2018, are factors that support increasing coal imports in Germany through 2020. Other coal-import-based capacity additions are either planned or under construction in Italy, the Netherlands, and Morocco .
In the longer term, the impact of new capacity on coal imports is diminished by the retirement of existing electric generating units in the IEO2013 projection. The emission reduction requirements for coal-fired generating capacity established by the European Union's Large Combustion Plant Directive (LCPD) lead to some planned retirements of coal-fired capacity, particularly in the United Kingdom, where approximately 8 gigawatts of capacity will be shuttered . On January 1, 2016, the LCPD will be superseded by the European Union's Industrial Emissions Directive (IED) , which will require additional cuts in emissions of sulfur dioxide, nitrogen oxide, and particulates. Additional retirements occur as a result of goals to increase generation from renewable energy in a number of European countries. For example, Germany has established a goal to increase the renewable share of its total electricity generation from approximately 20 percent in 2011 to 35 percent in 2020 and 65 percent in 2040 .
In the IEO2013 Reference case, coal imports in the Americas increase from 61 million tons in 2011 to 67 million tons in 2020 and 128 million tons in 2040. The share of total imports made up by steam coal falls from more than 60 percent in 2011 to approximately 50 percent in 2020, as steam coal imports in both Canada and the United States continue to decline over the next few years, and as coking coal imports in Brazil increase. In 2040, steam coal's share of the total recovers to the 2011 level, primarily as a result of increases in steam coal imports by the United States. Relative to global coal trade, the coal import market for the Americas is relatively small, accounting for only 5 percent of the world total in 2011 and increasing only slightly to 7 percent of the world total by 2040.
Five countries accounted for approximately 90 percent of the region's total coal imports in 2011: Brazil, the United States, Chile, Canada, and Mexico . The United States and Canada were the top two coal-importing countries in the Americas from 2001 to 2008, but imports by both countries have fallen substantially in recent years. U.S. coal imports have declined as coal-fired generating capacity fueled by imported coal has become less competitive with power plants fueled by domestic natural gas (which has become significantly less expensive since 2008), and Canada's imports have declined as a result of the ongoing phaseout of Ontario's coal-fired generating capacity.
In the IEO2013 Reference case, U.S. coal imports decline from 11 million tons in 2011 to a low of less than 2 million tons in 2017, where they remain for several years. From 2030 to 2040, however, imported coal from South America emerges as a competitive source of fuel for generation at power plants in the U.S. Southeast, and coal imports increase from 5 million tons to 38 million tons. Increases in overall U.S. electricity demand, combined with rising natural gas prices and a lack of national-level restrictions on CO2 emissions, lead to higher utilization of existing coal-fired generating capacity and, in turn, increasing demand for both domestic and foreign coal.
Canada, which was a major destination for U.S. coal exports over many years, has seen its coal imports decline substantially from a recent peak of 25 million tons in 2008 to 8 million tons in 2011. Further declines in Canada's coal imports are expected over the next several years, as Ontario's provincial government follows through, for environmental reasons, with the final and complete phaseout of its remaining 3.3 gigawatts of coal-fired generating capacity in 2013 and 2014 . The phaseout will leave Canada with only a few million tons of coking coal imports, primarily for use at coke plants in Ontario, and 2 million to 3 million tons of steam coal imports for use at power plants in Nova Scotia and New Brunswick.
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. Imports of coking coal to the Americas—primarily to Brazil—increase from 23 million tons in 2011 to 50 million tons in 2040. Brazil and Chile account for most of the increase in imports of thermal coal to South America through 2040. Brazil's MPX Energia is completing or has recently completed the construction of three new coal-fired generating units—Pecem I, Pecem II, and Itaqui—in northeastern Brazil, with a combined generating capacity of 1.4 gigawatts, which will be fueled with imported coal from Colombia .
As indicated above, most of the world's coal trade consists of steam coal. The top five exporters of steam coal in 2011 were Indonesia, Australia, South America (primarily Colombia), Eurasia (primarily Russia), and Southern Africa (primarily South Africa). Indonesia, currently the world's largest exporter of steam coal, maintains that position through 2040. The three top exporters of coking coal in 2011 were Australia, the United States, and Canada, and they remain so through 2040—although coking coal exports from Southern Africa increase substantially in the projection, as international energy companies begin to tap into and produce coking-quality coal from reserves in Mozambique.
Australia, which was the world's leading coal exporter for many years, was displaced from its position by Indonesia in 2011. While Indonesian coal exports increased by 36 million tons in 2011, Australia's exports fell by 21 million tons, as severe flooding in the state of Queensland in early 2011 significantly reduced its overall coal production and exports for the year. Nearly all of Australia's coal exports originate from two eastern states, Queensland in the northeast and New South Wales in the southeast. Queensland currently exports slightly more coal, with coking coal accounting for about 70 percent of its export tonnage . Coal exports from New South Wales are primarily steam coal, which accounts for roughly 80 percent of its total export tonnage . Australia exported 310 million tons of coal in 2011 (27 percent of total world coal trade), consisting of 164 million tons of steam coal and 147 million tons of coking coal.
In IEO2013, Australia dominates the outlook for international coal trade, with exports rising to 561 million tons and accounting for 32 percent of total world coal trade in 2040. According to a report released by the Australian government in December 2012, both the country's coal mining and coal transportation infrastructure will be expanded significantly over the next few years, with approximately 65 million tons of additional coal production capacity set to come on line, along with more than 80 million tons of port capacity expansions (40 million tons in New South Wales and 42 million tons in Queensland) .
Indonesia's coal exports increased dramatically from 63 million tons in 2000 to 356 million tons in 2011 as a result of the competitiveness of its low-cost surface mines. Indonesia lacks significant reserves of coking quality coal, and nearly all of its current coal exports are steam coal. In the IEO2013 Reference case, Indonesia's coal exports increase to 459 million tons in 2040, with 98 percent shipped to countries in Asia, up from 95 percent in 2011.
While future increases in exports of Indonesian coal are not expected to be limited by production infrastructure or port export capacity , there are several policy-related factors that could limit export growth. One is Indonesia's domestic market obligation law, which took effect in 2009 and requires Indonesian coal producers to set aside a certain percentage of their output each year for domestic coal buyers. Because of delays in bringing new coal-fired generating capacity on line and subsequent slower growth in coal demand than expected, the law so far has not been a significant impediment to coal exports . In addition, government plans for new generating capacity in Indonesia have recently been shifting away from coal toward renewable generating technologies, such as geothermal and conventional hydroelectric . On another front, the government had been working on a draft regulation that would restrict exports to coals with higher heat content as a way of preserving lower quality coals for future domestic use. The ban was to take effect in January 2014, but at the beginning of 2013 the government backed away from plans to move forward with the regulation, with the director of Indonesia's Energy and Mineral Resources Ministry indicating that the regulation would have "stopped mining activity" in the country .
From 2000 to 2011, coal exports from Southern Africa varied between 69 million tons and 79 million tons, with 77 million tons of exports recorded in 2011. Historically, South Africa has accounted for virtually all of Africa's coal export shipments, but the situation is changing with coal producers in Mozambique and, to a lesser extent, Botswana gearing up to export substantial quantities of coal to international markets. In South Africa, current activities are aimed at increasing the country's coal exports, including the development of new coal mines, port capacity expansions, and projects to expand rail capacity for hauling coal. In 2010, the annual throughput capacity at Richards Bay Coal Terminal, the country's main coal export facility, was increased from 79 million tons to 101 million tons, although the rail network serving the port still is not capable of transporting that amount of coal . In 2012, 75 million tons of coal was exported through the Richards Bay Coal Terminal, up from 72 million tons in 2011. South Africa's coal mines also export coal through the Matola Terminal in neighboring Mozambique , which currently has an annual throughput capacity of about 7 million tons. However, there is growing interest in expanding its capacity to perhaps more than 20 million tons later in the decade .
Mozambique plays an emerging role in world coal trade in the IEO2013 Reference case. A number of large international energy and steel companies are involved with the development of new coal mining projects in Mozambique, including Brazil's Vale SA; Australia's Rio Tinto; Australia's Beacon Hill Resources; India's Jindal Steel and Power, Ltd.; and the United Kingdom's Anglo American, which is the majority stakeholder in a joint venture with Japan's Nippon Steel and South Korea's Posco . While some minor shipments occurred in 2011, the first substantial exports were in 2012, when about 3 million tons were shipped out of Mozambique, primarily from coal produced at Vale's Moatize coal mine . In the near term, the primary factor limiting coal exports from Mozambique is the development of rail transportation infrastructure for moving coal from mines to ports. Currently, Vale is shipping coal on the 357-mile-long Sena Railway to Mozambique's Port Beira for export to overseas markets, but the rail line has an annual capacity of only about 7 million tons . A further upgrade of the Sena Railway line to 20 million tons could be completed as soon as the end of 2014. Construction of a new 567-mile rail line to the port of Nacala in Mozambique, with a potential capacity of 40 million tons per year, is also underway and could be ready for initial freight shipments by the end of 2014 .
In the IEO2013 Reference case, coal exports from Southern Africa grow from 77 million tons in 2011 to 109 million tons in 2020 and 141 million tons in 2040. Coking coal exports increase from 1 million tons in 2011 to 34 million tons in 2040, with most of the additional coking coal expected to come from Mozambique, although several new mines under development in northeastern South Africa also are expected to produce some coking-quality coals for export .
Although Eurasia has several coal-exporting countries, most of the seaborne coal exports from the region originate from mines in Russia. Ukraine currently ships a few million tons of coal annually to international markets from its ports on the Black Sea, and coal exports from Kazakhstan consist primarily of nonseaborne shipments to Russia. Over the past decade, coal exports from Eurasia have increased considerably, from 31 million tons in 2000 to 92 million tons in 2011. European countries were the primary area of growth for coal exports from Eurasia during the first half of that period, but since 2008 Asia has become the new area of growth for the region's coal exports. In 2011, Eurasia exported 52 million tons of coal to Europe and 40 million tons to Asia. With coal exports, particularly exports to Asia, viewed as a growth area, Russian companies continue to make investments in both mining capacity and port capacity. Coal production in the Kuzbass region, which grew to 220 million tons in 2012, continues increasing, with four new mines coming on line in 2012 . Investments also are being made in new mining capacity in the coal basins of eastern Siberia, as companies look to capitalize on the relatively shorter rail hauls to ports serving Asian coal markets. Mechel's Elga coal mine, in the far eastern republic of Sakha, is a good example of such an operation. With initial production in 2011, the Elga mine plans to increase production to as much as 20 million tons by the end of the decade, exporting nearly all of its output, both steam and coking coals, to Asian customers . The coal will be transported by rail to the far eastern port of Vanino, in which Mechel recently acquired a 55-percent ownership share. In the IEO2013 projection, Eurasia's coal exports increase from 92 million tons in 2011 to 142 million tons in 2040.
Although Russia is one of the world's top coal-exporting countries, long inland transport distances from major coal-producing areas to export terminals add substantially to the cost of its coal exports at the ports. For example, rail shipping distances from the country's top-producing Kuzbass region in western Siberia to ports in northwest Russia, such as Ust-Luga, are approximately 2,600 miles, and rail shipping distances from Kuzbass to far eastern ports, such as Vostochniy, are in excess of 3,600 miles, translating into shipping costs in excess of $40 per ton . On the other hand, Russia's relatively low coal production costs counterbalance the high inland transportation costs, keeping its exports competitive in world markets.
South America remains one of the top five coal-exporting regions through 2040, primarily as a result of continuing increases in exports from Colombia. The government of Colombia has a goal of improving the country's coal transportation infrastructure in an effort to increase its coal production to as much as 165 million tons by 2020 from 98 million tons in 2012 . The expansion will require sizable investments in mine capacity, rail infrastructure, and port capacity. Cerrejon, the country's largest coal producer, plans to increase its production from 38 million tons in 2012 to 44 million tons in 2014, and Prodeco, the third-largest producer, plans to increase output from 16 million tons in 2012 to 23 million tons in 2015 . Prodeco also is in the process of completing a new 24-million-ton coal export terminal at Santa Marta, Colombia. Drummond, Colombia's second-largest coal producer, has nearterm plans to increase its production by a little more than 5 million tons above the 2012 level and is also building a new coal export terminal at Santa Marta . CCX Carvero de Colombia, a potential new entrant to the country's coal industry, has plans to develop a new underground coal mine capable of producing more than 25 million tons of coal per year, along with two surface mines with a combined capacity of more than 5 million tons. CCX is also seeking licenses to develop a new 39-million-ton coal export terminal at La Guajira, Colombia, and a 93-mile-long rail line to transport its coal to the port . In the IEO2013 Reference case, coal exports from South America increase from 88 million tons in 2011 to 130 million tons in 2020 and 204 million tons in 2040.
The United States ranked as the world's third-largest coal exporter in both 2011 and 2012, shipping a record-breaking 126 million tons of coal to international markets in 2012—a substantial turnaround from the early to mid-2000s, when U.S. coal producers exported roughly 50 million tons of coal per year, between 31 and 48 percent of which went to Canada alone. The recent surge in U.S. coal exports, from 59 million tons in 2009 to 126 million tons in 2012, is attributable to a number of factors, including substantial growth in total world coal trade; the recovery of coal import demand in OECD countries following the recessionary downturn in 2009; weather- and labor-related supply disruptions in some of the key coal-exporting countries; substantial declines in demand for coal in the U.S. electric power sector in 2011 and 2012; and strong pricing for both coking and steam coals in international markets. The United States has benefited from increased export sales to customers in both Europe and Asia, with exports to the Europe/Other region increasing by 39 million tons and exports to Asia increasing by 26 million tons from 2009 to 2012. U.S. coal exports to the Americas remained mostly unchanged over the same period, with declines in coal exports to Canada offset by increases in exports to Brazil, Chile, and Mexico. In 2012, the United States exported 7 million tons of coal to Canada, representing only 6 percent of total U.S. exports. Historically, U.S. coal exports have been fairly evenly divided between coking and steam coal, with coking coal generally accounting for slightly more than one-half of total export sales.
With the combination of strong growth in world coal trade, high international coal prices, and declining demand for coal in the U.S. electric power sector, there has been a surge in activity and investment in port capacity expansion projects to facilitate the growth of U.S. coal exports. Although plans to construct new coal ports along the coastlines of Washington and Oregon to support exports of western coal to Asia face some considerable hurdles, a substantial number of projects on the U.S. Gulf coast are moving ahead. Those projects will add approximately 50 million tons of additional export capacity between 2012 and 2015 . Currently there are three coal export projects proposed for the U.S. West Coast, which together could add more than 100 million tons of annual coal export capacity . For now, port capacity for coal exports along the U.S. West Coast (excluding Alaska) is limited to a couple of million tons, primarily out of the Port of Long Beach in California.
In addition to U.S. coal ports, several coal producers in the western United States have secured the rights to—and currently are exporting coal through—the Westshore and Ridley coal terminals in Canada (reported in EIA's Quarterly Coal Report as U.S. coal exports out of the Seattle, Washington, customs district). Westshore reported that it handled 9 million tons of U.S. coal exports in 2011 . The transportation costs associated with shipping western coal to these ports are substantial, however, with rail shipping distances that can exceed 2,500 miles for U.S. coal shipments out of Ridley and 1,500 miles for coal shipped out of the Westshore Terminals near Vancouver . Although rail shipping distances from Powder River Basin mines in Wyoming and Montana to potential port facilities in Washington and Oregon would not be substantially shorter than the distances to Westshore in Canada, U.S. coal producers could potentially export much larger quantities of coal, and they would not have to compete with Canadian mines for export terminal capacity.
In the IEO2013 Reference case, U.S. coal exports increase from about 107 million tons in 2011 to 169 million tons in 2040, buoyed primarily by the overall increase in world coal trade. Although most of the coal exported from the United States originates from mines in the Appalachian coal basin, all of the increment in U.S. coal exports through 2040 in IEO2013 is from the Interior and Western supply regions.
Of potential benefit to both U.S. and Colombian coal producers is the planned completion of the Panama Canal expansion project in 2015, which will allow for the transit of larger bulk shipping vessels through the canal and should result in slightly lower freight rates for coal shipped to Asian markets . While only bulk-carrier vessels of Panamax size (approximately 80,000 deadweight tons) or smaller can use the canal currently, the expansion will allow for the transit of post-Panamax or smaller capesize vessels with rated capacities of up to 140,000 deadweight tons . Currently, capesize shipments of coal from ports in Colombia and the U.S. East and Gulf coasts to Asia generally travel a longer route around the tip of Africa (Cape of Good Hope). As an example, the shipping distance from Puerto Prodeco, Colombia, to Guangzhou, China, is approximately 13,000 nautical miles via the Cape of Good Hope but only about 9,700 nautical miles through the Panama Canal . During fiscal year 2011 (ending on September 30, 2011), the Panama Canal Authority reported that 12 million tons of coal were shipped from the Atlantic to the Pacific, including some going to the west coast of South America and the remainder going primarily to Asia . In comparison, 24 million tons of coal were shipped to Asia in calendar year 2011 from the U.S. East and Gulf coasts, Colombia, and Venezuela .
Canada exported 37 million tons of coal in 2011—the highest level since 2000, when exports totaled 38 million tons. Canada is primarily a coking coal exporter, with steam coal accounting for less than 20 percent of its total exports. Currently, Canada's exports originate solely from mines located in the province of British Columbia and are shipped out of three coal export terminals (Westshore, Neptune, and Ridley) located along the Pacific Coast (although some coking coal is shipped by rail to coke plants in the U.S. Midwest). All of Canada's western coal export terminals have either recently increased or are in the process of expanding their capacity, primarily as a result of increasing demand for coal imports by Asian countries. Westshore Terminals recently increased its annual capacity from 32 million tons to 36 million tons, and its plans for upgrading equipment at the terminal will increase capacity by another 2 to 3 million tons by 2018 . Neptune Terminals is planning to increase capacity from 13 million tons per year to 20 million tons, and Ridley plans to double annual throughput capacity from 13 million tons to 26 million tons . Two export-oriented mining projects currently in the works in western Canada are the planned restart of Teck Resources Ltd.'s coking coal mine in British Columbia in 2014, with a planned capacity of 4 million tons per year, and plans by the Australian company Coalspur to develop a new coal mine in Alberta that would ship as much as 12 million tons of steam coal to Asian markets by the end of the decade, with initial shipments out of Ridley Terminal beginning as early as 2015 . In the IEO2013 Reference case, Canada's coal exports increase from 37 million tons in 2011 to 52 million tons in 2040.
World coal reserves
As of January 1, 2009, total recoverable reserves of coal around the world were estimated at 946 billion tons—reflecting a reserves-to-production ratio of approximately 120 years (Table 12).36 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 946 billion tons with the upward revision of 37 billion tons reflecting 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 coal resources 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 2010, the five regions together produced 5.7 billion tons (113.0 quadrillion Btu) of coal, representing 72 percent of total world coal production by tonnage and 75 percent on a Btu basis . By rank, anthracite and bituminous coal account for 47 percent of the worldâ€™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 heterogeneous, 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 . 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 2010 indicate that the average heat content of lignite in major producing countries varies from a low of 4.9 million Btu per ton in Greece to a high of 12.9 million Btu per ton in Canada .
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