King Coal

World coal consumption set a new record in 2022, and coal consumption is set to remain at record levels until 2025. Universally shunned as dirty and toxic, coal’s drawbacks are well documented. However, the world cannot seem to shed the energy source. This phenomenon brings to attention a particularly pertinent question: are countries willing to suffer decreases in standard of living in order to advance environmental and climate concerns? The answer, as illustrated by the recent spike in use of coal, is a resounding no.

Coal, a carbon-rich sedimentary deposit, contains the energy of dead plant matter compressed by heat and pressure over time. As an energy source, coal is lauded for three primary factors: reliability, cheapness, and storage. Coal can be stored for long periods of time and either mined or purchased at lower costs than alternatives, offering geopolitical security for countries in times of crisis.

Thus, coal usage is a helpful barometer to measure how poor the world’s energy decision-making has been, as coal is essentially a crutch. The developed world’s decisions to eschew transition energy sources like natural gas and, either hamper investment into nuclear, or shut down functioning nuclear plants, has caused the coal usage barometer to surge, either directly or indirectly, in the wake of the Russo-Ukrainian War.

A prime example is that of Germany, a country ranked 13th in the Climate Change Performance Index in 2022 and known for internal climate activism through movements like “Fridays for Future.” While coal played an important part in Germany’s history, the German coal industry started its decline in the 1950s. Nonetheless, coal is still an important part of Germany’s energy sector, comprising close to a third of total supply.

And it is more important than ever today. While global coal consumption increased across the board in 2022, Germany had one of the highest year-over-year increases in coal consumption at 19% or 26 million tons. This increase was a result of two primary causes, each contributing to the country’s energy crisis: a need to decrease reliance on Russian energy exports due to the war, and the fact that Germany had been shutting down functioning nuclear plants, with only three remaining from an original seventeen.

Specifically, Germany took two measures to increase energy stability. First, the country postponed the decommissioning of 2.6GW of hard coal power capacity and 1.2 GW of lignite capacity. Secondly, the country created a gas replacement reserve, allowing 1.9GW of lignite coal and 4.3 GW of hard coal to return to production until 2024. Notably, lignite coal has the lowest energy content of all coal ranks, making it the dirtiest of fossil fuels.

At the same time as the German government announced these measures, as a concession, they also announced that they moved up the planned date to phase out coal in the coal mining region of North Rhine-Westphalia from 2038 to 2030. One cannot be blamed for being confused as to how Germany will be simultaneously ramping up coal capacity and shutting down the vast majority of its coal production eight years sooner than planned.

It is important to note that Germany embarked on its coal expansion plans despite also spending 17 billion euros filling its gas caverns, including 4 billion euros on liquefied natural gas (LNG) and 9 billion euros on gas from non-Russian sources. The rest of the EU engaged in similar purchases, bidding up the price of gas and pricing out developing nations, producing significant collateral damage.

Pakistan was one such developing nation. Natural gas accounts for over a third of the country’s power outputs. However, despite an increased power demand in the country in 2022, LNG imports decreased to the lowest amount in five years as European buyers bid up its price. Thus, the maximum power demand met by Pakistan in the year ending June 2022 was only 28.25 GW, 35% less than its capacity of 43.77 GW.

As a result, Pakistan saw two electricity grid breakdowns, the first in October and the second in January. Both created 12-hour blackouts in cold months, adding onto the intermittent blackouts that occur in the country on a daily basis. In addition to the humanitarian ramifications, the blackouts caused direct economic damage, with an estimated $70 million hit to the textile industry, not to mention the exacerbation of the country’s roaring inflation and currency crises.

In an effort to bolster its energy security, Pakistan announced a plan to increase its domestic coal capacity from 2.31 GW to 10 GW in the medium term, and that LNG would not be part of the country’s long term plans. This story is not unique to Pakistan. China, India, and Indonesia have all ramped up coal production as prices of other energy sources have risen. Together these four countries comprise nearly half of the world’s population, with significant impacts on global emissions.

As aforementioned, a particularly pertinent question today is whether countries are willing to suffer decreases in the standard of living in order to advance environmental and climate concerns. Both the cases of Germany and Pakistan show that when faced with a decision between energy security and an environmental agenda, the choice was clear–a reversion to the dirtiest, but most geopolitically secure fuel source: coal.

To be clear, there is not an inherent tradeoff between coal and the standard of living.

Instead, the need to turn to coal is the result of years of poor energy decision-making from the developed world that has constructed a highly vulnerable system. The question to ask next is whether countries will evolve for the better in order to make the recent spike in coal a temporary phenomenon or whether they will continue to build a house of cards for the next crisis to wreck.

This insight is a part of our Undergraduate Seminar Fellows’ Student Blog Series. Learn more about the Undergraduate Climate and Energy Seminar.

Dhruva Nistane

Undergraduate Seminar Fellow

Dhruva Nistane is an undergraduate student in the Huntsman Program, studying finance at the Wharton School and international studies in the College of Arts and Sciences. Nistane is also a 2023 Undergraduate Student Fellow.