Coal consultant warns thermal coal use could plummet – but dodges questions | RenewEconomy

Coal consultant warns thermal coal use could plummet – but dodges questions

Wood Mackenzie estimates seaborne thermal coal use would have to fall by 40 per cent by 2035 to meet the 2° target.




Wood Mackenzie, a consultancy which is used by the International Energy Agency (IEA) and major coal companies, estimates seaborne thermal coal use would have to fall by 40 per cent by 2035 to meet the target of limiting global warming to a two-degree increase.

While Wood Mackenzie issued a media release touting the findings of its 10-page report, which sells for US$4560, it declined to respond to inquiries about its findings or provide a copy of the report.

In its media release WoodMac – as the consultancy is commonly referred to – estimated that by 2035 coal would plummet to just a 16 per cent share of power generation from 41 per cent in 2013 if the IEA’s 450 Scenario was achieved.


In its annual modelling the IEA produces three scenarios: the Current Policies scenario, the New Policies scenario and the 450 scenario. Coal lobby groups prefer to approvingly cite the New Policies scenario – which projects rapidly growing coal demand equating to about a 3.6 degrees temperature increase – and ignores the 450 scenario which nominally equates to a two-degrees scenario.

A dramatic decline in coal power generation, WoodMac estimated, could see the global thermal coal trade drop from an estimated 900 million tonnes in 2016 to 527 million tonnes by 2035.

The IEA’s 450 Scenario assumes Carbon Capture and Storage (CCS) is viable after 2020, is rapidly deployed to three-quarters of the coal fleet by 2040 and preserves a high level of coal use. However, with CCS projects faltering and proving far more costly than renewables, achieving the IEA’s 450 scenario without the widespread deployment of the technology would require even greater cuts to thermal coal consumption.

WoodMac declined to comment on what its assessment is of the viability of CCS after 2020.

Nor did WoodMac respond to whether its report addressed the question of what the implications of keeping the temperature increase to “well below 2°C” – as the Paris Agreement states – would mean for the global coal trade.

Going down

Even so, WoodMac estimates concerted global action to reach the 2 degrees target would cause major production cuts in the world’s big coal exporters.

Indonesia, as the largest thermal coal exporter, would be hit hard, with WoodMac estimating exports could fall from an estimated 340 million tonnes in 2016 to 193 million tonnes by 2035.

Australian exports could fall from an estimated 210 million tonnes in 2016 to 135 million tonnes by 2035. Currently, the overwhelming bulk of Australian thermal coal exports originate from the Hunter Valley in New South Wales, underlining the shift likely to hit this region hard in the decade or so ahead.

While WoodMac’s media release stated combined exports from Colombia, Russia and South Africa – the other leading thermal coal exporters – would be “less than Australia in 2035”, the consultancy  declined to provide a more detailed country-by country breakdown.

Amongst importers, WoodMac estimates imports to Europe and North and South America could fall by more than half to 80 million tonnes and 15 million tonnes respectively.

Asian imports could decline from an estimated 673 million tonnes in 2016 to 433 million tonnes, the consultancy stated. Aside from noting “a bearish coal import outlook for Japan, South Korea, Taiwan and Southeast Asia”, WoodMac declined to provide a more detailed breakdown.

Major coal power plans in countries such as IndiaMyanmar and the Philippines are in a state of flux, with major cuts to the number of proposed coal plants likely. Vietnam, another key potential source of coal demand, has trimmed the number of proposed coal plants back a little but has not yet signalled a major retreat despite the rapid decline in the cost of renewables.

In comments to WorldCoal, the World Coal Association’s website, WoodMac’s Research Director for Global Coal Markets, Jonny Sultoon, explained if Japan – a major customer for Australian exports – met its current 2030 goal of coal accounting for 25 per cent share of fuel mix, coal imports would fall to 100 million tonnes.

In 2015 Japan imported 114 million tonnes of thermal coal, of which over two-thirds came from Australia.

However, Sultoon stated that even if all of the Nationally Determined Contributions submitted in support of the Paris Agreement were implemented that would at best cap the temperature increase at between 2.7°C and 3.3°C.

Achieving a 2°C target would require Japan to cut imports to between 50 to 60 million tonnes a year.

WoodMac estimates the price of global thermal coal would fall significantly to below US$50 per tonne long-term.

WoodMac and the coal lobby

Wood Mackenzie has long been the coal industry’s market consultant of choice and was, at least until earlier this year, a member of the US mining industry’s peak lobby group, the National Mining Association (NMA). The company did not respond to questions on whether it is still a member and, if not, when it resigned and why.

Wood Mackenzie’s estimates of coal industry trends have long been contentious for overestimating demand. In June 2013 it claimed China’s coal consumption would double by 2030 and US coal producers would be exporting hundreds of millions of tonnes to the Asian market by then too. Both estimates have proven to be fanciful, which the consultancy has gradually backtracked from.

On September 8 – two days after the media release was issued – WoodMac Tweeted that its assessment of the IEA’s 450 Scenario “is not WoodMac’s base case view of thermal coal trade.”  WoodMac declined to comment on whether this was prompted by concern from coal industry clients over the original media release.

Nor did WoodMac indicate what its current base case for thermal coal is in 2035 and why it downplays the likelihood of the IEA’s 450 Scenario coming to fruition.

Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) His Twitter feed is here.

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  1. Kenshō 4 years ago

    There’s been a polarisation of renewable energy sectors and fossil fuel sectors. This isn’t serving us. From here on, we need to cooperate as an international community to see a complimentary relationship of renewable energy with coal, gas and oil. Resources from the earth need to be valued, while acknowledging renewable solutions need to be implemented wherever possible. We need strategic local, state, national and international strategies, for staging the effective transition. Coal, gas and oil are part of our precious resources of the planet and we will be using many products from those industries for decades and generations to come. Instead of reactionary and polarised positions, we need a careful appraisal of how best to unfold a cooperative and discerning use of all our resources.

    • Ren Stimpy 4 years ago

      Thanks, spokesperson for the coal, oil and gas industries.

      Coal, oil and gas are precious? Yes precious they were in our past, but not in our future.

      But anyway thanks for your suggestion of “careful appraisal” aka “more delay”.

      • Kenshō 4 years ago

        No realist about what’s happening. Moving to renewable energy ASAP. Strategy. Will require cooperation of everyone.

      • jeffhre 4 years ago

        Yeah, let’s just wait (cooperate).

    • nakedChimp 4 years ago

      The RE crowd wanted a smooth hand over.. the others didn’t want to play that way. Their fault.
      Now suck it up and grow a pair.

      • Kenshō 4 years ago
        • jeffhre 4 years ago

          Master of universe refuses to accept rope tossed to him…after bystanders realize his foundation is built on quicksand.

          • Kenshō 4 years ago

            Yes although the grid isn’t a bystander. If they don’t grab hold of the rope, the grid is facing additional challenges with reliability and cost effectiveness.

          • jeffhre 4 years ago

            The grid isn’t the bystander – you are!

          • Kenshō 4 years ago

            Yes I’ve got one foot in the sand. I’m hybrid with PV/storage, 20,000L water storage and started some permaculture.

    • Barri Mundee 4 years ago

      Hm, yes but coal use must decline. Your argument seems reasonable but amounts to a capitulation in favour of FF use (as I see it).

      • Kenshō 4 years ago

        I said implement renewable energy “wherever possible”. To me that means “coal must decline”. So how does that equate to capitulation? I’ve endeavoured to choose my words carefully to strike the right balance of cooperation and I don’t see a two sided cooperation as capitulation. As I see it, if one side doesn’t agree, then a policy doesn’t get up.
        So back to you, are you willing to cooperate with the fossil fuel industry?

        • Barri Mundee 4 years ago

          I am but I do not think that on past and current trends we can expect much in the way of co-operation from the FF industry; quite the contrary, they seem to be trying to frustrate any moves that will increase the move to renewables.

          • Kenshō 4 years ago

            The problem is those interests are in control of the grid and it has lots of poor people hanging off it. Over time they will probably become more pliable as renewable energy gets stronger, then hopefully a truce can happen, leading to a respectful transition.

          • Barri Mundee 4 years ago

            Let’s hope you are right.

          • Kenshō 4 years ago

            Well it’s a matter of how bad it has to get for grid interests/operators and those on it. I’m told it costs a great deal of money to maintain a grid at the % reliability we have in Australia, so if operators struggle, quality of service is likely to drop (as well as profits). It’s transform and go with new models of service delivery or send shareholders and customers into ruin.

  2. nakedChimp 4 years ago

    Yeah, WoodMac isn’t dumb and wants to be the bearer of bad news.. just look what happened to the pour souls at CSIRO.

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