The coal days are numbered. The world’s dirtiest fossil fuels have long fallen out of favor with climate-conscious policymakers, investors and constituents, and even those who are less environmentally motivated have little reason to remain loyal to today’s emitting heavy fuel sources. more expensive than wind and sun in most parts of the world for years now. But even though coal is definitively experiencing terminal settlement, the settlement is anything but linear. While countries have made increasingly ambitious public commitments to curb their greenhouse gas emissions and wean themselves off coal when the crisis hits these goals are often overlooked in favor of a fast, cheap, immediate and reliable fuel. You could say that coal thrives in the midst of a crisis. We see Japan returned to coal after the 2011 earthquake and the subsequent Fukushima nuclear disaster caused politicians and constituents to shy away from nuclear energy. Mexico is experiencing a coal revival as we speak as President López Obrador makesthe push for domestic energy sovereignty is largely an antidote to an economic downturn. Even climate-conscious Canadians are tinkering with a return to coal because the economic strength of the oil sands has plummeted. But the biggest and most globally impacted coal returns have come from China, where many provinces are located leading the charge back to coal for economic security even as President Xi Jinping is committed to higher climate goals.
Although China has been busy increasing its domestic production capacity in various forms of energy and fuel production, from nuclear for renewable energy, it became clear that China was still heavily dependent on coal as its main fuel source when an unofficial embargo on Australian coal imports reportedly led to entire cities in China went dark earlier this year.
The unofficial embargo is just one chapter in a a much longer saga rising political tensions and failed diplomatic relations between China and Australia. “Relations between the two countries deteriorated last year after Australia supported an international investigation into the handling of the coronavirus pandemic in China,” CNBC reported late last year. While coal is not the only item on the long list of boycotted Australian goods, it certainly has a salient effect and reveals the extent to which China is willing to do a bit of geopolitical weaponry.
In October 2020, Australia exported 2.5 million tonnes of thermal and coking coal to China. Now, that number is zero. This means that a huge gap has opened in the market, and the United States seems eager to fill it, to the chagrin of those who urge coal producers to defend it. China has committed to buying files an additional US $ 52.4 billion in energy products over the two years starting last January as a condition of the first tranche of trade deals signed at that time. And some of these have directly filled the gap left by Australian coking coal with US imports “as trade manipulation creates ‘winners and losers’,” the “China Macroeconomics” section of the South China Morning Post. reported this week. Whereas the United States sold zero coking coal to China in October, when Australia’s coal ban began, it increased to nearly 300,000 tonnes of coking coal in February.
The US is not the only coal producer stepping up to meet China’s coal demand. Apart from increasing domestic coal production, China also relies on “increasing imports from the US, South Africa and Colombia which previously relied mainly on countries such as Indonesia, Russia, Mongolia and Australia,” the South China Morning Post report continued. . All of China’s major coal suppliers have increased or at least maintained their exports during Australia’s coal ban.
Coal is still in the process of being released. China has indicates that it is serious about meeting its goal of a net zero carbon footprint, and even the steel industry is moving towards a future where coking coal will not longer is needed in the production process. But the road to zero-day for coal will be a long and bumpy one, and as long as there is demand and money to be made, there are clearly many countries that want to provide supply.
By Haley Zaremba for Oilprice.com
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