COAL is enjoying a resurgence in reputation. Last month the 300-year-old Lloyd’s of London abandoned one of its climate commitments by allowing its insurers to go back to the sector. Why the change?
First, demand for thermal coal, which power stations burn to generate electricity, has defied the forecasts by stabilising rather than declining, providing economic incentive for banks like Lloyds. Secondly, political and social events have changed the way goverments think about energy security. On the same theme, leaders such as US President Donald Trump have emboldened the backlash against renewable power.
Even before Trump’s second term, the ability of renewable power to solve the world’s energy problems was under scrutiny. The twin global effects of Covid and the invasion of Ukraine by Russia in 2022 reminded developed economies of their vulnerability. Meanwhile, in developing economies, especially India and China, data shows coal was never actually out of favour.
The world burns nearly double the amount of coal today that it did in 2000, and four times the amount it consumed in 1950. Every minute, 16,700 tons of coal are excavated globally — enough to fill seven Olympic swimming pools, according to a report in the Financial Times in July.
It should also be acknowledged that not all of this demand growth is from developing countries. All nations want coal, as well as gas and nuclear power, given its importance to baseload supply.
US electricity demand is projected to climb 25% by 2030, driven by manufacturing, home electrification and particularly the rapid expansion of data centres supporting AI systems. Peabody Energy, the largest producer in the US, estimates this could translate into 250 million tons of new demand. Industry experts question whether this “theoretical maximum” can be extracted from latent US coal fleet capacity. Still, US coal demand is forecast to grow 6.7% this year.
The difficulties of transitioning developing economies to renewable power, its cost and its limitations, and coal’s new favour in developed economies have changed the way the International Energy Agency (IEA) talks about the market’s prospects.
Previous forecasts of coal peaking by 2013 have been quietly filed away. Now the agency talks of a “plateau”. Carlos Fernández Alvarez, head of gas, coal and power markets at the IEA, acknowledged recently: “We changed our wording.”
Yet the clear and present dangers to the environment of burning coal are far from forgotten. It is still difficult for coal miners to finance projects, and to insure them. Australia’s Queensland state, for instance, imposes royalties on coal production that makes new developments uneconomical.
In response to such actions, FutureCoal, a UK-based coal industry advocacy group led by South African coal mining executive Mike Teke, has issued letters calling on banks to reconsider their views on coal funding. FutureCoal believes that with a little encouragement, banks such as Nedbank and Investec may want to “find their way back to coal”. It will be interesting to see if Teke receives anything more than polite acknowledgment.
The argument of the coal lobby he represents is that the way ahead may lie in using cleaner technology to produce coal. Environmentalists scoff at this notion: coal remains among the most polluting of all the minerals. Yet the debate has been successfully shifted by the coal lobby away from what it calls “false binaries” of good and bad energy to balancing fossil fuels with renewable technologies. This is an economic good, coal’s backers say, pointing to hot-button topics such as employment, a factor not lost on the government.
In a recent policy update, the department of mineral & petroleum resources named coal as one of its “critical minerals”. In a local mining industry where employment fell in 2024, coal is a beacon. It grew employees 2.4% year on year, grossing R36.4bn in pay, and 3.2% higher since pre-Covid, according to Minerals Council South Africa data. Critical indeed.
A version of this article first appeared in the Financial Mail.
