The Tug-of-War over Coal: G7’s Commitment vs Global Demand and Uncertainty in the Energy Transition

The G-7 countries have announced their commitment to phasing out coal for electricity generation by 2035, with the goal of reducing reliance on the dirtiest fossil fuel. However, the future of fossil fuels, particularly coal, may be decided in other regions of the world. While the G-7 countries, which include major industrialized nations like Germany, France, and the United States, have set targets to reduce coal use, global demand for coal has continued to rise.

Despite the commitments of the G-7 countries, global coal consumption has not significantly decreased. Countries like China, India, and Indonesia continue to build new coal-fired power plants, contributing to ongoing coal consumption worldwide. The expansion of artificial intelligence and data centers is also expected to increase electricity demand potentially leading to continued reliance on coal in some regions.

At a time when many developed countries are seeking to phase out coal altogether or at least reduce its use significantly, Glencore shareholders recently opposed a spin-off of the company’s profitable coal business. This decision highlights that while some industrialized nations may be committed to transitioning away from fossil fuels like coal, others may see it as too expensive or risky to do so just yet.

The IEA forecasts that global coal demand may peak in the coming years but uncertainties remain about the future role of coal in the energy transition. The decisions made by countries like China will play a crucial role in determining whether or not it will be able to sustain its economic growth without relying heavily on fossil fuels like oil and gas or even on cleaner sources such as wind and solar energy.