Coal’s role in energy use worldwide has shifted substantially over the decades, from a fuel used extensively in all sectors of the economy to one that is now used primarily for electricity generation and in a few key industrial sectors, such as steel, cement, and chemicals. Although coal has lost market share to petroleum products, natural gas, and nuclear power, it continues to be a key source of energy because of the dominant role it has maintained in its core markets and its success in penetrating markets in emerging economies. In 1995, coal accounted for 25 percent of the world’s primary energy consumption and 36 percent of the energy consumed worldwide for electricity generation. Those shares are not projected to change substantially in the IEO98 reference case through 2020 (Figure 55).

Figure 55. Coal Share of World Energy Consumption by Sector, 1995 and 2020

Sources: 1995: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1998).

The relatively stable outlook portrayed for coal in the IEO98 forecast could change, however, as a result of recent commitments announced by 38 of the industrialized countries of the world to reduce or curtail emissions of greenhouse gases. Those commitments are not represented in the IEO98 forecast, because they do not become binding until ratified by the governments of the individual countries. If the treaty is ratified, however, the coal industry could face a rapidly declining market for its product over the years ahead, despite any additional cost-cutting they may be able to achieve in the mining or preparation of coal.⁶ On the other hand, a trading program for greenhouse gases may reduce the compliance costs associated with the Kyoto agreement.

Highlights of the IEO98 projections for coal are as follows:

• World coal consumption is projected to increase by 3.5 billion tons, from 5.1 billion tons in 1995 to 8.6 billion tons in 2020. Coal use in developing Asia alone is projected to increase by 3.1 billion tons.⁷
  

• Coal’s share of the world’s total primary energy consumption declines slightly, from 25 percent in 1995 to 24 percent by 2020.
  

• Coal’s share of energy consumed worldwide for electricity generation remains constant at 36 percent through 2020.
  

• China and India, taken together, are projected to account for 34 percent of the total increase in energy consumption worldwide between 1995 and 2020 and 85 percent of the world’s total projected increase in coal use, on a Btu basis.
  

• In China, 59 percent of the total increase in coal demand is projected to occur in the non-electricity sectors. Elsewhere, overall coal consumption in the non-electricity sectors is expected to decline slightly.
  

• The forecast for electricity coal consumption indicates that China will need more than 340 gigawatts of additional coal-fired generating capacity by 2020, and that India will need approximately 70 more gigawatts.

• Recent agreements regarding limitations on coal subsidies in Germany, Spain, and France indicate that hard coal production in Western Europe will contract by an additional 40 million tons between 1995 and 2005.
  

• World coal trade is projected to increase from 503 million tons in 1996 to 740 million tons in 2020, continuing to account for approximately 9 percent of total world coal consumption.
  

• In the IEO98 forecast, steam coal (including coal for pulverized coal injection at blast furnaces) accounts for all of the projected increase in world coal trade.

Trends in Coal Consumption

Historically, trends in coal consumption have varied considerably by region. Consumption has continued to rise in the United States and Japan (on a Btu basis) over the past decade. Over the same period, however, coal use in other industrialized countries (primarily, the countries of Western Europe) has declined by about 20 percent, being displaced in considerable measure by growing use of natural gas and in France by nuclear power. Even sharper declines have occurred in the countries of Eastern Europe and former Soviet Union (EE/FSU), primarily as a result of reductions in economic activity.

Nonetheless, growth in overall coal use has been substantial and is expected to continue. Declines in coal usage in Western Europe and in the FSU have been more than offset by strong growth elsewhere, particularly in China and other Asian countries. In 1980, China accounted for 17 percent of world coal use (on a Btu basis); in 1995, its share was 29 percent. As a group, the developing countries of Asia accounted for 41 percent of world coal consumption in 1995, whereas in 1980 their share was about 23 percent. The United States accounted for 21 percent of the world total in both 1980 and 1995.

Over the forecast period, coal is projected to account for approximately 24 percent of total energy consumption in the world. In the forecast, coal maintains its historical share because of the large increases in energy use projected for the developing countries of Asia and the strong role that coal plays in their economies. Together, two of the key countries in the region, China and India, are projected to account for 34 percent of the world’s total increase in energy consumption over the forecast period and 85 percent of the world’s total projected increase in coal use. The share of total energy consumption met by coal in these countries declines from 70 percent in 1995 to 63 percent in 2020 (Figure 56), because consumption of other energy sources rises in the forecast at a more rapid rate than consumption of coal (natural gas, oil, and renewable energy increase by 8.6, 4.6, and 5.1 percent per year, respectively, while coal consumption increases by 4.0 percent per year). Strong growth in the consumption of oil and natural gas results from fast-paced growth for petroleum products in the transportation sector and from the expanded use of natural gas for electricity generation, heating, and cooking.

Figure 56. Coal Share of Regional Energy Consumption, 1970-2020

Sources: History: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1998).

The most substantial decline in coal’s share of total energy consumption is expected to occur in the EE/FSU, where its share decreases from 26 percent in 1995 to 15 percent in 2020 (Figure 56). In this region, natural gas is projected to capture an increasing share of the energy market over time. In the remaining regions—the industrialized countries and the other developing countries— coal’s share of total energy consumption is projected to decline slightly over the forecast period. As in China and India, coal’s declining share in these regions is attributable to a more rapid increase in the consumption of other sources of energy.

In physical units, coal usage increased from 4.1 billion tons in 1980 to a peak of 5.3 billion tons in 1989 (Figure 57). Recently, growth in coal consumption in the developing countries of Asia has led to a recovery in worldwide coal consumption from a low of 5.0 billion tons in 1993 to 5.1 billion tons in 1995. In the forecast, world coal consumption rises by 68 percent between 1995 and 2020, reaching 8.6 billion tons in 2020. Based on alternative assumptions about economic growth rates, world coal consumption in 2020 could be as high as 10.5 billion tons or as low as 6.5 billion tons.⁸

Figure 57. World Coal Consumption in Three Cases, 1970-2020

Sources: History: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1998).

With the exception of China, coal for electricity generation will account for virtually all of the projected growth in coal consumption worldwide. In the non-electricity sectors, other fuels—primarily, natural gas and electricity—are expected to gain market share. In China, however, coal should continue to be the primary fuel for industrial applications, in view of the nation’s abundant coal reserves and limited access to alternative sources of energy. Consumption of coking coal is projected to decline slightly in most regions of the world as a result of technological advances in steelmaking, increasing output from electric arc furnaces, and continuing substitution of other materials for steel in end-use applications.

Environmental Issues

In future years, coal will face tough challenges, particularly in the environmental area. Increased concern about the adverse environmental impacts associated with coal use has taken a toll on coal demand throughout industrialized areas. Coal combustion produces several air pollutants that adversely affect ground-level air quality.

One of the most significant pollutants from coal is sulfur dioxide, which has been linked to acid rain. Many countries have implemented policies or regulations to limit sulfur dioxide emissions, which typically require electricity producers to switch to lower sulfur fuels or invest in technologies that reduce the amount of sulfur dioxide emitted. In addition, coal has the highest carbon content of all the fossil fuels. Carbon dioxide emissions per unit of energy obtained from coal are 80 percent higher than from natural gas and approximately 20 percent higher than from residual fuel oil—the petroleum product most widely used for electricity generation [3].

The first binding international legal agreement dealing directly with climate change—the United Nations Framework Convention on Climate Change (“the Rio Treaty”)—became effective in March 1994. The Convention’s primary objective is the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” Carbon dioxide, the predominant greenhouse gas, accounted for an estimated 99 percent of total greenhouse gas emissions in Annex I countries in 1990 on the basis of tons of gas emitted, and for 81 percent of the total on a carbon equivalent basis [4].⁹

Followup meetings to the Convention have led to a strengthening of commitments. In the most recent meeting, held in Kyoto, Japan, in December 1997, commitments were obtained from 32 countries to reduce their greenhouse gas emissions (six different gases)¹⁰ to levels below those in 1990 [5]. Between 2008 and 2012, countries of the European Union must reduce their emissions by 8 percent from 1990 levels, the United States by 7 percent, and Japan by 6 percent. Countries of the European Union are permitted to act as a single entity for purposes of meeting the commitments of all its member states.¹¹ For the same time frame, six additional countries agreed to curtail their emissions to levels at or slightly above their 1990 emissions. The agreement (the “Kyoto Protocol”) allows for the trading of emissions allowances between Annex I nations and is binding on individual countries only when their governments complete ratification. Countries will be allowed to use net changes in carbon stocks, including reforestation, afforestation, and deforestation activities, to meet reduction commitments.

In the IEO98 forecast, carbon emissions are projected to rise between 1990 and 2010 in many countries, including an increase of 34 percent for the United States, 25 percent for Japan, and 13 percent for Western Europe (Figure 58). On the other hand, carbon emissions for the former Soviet Union are projected to be 20 percent lower in 2010, and emissions in Eastern Europe are projected to be 6 percent lower. Ratification of the reduced levels of emissions agreed to in Kyoto could have a substantial adverse impact on coal, particularly in the United States, which relies heavily on coal to meet its energy needs and faces relatively severe cutbacks in carbon emissions from those currently projected for 2010 (Figures 58 and 59).

Figure 58. Projected Cumulative Growth in World Carbon Emissions by Region, 1990-2010

Source: Energy Information Administration, World Energy Projection System (1998).

Figure 59. Coal Share of Total Carbon Emissions by Region, 1995 and 2010

Sources: 1995: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 2020: EIA, World Energy Projection System (1998).

In the IEO98 forecast, coal continues to be the second largest source of carbon emissions, accounting for 38 percent of the world total in 2020. Oil, at 39 percent in 2020, remains the largest source of carbon emissions, and natural gas accounts for almost all the remaining portion. By country, the world’s dominant coal consumers—the United States and China—were also the top two contributors to world carbon emissions in 1995, at 24 percent and 14 percent of the world total, respectively (Figure 60). By 2020, however, the roles of the two countries are expected to switch, with China accounting for 22 percent of carbon emissions worldwide, compared with 19 percent for the United States. The reversal is attributed to the relatively strong economic growth projected for China over the forecast period and the country’s continuing reliance on coal as its primary source of energy.

Figure 60. Regional Shares of World Carbon Emissions, 1995 and 2020

Sources: 1995: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 2020: EIA, World Energy Projection System (1998).

In the future, environmental regulation will represent a major challenge for coal markets in many areas of theworld. On the other hand, increases in coal use are possible in countries that have not yet committed to greenhouse gas emissions reduction programs. Although local air pollution problems in those areas may intensify and encourage greater use of alternative fuels, the available alternatives are more costly, and increased use will require multilateral policy decisions. In other areas, coal use will diminish or its growth will slow.

Competitive pressure from other fuels—particularly, oil and natural gas—has intensified because of their current low prices, the availability of new technologies that favor the use of natural gas for electricity generation, and increased costs of environmental compliance for coal-fired energy sources. Nonetheless, coal use in the IEO98 reference case is projected to grow by 3.5 billion tons (68 percent) worldwide between 1995 and 2020.

Reserves

Total recoverable reserves of coal are estimated at 1,142 billion tons—enough to last another 220 years at current production levels (Figure 61).¹² Although coal deposits are widely distributed, 57 percent of the world’s recoverable reserves are located in three regions: the United States (24 percent); FSU (23 percent); and China (11 percent). Another four countries—Australia, India, Germany, and South Africa—account for an additional 27 percent. In 1995, these seven regions accounted for 81 percent of total world coal production [6, Table 2.5].

Figure 61. World Recoverable Coal Reserves

Note: Data shown for the United States represent recoverable coal reserves as of January 1, 1997. Data for all other countries are as of January 1, 1993.
Source: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998), Table 8.2.

Quality and geological characteristics of coal deposits are other important parameters for coal reserves. Coal is a much more heterogeneous source of energy than is oil or natural gas, with quality varying significantly from one region to the next and even within an individual coal seam. For example, Australia, the United States, and Canada are endowed with substantial reserves of premium coals that can be used to manufacture coke. Together, these three countries supplied 86 percent of the metallurgical coal traded worldwide in 1996 (see Table 21, below).

At the other end of the spectrum are reserves of low-Btu lignite or brown coal. Coal of this type is not traded to any significant extent in world markets, because of its relatively low heat content (which raises transportation costs on a Btu basis) and other problems related to transport and storage. In 1995, lignite accounted for 19 percent of total world coal production (on a tonnage basis) [6, Tables 2.5 and 5.4]. The top three producers were Germany (213 million tons), Russia (108 million tons), and the United States (86 million tons). As a group, these countries accounted for 44 percent of the world’s total lignite production in 1995. On a Btu basis, lignite deposits show considerable variation. Estimates by the International Energy Agency indicate that the average heat content of lignite from major producers in OECD countries varies from a low of 5.2 million Btu per ton in Greece to a high of 13.5 million Btu per ton in Canada [7, pp. II.xvii-II.xx].

Several new low-cost producers, including Indonesia, Colombia, and Venezuela, have entered the coal supply picture in recent years and are rapidly penetrating world coal trade markets. Indonesia currently ranks ninth in the world in recoverable coal reserves, with anestimated 35 billion tons. As recently as 1989, Indonesia’s recoverable reserves were estimated at only 3 billion tons [8]. Indonesia’s coal production has increased rapidly, rising from less than 1 million tons in 1980 to 41 million tons in 1995 [6, Table 2.5]. Some of its coal reserves have unique characteristics that have made them sought after in international markets. Some have extremely low sulfur content (0.08 percent average by weight). Other high-quality Indonesian reserves are finding acceptance as soft coking coals and in the growing market for pulverized coal injection at blast furnaces [9].

Regional Consumption
Asia

As a result of fast-paced economic growth, coal consumption is expected to grow most rapidly in the developing countries of Asia. In the IEO98 forecast, this region’s share of total world coal consumption increases from 40 percent in 1995 to 60 percent in 2020 (on a tonnage basis). Coal consumption in the region is projected to increase by more than 3.1 billion tons, from 2.0 billion tons in 1995 to almost 5.2 billion tons in 2020 (Figure 62). In China alone, coal consumption is expected to increase by about 2.8 billion tons. India, too, is poised for a substantial increase in coal usage, with consumption projected to rise by 270 million tons between 1995 and 2020.

The large increases in coal consumption projected for China and India are based on an outlook for strong economic growth (7.9 percent per year in China and 5.5 percent per year in India) and the expectation that much of the increased demand for energy will be met by coal, particularly in the industrial and electricity sectors. The IEO98 forecast assumes no significant changes in environmental policies in the two countries. It also assumes that necessary investments in the countries’ mines, transportation, industrial facilities, and power plants will be made.

Figure 62. World Coal Consumption by Region, 1980, 1995, and 2020

Sources: 1980 and 1995: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 2020: EIA, World Energy Projection System (1998).

In China, 59 percent of the total increase in coal demand is projected to occur in the non-electricity sectors, primarily for steam and direct heat for industrial applications (primarily in the chemical, cement, and pulp and paper industries) and for the manufacture of coal coke for input to the steelmaking process. Strong growth in steel demand is expected in China, as infrastructure and capital equipment markets expand.

Coal remains the primary source of energy in China’s industrial sector, primarily because China has limited reserves of oil and natural gas. In the non-electricity sectors, most of the increase in oil use comes from rising demand for energy for transportation. Growth in the consumption of natural gas comes primarily from increased use for space heating in the residential and commercial sectors. A substantial portion of the increase in demand for both natural gas and oil is projected to be satisfied by imports.

In the electricity sector in China, coal use is projected to grow by 5.3 percent a year, from 7.6 quadrillion Btu in 1995 to 27.5 quadrillion Btu in 2020. In comparison, coal consumption by electricity generators in the United States is projected to rise from 17.3 quadrillion Btu in 1995 to 23.0 quadrillion Btu in 2020. One of the key implications of the substantial rise in electricity coal demand in China is that large financial investments in new coal-fired power plants and in the associated transmission and distribution systems will be needed. The projected growth in coal demand implies that China will need approximately 480 gigawatts of coal-fired capacity in 2020.¹³ In 1995, China had approximately 142 gigawatts of fossil-fuel-fired (coal, oil, and gas) generating capacity [6, Table 6.4].

In India, projected growth in coal demand matches the pattern expected in most other areas of the world, with virtually all of the increase occurring in the electricity sector. Between 1995 and 2020, coal use for electricity generation in India is projected to rise by 3.4 percent a year, from 4.2 quadrillion Btu in 1995 to 9.7 quadrillion Btu in 2020. This growth implies that India will need approximately 140 gigawatts of coal-fired capacity in 2020.¹⁴ In 1995, India’s total fossil-fuel-fired generating capacity amounted to 69 gigawatts [6, Table 6.4].

In Japan, coal consumption is projected to increase at a much slower pace than in the other countries of Asia. In the electricity sector, coal use is projected to rise at a rate of only 1.3 percent a year, from 1.3 quadrillion Btu in 1995 to 1.8 quadrillion Btu in 2020. Projected growth in the non-electricity sectors is even smaller, with only a slight increase expected over the forecast period. The limited growth in the non-electricity sectors is attributable in part to continuing efforts by Japanese steelmakers to reduce the overall amount of coal required per ton of steel produced.

In the remaining areas of Asia, a substantial rise in coal consumption is expected over the forecast period, driven by strong growth in coal-fired electricity generation in Indonesia, South Korea, Taiwan, and the member countries of the Association of Southeast Asian Nations (the Philippines, Thailand, and Malaysia). South Korea’s only electric utility, the Korean Electric Power Corporation, plans to build 25 additional coal-fired units (14gigawatts) between 1995 and 2005 [10]. In the electricity sector, coal use in the other developing countries of Asia is projected to rise by 4.1 percent a year, from 2.3 quadrillion Btu in 1995 to 6.3 quadrillion Btu in 2020.

Western Europe

Coal consumption in Western Europe has declined by 313 million tons since 1989, to a level of 674 million tons in 1995. Over the forecast period, the decline in coal consumption is expected to slow, and a slight recovery is expected after 2005. In Western Europe, environmental concerns play an important role in the competition among coal, natural gas, and nuclear power. Recently, other fuels, particularly natural gas, have been favored over coal.

Although coal consumption has declined substantially in Western Europe in recent years, much of the decline is attributable to the rapid contraction of Germany’s lignite industry. Between 1989 and 1995, German lignite production declined by 267 million tons, while hard coal ¹⁵ production in all of Western Europe declined by only 85 million tons [6, Tables 5.2, 5.3, and 5.4]. The sharp decline in German lignite production followed the conversion from lignite-based town gas¹⁶ to natural gas in the eastern states of Germany after reunification in 1990, as well as substitution of natural gas and other fuels for lignite in home heating [7, p. II.157; 11]. A second factor was the collapse of industrial output in the eastern states [7, p. II.157; 12]. Reduced economic activity in eastern Germany contributed to an 8.5-percent decline in total energy consumption in Germany between 1988 and 1994.

In the IEO98 forecast, further declines in lignite production are projected to be small. This outlook is based on the competitiveness of German lignite with other imported fuels, as well as planned investments to refurbish or replace existing lignite-fired plants using best available combustion and pollution control technologies. A new 900-megawatt lignite plant to be built in the Rheinland area of Germany is expected to be the most up-to-date lignite-based power station in the world when it is completed in 2002, boasting a 43-percent conversion efficiency [7, p. I.162].

Two key trends in Western Europe are at play over the forecast period. In the European Union, hard coal production is expected to continue its long, relatively slow decline (see box on page 76). Following the closure of the last remaining coal mines in Belgium in 1992 and Portugal in 1994, only four member States of the European Union—the United Kingdom, Germany, Spain, and France—continue to produce hard coal [13, 14]. As a result, coal consumption in these four countries is expected to decline slightly, because coal imports are not expected to fill the entire gap in energy supply left by the loss of indigenous coal. Rather, a combination of fuels—including natural gas, imported coal, and renewable energy—are expected to compensate for the reduction in domestic coal supply. Offsetting the decline in hard coal in Europe are projected increases in the consumption of indigenous lignite for electricity generation in Turkey and Greece. Much of the increase is in Turkey, where coal (both lignite and hard coal) and natural gas are expected to fuel a large increase in electricity demand [7, pp. II.301-II.308; 15].

Eastern Europe and the Former Soviet Union

In the EE/FSU countries, the process of economic reform continues, as the transition to a market-oriented economy replaces centrally planned economic systems. The dislocations associated with these institutional changes have contributed substantially to declines in both coal production and consumption. Coal consumption in the EE/FSU region has fallen by more than 513 million tons since 1988, reaching 934 million tons in 1995 [6, Table 1.4]. In the future, total energy consumption in the EE/FSU is expected to rise, driven primarily by increasing production and consumption of natural gas. In the forecast, coal’s share of total EE/FSU energy consumption declines from 26 percent in 1995 to 15 percent in 2020, while the portion of consumption met by natural gas increases from 40 percent in 1995 to 49 percent in 2020.

The three main coal-producing countries of the FSU— Russia, the Ukraine, and Kazakhstan—are facing similar problems. The coal industries in Russia and the Ukraine continue to be state-run operations, although efforts are underway to privatize the industries in both countries. These efforts are aimed primarily at shutting down inefficient mines and transferring support activities, such as housing, kindergartens, and health and recreation facilities, to local municipalities. Even efficient mines, however, are hampered by the payment arrears of their large customers, which have been making it nearly impossible to pay workers and purchase needed mining supplies and equipment [16]. In Russia, the government provided the equivalent of $1.1 billion in subsidies to the coal industry in 1997 [17]. To date, the World Bank has provided $900 million in loan assistance to the Russian coal industry and $300 million to the Ukraine [18, 19, 20, 21].

Poland is the key coal producer and consumer in Eastern Europe. In 1995, coal consumption in Poland totaled 178 million tons, 43 percent of Eastern Europe’s total coal consumption for the year. Poland’s hard coal industry produced 148 million tons in 1995, and lignite producers contributed an additional 70 million tons [6, Tables 5.2, 5.3, and 5.4]. In other Eastern European countries, coal consumption is dominated by the use of low-Btu subbituminous coal and lignite, produced from local reserves. In 1995, the region’s other important coal-consuming countries were the Czech Republic (16 percent of the region’s total coal use), Romania (12 percent), Serbia (11percent), Bulgaria (8 percent), and Hungary (4 percent). Eastern Europe relies heavily on local production, with seaborne imports of coal to the region totaling less than 5 million tons in 1996 [22, p. 64].

At present, Poland’s hard coal industry is at a crossroads. The industry is faced with radical restructuring plans, such as the one proposed in a World Bank report in 1997 that recommended the closure of between 17 and 28 of Poland’s 62 hard coal mines by as early as 2002 [30, 33]. The Polish government’s own restructuring plan presented in 1995 (the Markowski Plan) recommended a much less severe downsizing of the industry. Nevertheless, the primary goal of both restructuring plans is to transform Poland’s hard coal industry to a position of positive earnings, eliminating the need for government subsidies. Although Poland has abandoned the Markowski Plan, its Economics Ministry has indicated that a new restructuring plan will be forthcoming in 1998 [32]. Also affecting Poland’s coal industry is the new Energy Law, passed in April 1997, which calls for the gradual freeing of prices for both liquid fuels and coal [33].

Coal Industry Subsidies, Production, and Import Prices, 1996

At present, Poland’s hard coal industry is at a crossroads. The industry is faced with radical restructuring plans, such as the one proposed in a World Bank report in 1997 that recommended the closure of between 17 and 28 of Poland’s 62 hard coal mines by as early as 2002 [30, 33]. The Polish government’s own restructuring plan presented in 1995 (the Markowski Plan) recommended a much less severe downsizing of the industry. Nevertheless, the primary goal of both restructuring plans is to transform Poland’s hard coal industry to a position of positive earnings, eliminating the need for government subsidies. Although Poland has abandoned the Markowski Plan, its Economics Ministry has indicated that a new restructuring plan will be forthcoming in 1998 [32]. Also affecting Poland’s coal industry is the new Energy Law, passed in April 1997, which calls for the gradual freeing of prices for both liquid fuels and coal [33].

Over the forecast period, coal consumption in Eastern Europe is projected to decline by about 19 percent on a Btu basis. Increased use of natural gas, oil, and renewable energy compensate for the reduced output from coal in meeting the region’s projected growth in energy demand.

North America

In North America, coal consumption is concentrated in the United States, which, at 941 million tons, accounted for 93 percent of the regional total in 1995. By 2020, U.S. coal consumption is projected to rise to 1,257 million tons. With its substantial supplies of coal reserves, the United States has come to rely heavily on coal for electricity generation and continues to do so over the forecast. Coal provided 51 percent of total U.S. electricity generation in 1995 and is projected to provide 49 percent in 2020 [34]. To a large extent, EIA’s projections of declines in both minemouth coal prices and coal transportation rates are the basis for the expectation that coal will continue to compete as a fuel for U.S. power generation (see box above). In Canada and Mexico (the other countries of North America), coal consumption is projected to rise from 72 million tons in 1995 to 108 million tons in 2020.

Canada’s increased use of coal in the IEO98 forecast results primarily from the expected retirement of some of the country’s older nuclear units after 2010, and the subsequent need to replace that generation [35]. During this period, Canada’s nuclear generation is projected to decline by 24 percent. A temporary decrease in Canada’s nuclear generation early in the forecast period also leads to some increased coal burn then. During the summer of1997, Ontario Hydro shut down 7 of its 19 nuclear reactors for major overhauls after the discovery of widespread safety and performance problems [36].

In Mexico, the state-owned Comision Federal de Electricidad has plans to construct a 2.1-gigawatt dual coal- and oil-fired plant on Mexico’s Pacific coast [37]. When all of the plant’s generating units are completed in the early 2000s, its coal consumption is projected to exceed 5 million tons annually. A new coal import facility being constructed adjacent to the plant should have an annual throughput capacity of more than 9 million tons.

Sulfur Allowance Penalties by Coal Type and Demand Region in the United States, 1996
(1996 Dollars per Million Btu)

*A sulfur allowance entitles the owner to emit 1 ton of SO_x. Allowances are priced in a national market, open to all. The sulfur allowance penalty of $0.202 per million Btu for high-sulfur coal is calculated from the national allowance price of $76.85 per ton of SO_x (as estimated for 1996 by the National Energy Modeling System (NEMS) in EIA’s AEO98, based on the average heat and sulfur content for high-sulfur coal purchased by electric utilities in 1996).
**The allowance prices shown differ from region to region because of variation in the heat and sulfur content of the coal consumed. The NEMS Coal Market Module simulates 34 types of coal, the characteristics of which have been aggregated into the five categories shown in the table. The national values are weighted averages.
***Scrubbing achieves an average of about 87 percent removal of sulfur oxides from plant emissions. It therefore reduces the allowance penalty associated with burning high-sulfur coal proportionately to about (1.00 - 0.87) × $0.202 = $0.026 per million Btu.

Africa

In Africa, coal production and consumption are concentrated almost entirely in South Africa. In 1995, South Africa produced 227 million tons of coal, 70 percent of which was routed to domestic markets and the remainder to exports [6, Table 2.5]. South Africa ranks third in the world in coal exports, behind Australia and the United States, and is projected to maintain that position over the forecast. South Africa holds the distinction of being the world’s largest producer of coal-based synthetic liquid fuels. In 1995, almost one-fifth of the coal consumed in South Africa (on a Btu basis) was used to produce coal-based synthetic fuels, which in turn accounted for approximately one-third of all liquid fuels consumed in South Africa during the year [38, 39].

For Africa as a whole, coal consumption is projected to increase by 45 million tons between 1995 and 2020, primarily to meet increased demand for electricity. Contributing to the increase in electricity demand is South Africa’s commitment to rural electrification. There are substantial opportunities for trade in electricity and natural gas between South Africa and neighboring countries. Such trades may occur, given government reform in South Africa and the subsequent removal of trade sanctions.

Elsewhere in Africa, the completion of four additional coal-fired units at Morocco’s Jorf Lasfar plant near Casablanca should increase coal consumption there from about 2 million tons in 1996 to more than 5 million tons [40, 41]. When all units are completed, the plant is expected to account for approximately one-third of Morocco’s total power generation.

South America

Historically, coal has not been an important source of energy in South America, accounting for less than 5 percent of the region’s total energy consumption. In the electricity sector, hydroelectric power currently meets much of South America’s electricity demand. Over the forecast period, both hydropower and natural gas are projected to fuel much of the projected increase in electricity generation.

In 1995, Brazil accounted for 56 percent of South America’s total coal demand, with Colombia, Chile, and Argentina accounting for much of the remaining portion [6, Table 1.4]. In Brazil, the steel industry accounts for almost two-thirds of the country’s total coal consumption, relying on imports of metallurgical coal to produce coke for use in its blast furnaces [6, Table 1.4; 7, p.III.136]. In the forecast, increased use of coal for steelmaking (both coking coal and coal for pulverized coal injection) accounts for much of the projected increase in Brazilian coal consumption [42]. New power projects in Colombia and Brazil account for most of the remaining growth in coal consumption projected for South and Central America [43].

Middle East

Israel and Iran accounted for most of the 10 million tons of coal consumed in the Middle East in 1995 [6, Table 1.4]. Over the forecast, Israel’s coal consumption is projected to rise by approximately 6 million tons with the completion of two new coal-fired generating plants between 1999 and 2005 [7, III.136; 44]. Israel’s state-owned utility, Israel Electric Corporation, estimates that coal-fired plants will meet approximately 60 percent of the country’s electricity needs in the post-2000 period [45].

In Iran, approximately 1 million tons of coal consumption has been satisfied historically by indigenous suppliers [6, Table 2.5]. In addition, Iran’s National Steel Corporation (NISCO) imports approximately 0.5 million tons of coking coal annually, and some additional imports are expected over the forecast period as a result of planned expansions in the country’s steelmaking capacity [46, 47].

Trade
Overview

The amount of coal traded in international markets is small in comparison with total world consumption. In 1996, world imports of coal amounted to 503 million tons (Table 21 and Figure 63), representing 9 percent of total consumption. By 2020, coal imports are projected to rise to 740 million tons, accounting for the same share of world coal consumption as in 1996. Although coal trade has accounted for a relatively constant share of world coal consumption over time and should continue to do so in future years, the geographical composition of trade is shifting.

In recent years, international coal trade has been characterized by relatively stable demand for coal imports in Western Europe and expanding demand in Asia (Figure 63). Rising production costs in the indigenous coal industries in Western Europe, combined with continuing pressure to reduce industry subsidies, have led to substantial declines in production there, creating thepotential for large increases in coal imports; however, slow economic growth in recent years and increased electricity generation from natural gas, nuclear, and hydropower have curtailed the growth in coal imports. Conversely, growth in coal demand in Japan, South Korea, and Taiwan in recent years has contributed to a substantial rise in Asian coal imports.

Figure 63. Production and Imports of Hard Coal by Region, 1985, 1990, and 1996

Note: Production and imports include data for anthracite, bituminous, and subbituminous coal.
Sources: Production: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Imports: International Energy Agency, Coal Information 1994 (Paris, France, 1995), and Coal Information 1996 (Paris, France, July 1997).

Table 21. World Coal Flows by Importing and Exporting Regions, Reference Case, 1996, 2010, and 2020
(Million Short Tons)