Coal Coal's share of world energy consumption falls slightly in the IEO99 forecast. Coal continues to dominate many national fuel markets in developing Asia, but it is projected to lose market share to natural gas in some other areas of the world. Historically, trends in coal consumption have varied considerably by region. Despite declines in some regions, world coal consumption has increased from 84 quadrillion British thermal units (Btu) in 1985 to 93 quadrillion Btu in 1996. Regions that have seen increases in coal consumption include the United States, Japan, and developing Asia. Declines have occurred in Western Europe, Eastern Europe, and the countries of the former Soviet Union. In Western Europe, coal consumption declined by 30 percent (on a Btu basis) between 1985 and 1996, displaced in considerable measure by growing use of natural gas and, in France, by nuclear power. The countries of Eastern Europe and former Soviet Union (EE/FSU) saw an even sharper decline in coal use during the period (a 39-percent decline), primarily the result of reduced economic activity. Although coal has lost market share to petroleum products, natural gas, and nuclear power, it continues to be a key source of energy, especially for electric power generation. In 1996, coal accounted for 25 percent of the world's primary energy consumption (down from 27 percent in 1985) and 38 percent of the energy consumed worldwide for electricity generation (Figure 43). Figure 43. Coal Share of World Energy Consumption by Sector, 1996 and 2020 In the International Energy Outlook 1999 (IEO99) forecast, coal's share of total energy consumption falls only slightly, from 25 percent in 1996 to 23 percent in 2020. Its historical share is nearly maintained, because large increases in energy use are projected for the developing countries of Asia, where coal continues to dominate many national fuel markets. Together, two of the key countries in the region, China and India (Figure 44), are projected to account for 33 percent of the world's total increase in energy consumption over the forecast period and 90 percent of the world's total increase in coal use (on a Btu basis). Figure 44. Coal Share of Regional Energy Electricity Non-Electricity Total Sources: 1996: 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 (1999). 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 (1999). With the exception of China, coal for electricity generation will account for virtually all the projected growth in coal consumption worldwide. In the non-electricity sectors, other energy sources-primarily, natural gas and electricity-are expected to gain market share. In China. however, coal continues to be the primary fuel in a rapidly growing industrial sector, 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. Because the Kyoto Protocol is not currently a legally binding agreement, the IEO99 projections do not reflect the commitments made by the signatory countries to reduce or moderate their emissions of greenhouse gases. If their commitments do become legally binding, however, it is likely that the coal outlook for the industrialized countries will differ substantially from the IEO99 projections (see box below). In IEO99, coal consumption in the industrialized countries is projected to increase by 12 percent over the forecast period, rising from 35.8 quadrillion Btu in 1996 to 40.0 quadrillion Btu in 2020. The recent Asian financial crisis has a direct impact on the IEO99 projections. The crisis has led to a substantial devaluation of currencies in many of the countries of developing Asia, as well as in the industrialized countries that depend on export markets in the region. As a result, many projects to build coal-fired power plants in Asia have been delayed or canceled, and patterns of international coal trade have changed significantly. Highlights of the IEO99 projections for coal are as follows: -⚫World coal consumption is projected to increase by 2.4 billion tons, from 5.2 billion tons in 1996 to 7.6 billion tons in 2020 (Figure 45). World coal consumption in 2020 could be as high as 9.2 billion tons or as However severe the case, coal was the major "swing fuel" for making adjustments relative to Kyoto targets. In the least severe case completed for the EIA study, U.S. carbon emissions from the combustion of fossil fuels were permitted to be 24 percent above the 1990 level in 2010-still a reduction from the study's reference case, in which U.S. carbon emissions in 2010 were projected to be 33 percent higher than in 1990. Impacts of the Kyoto Protocol on the U.S. and Japanese Energy Markets In a study completed in October 1998, the Energy Information Administration (EIA) projected that for the United States to meet its Kyoto emissions target, annual U.S. coal consumption would need to be reduced by as little as 20 percent or by as much as 80 percent (on a tonnage basis) by 2010, relative to a reference case forecast without the Kyoto carbon emissions constraints [1, Table B16]. In the study's reference case, U.S. coal consumption was projected to rise from 896 million short tons in 1996 to 1,181 million short tons in 2010. The largest reduction in coal consumption was projected in a case that assumed the United States would be required to reduce its carbon emissions to 7 percent below the 1990 level through fuel switching, increased penetration of energy-efficient technologies, and reductions In overall energy use. Other cases modeled in the study assumed that the United States would meet its Kyoto emissions target through a combination of actions such as fuel switching, emissions trading, joint implementation, reforestation, and reductions in emissions of other greenhouse gases. As a result of higher projected delivered energy prices in the carbon reduction cases for the EIA's 1998 study, both the overall intensity of energy (units of energy consumed per dollar of gross domestic product) and the levels of economic activity were lower, leading to reductions in total energy consumption. Consumption levels for both coal and petroleum products were lower in the carbon reduction cases than in the reference case, whereas projected consumption levels for natural gas, renewable energy, and nuclear power were higher. 6Throughout this chapter, tons refers to short tons (2,000 pounds). In mid-1998, the Advisory Committee for Energy--an advisory body to Japan's Ministry of International Trade and Industry (MITI)-released a forecast showing how Japan could meet its Kyoto emissions target [2]. Their study concluded that coal consumption in Japan would need to be 14 percent lower (on a tonnage basis) in 2010 than in a business-as-usual case. Interestingly, their Kyoto scenario indicated that only the supply of renewable energy would be higher. The committee projected that the supply of petroleum products, natural gas, liquefied petroleum gas (LPG), and coal would all be lower in 2010 than in their business-as-usual case, with nuclear and hydropower remaining the same. Much of the projected reduction in carbon emissions in the Japanese study was based on assumed increases in energy efficiency and shifts away from energy-intensive activities. A Kyoto study completed by the WEFA Energy Group in 1998 projected that Japan's steam coal consumption would have to be 28 percent lower (on a Btu basis) in 2010 than it would be in a reference case forecast with no restraints on carbon emissions if Japan's commitments under the Kyoto Protocol were to be met [3]. Environmental Issues In future years, coal will face tough challenges, particu larly in the environmental area. Increased concern about the harmful 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 of the industrialized countries have implemented policies or regulations to limit sulfur dioxide emissions. Such policies typically require electricity producers to switch to lower sulfur fuels or invest in technologies (primarily flue gas desulfurization (FGD) equipment) that reduce the amounts of sulfur dioxide emitted. China, the world's largest emitter of sulfur dioxide, has been successful in reducing ambient sulfur dioxide levels in major urban areas in recent years but has been unable to restrain the growth of sulfur emissions overall (see box on page 60). A recent study completed by the International Energy Agency reported that most of the coal-fired capacity in Southeast Asian countries is not fitted with FGD equip ment, primarily because of cost but also because most plants in the region currently use low-sulfur coal [4]. The study concludes that public concern over pollution in Southeast Asia is likely to increase as living standards rise, but at present the emphasis is on increasing electricity generation to satisfy demand and ensure economic growth. In late 1998, approximately 5,000 villagers in southern Thailand staged a protest against plans for three new coal-fired power plants in the region [5]. Although the plants are being designed to burn imported low-sulfur coal, residents living nearby were under the impression that locally produced, high-sulfur lignite was to be used. Many people living in close proximity to the Mae Moe lignite-fired plant in northern Thailand have suffered serious respiratory problems attributed to high levels of sulfur dioxide emissions. In addition to sulfur dioxide, increased restrictions on emissions of nitrogen oxides, particulates, and carbon dioxide are likely, especially in the industrialized countries. Although the potential magnitudes and costs of additional environmental restrictions for coal are uncer tain, it seems likely that costs for coal-fired generation will increase. The costs of natural-gas-fired generation 7In the IEO99 reference case, world gross domestic product (GDP) is projected to increase at a rate of 2.9 percent per year between 1996 and 2020. In the low and high economic growth cases, world economic growth rates are assumed to be 1.3 percent lower and 1.2 percent higher, respectively, than in the reference case. By region, the dispersion in economic growth rates across the cases is less symmetrical than for the world as a whole, resulting in slightly asymmetrical variations in the projections of world coal consumption. In the low and high economic growth cases, the expected economic growth rates for China are 3.0 percent lower and 1.5 percent higher, respectively, than in the ref erence case. China: Emissions of Sulfur Dioxide and Particulates Sulfur dioxide (SO) and particulates are considered by many environmental experts in China to be the ambient air pollutants of gravest concern. In 1995, SO, emissions in China were estimated at 20.8 million tons, and particulate emissions totaled 23.3 million tons (see figure). By comparison, SO, emissions in the United States were estimated at 18.6 million tons in 1995a and particulate emissions totaled 3.3 million tons [6]. Coal is estimated to be the source of approximately 90 percent of China's SO, emissions and 70 percent of its particulate emissions [7]. Emissions of Sulfur Dioxide and Particulates in Source: National Environmental Protection Agency (NEPA), Peoples Republic of China, China Environmental Yearbook (various issues). Although China's SO, emissions are similar to those in the United States, the direct use of coal in China in the industrial and residential sectors within or in close proximity to urban areas has created serious health problems in its major cities. As recently as 1996, five citles in China (Beijing, Shenyang, Xi'an, Shanghai, and Guangzhou) were ranked among the world's ten worst for air pollution [8. p. VIII-3]. Mortality data for China indicate that 17 percent of the deaths in China's urban areas are due to acute and chronic respiratory illnesses [8. p. VIII-3]. This is substantially higher than the 7-percent share estimated for urban areas in the United States. According to a World Bank study completed in 1997, an estimated 178,000 people in China's major cities suffer early deaths each year because of ambient pollution levels in excess of China's standards [9, p. 19]. In China, SO, emissions originate from a wide range of Industrial sources, including power plants, which account for approximately one-third of China's total sulfur emissions, and the production of chemicals, building materials, and metals, which, taken together, account for an additional 20 percent of total sulfur emissions [8. p. VIII-2]. The consumption of coal for residential heating and cooking also accounts for about 20 percent of total SO, emissions. The widespread dispersion of point sources in China makes it more complicated than in other countries to reduce emissions through stack emission controls. In most countries, a relatively small number of centralized power plants account for the majority of total SO, emissions. At present, very little of China's manufacturing or generating plants are fitted with FGD equipment. Particulate emissions originate primarily from the same sources that emit sulfur dioxide. The key industrial source of particulates is the building materials sector, accounting for almost 25 percent of total emissions, followed by power plants (approximately 20 percent) and ferrous metals (approximately 8 percent) [8. p. VIII-3]. The nonindustrial sectors, primarily residential, account for more than 25 percent of China's total emissions of particulates. To date most efforts at reducing emissions in China have focused on the control of particulates, primarily those associated with such noncombustion processes as grinding, crushing, and sorting. Between 1986 and 1995, the average concentration of particulates in China's top ten populous cities declined from 636 micrograms per cubic meter (pg/m3) to 300 pg/m3 (see figure). During the same period, the share of total particulate emissions originating from noncombustion sources fell from 50 percent to 30 percent [8, Table VIII-2]. Improvements in ambient SO, levels have been relatively steady but less impressive than those for particulates. Between 1986 and 1995, the average annual SO, concentration for the ten most populous cities in China declined from 149 μg/m3 to 91 μg/m3. The most recent levels, however, continue to exceed the 50 μg/m3 guideline for sulfur dioxide set forth by the World Health Organization. The Chinese government recognizes the need to reduce pollution further, particularly in urban areas. (continued on page 61) According to the U.S. Environmental Protection Agency, 87 percent of U.S. sulfur dioxide emissions in 1995 resulted from the combustion of energy fuels in the electricity generation, Industrial, commercial, and residential sectors. The remaining portion originated from industrial processes (9 percent) and the use of fuels for transportation (4 percent). bBased on data collected for 1993. China: Emissions of Sulfur Dioxide and Particulates (Continued) Amblent Air Quality for China's Ten Most Populous Cities, 1985-1995 are not likely to be affected as much. For nuclear and hydropower, which compete with coal for baseload power generation, the future is unclear. Proposals have been put forth in several of the developed countries to phase out nuclear capacity in full or in large measure. In other countries, it has become difficult to site new capacity because of unfavorable public reaction. The siting of new large hydroelectric dams is also becoming more difficult because of increased environmental scrutiny. In addition, suitable sites for new large hydropower projects are limited. By far the most significant emerging issue for coal is the potential for a binding international agreement to reduce emissions of carbon dioxide and other greenhouse gases. On a Btu basis, the combustion of coal produces more carbon dioxide than that of natural gas or of most petroleum products (11, Table B1]. Carbon dioxide emissions per unit of energy obtained from coal are nearly 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. In the IEO99 forecast, carbon emissions are projected to rise between 1990 and 2010 in many countries, including increases of 33 percent for the United States, 17 percent for Japan, and 9 percent for Western Europe (Figure 46). On the other hand, carbon emissions for the former Soviet Union are projected to be 33 percent lower in 2010, and emissions in Eastern Many new laws and regulations to protect the environment have been promulgated in recent years, and various programs to control pollution, such as emission fees and pollution trading schemes, have been tested. A recently enacted program to reduce pollution levels in Beijing requires that all boilers using high-sulfur coal switch to a cleaner fuel such as natural gas or low-sulfur coal, and that building sites be walled off to contain fugitive dust from construction activities [10]. Additional means for reducing air pollution, both ongoing and under consideration, include: (1) encouraging investments in coal preparation facilities (noncombustible materials in coal contribute to increased emissions of particulates); (2) encouraging retrofits of electrostatic precipitators at existing coalfired power plants; (3) encouraging industrial facilities to locate away from urban areas; (4) implementing additional government policies to encourage investments in less energy-intensive industries; and (5) encouraging households to switch from the use of raw coal for heating and cooking to cleaner burning fuels such as natural gas or coal briquettes (8, p. VIII-3; 9, pp. 50-51]. |