Asia's Return to Coal: Conflict Drives Short-Term Energy Shift

Asian countries are increasing their use of coal due to disruptions in oil and gas shipments, specifically liquefied natural gas (LNG), stemming from the ongoing conflict in the Middle East. The region's heavy reliance on imported fuel, much of which transits through the critical Strait of Hormuz chokepoint, exposes it to significant supply vulnerabilities.

The conflict in the Middle East has prompted a broad shift back to coal across Asia to cover LNG shortfalls, raising concerns about air quality and climate goals.

Energy Shift Across Asia

LNG, a natural gas cooled for transport, has long been promoted as a transitional fuel towards cleaner energy. However, current global events have compelled a return to coal.

Key developments across the continent include:

• India: Significantly increased coal burning to meet heightened summer demand.
• South Korea: Lifted caps on electricity generation from coal.
• Indonesia: Prioritizing its domestic coal supply for internal use over exports.
• Thailand, Philippines, Vietnam: Actively boosting coal-fired power generation.

This increased reliance on coal carries substantial risks. It has the potential to worsen urban air quality, impede the crucial transition to renewable energy sources, and escalate regional greenhouse gas emissions. Experts emphasize that coal serves merely as a short-term solution, while renewable energy represents the indispensable long-term objective. Continued dependence on coal leaves Asia susceptible to future energy shocks.

Major Coal Consumers and Producers

Coal is central to Asia's emergency energy planning primarily due to its widespread availability within the region.

China's Coal Strategy

China, as the world's leading coal consumer and producer, has significantly expanded its coal power generating capacity since 2021 to enhance national energy security. Its national policy openly supports ongoing coal use, even while it continues to develop substantial clean energy infrastructure.

India's Demand Surge

India, the second-largest coal consumer and producer globally, is actively preparing for high summer demand, expected to reach 270 gigawatts, which will be primarily met using coal. The country currently possesses approximately three months of coal supply.

Indonesia's Export Prioritization

Indonesia, the world's largest coal exporter, is now prioritizing domestic consumption over exports. This policy could tighten regional supplies and exert upward pressure on global coal prices.

Coal prices are determined globally, subjecting importers to market fluctuations and disruptions.

Impact on Long-Term Energy Goals

An increase in current coal use could significantly impede or even reverse long-term efforts to phase out coal-fired power across Asia.

Indonesia's Retirement Challenges

Indonesia has faced considerable challenges in meeting targets for early coal plant retirements. Financing delays occurred even before the current Middle East conflict exacerbated energy concerns. The cost of coal power in Indonesia was 48% higher in 2024 than in 2020 due to aging infrastructure and increased expenses, leading to a 24% rise in national utility subsidies, totaling $11 billion.

South Korea's Policy Reversals

South Korea had previously pledged to retire most coal plants by 2040 and committed to reducing emissions by half by 2035. However, the nation is now permitting greater coal use during periods of low air pollution and LNG scarcity. South Korea's renewable energy growth has been notably slow, accounting for only 10% of its electricity generation in 2024.

Over the past 11 years, South Korea allocated $127 billion to fossil fuels, significantly more than its investment in renewables, with 60% of export finance directed towards LNG and $120.1 billion spent on fuel imports in 2024 alone.

Health and Environmental Concerns

Burning coal releases fine particulate matter that can lead to severe health issues. According to the World Health Organization (WHO), these include heart disease, stroke, lung cancer, and chronic respiratory diseases. This poses a substantial public health challenge across Asia.

The increase in coal use across Asia presents a substantial public health challenge due to severe health issues linked to fine particulate matter.

India's Air Quality Crisis

In India, all 1.4 billion residents breathe air with particulate concentrations deemed unsafe by the WHO. The government recently took the step of temporarily suspending certain air-quality regulations, even allowing restaurants to burn coal to alleviate gas shortages.

Vietnam's Persistent Pollution

Vietnam consistently experiences severe air pollution, with PM2.5 levels frequently exceeding WHO limits. This occurs despite various initiatives aimed at promoting electric vehicles and reducing coal consumption.