Despite the global push toward renewable energy sources, the reality is that the switch from coal energy isn't going at the pace some had hoped for. In this segment of Backstage Pass, recorded on Dec. 20, Fool.com contributors Rachel Warren and Jason Hall discuss some of the key catalysts behind this slow transition.
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Rachel Warren: I think this is interesting. I don't think it's surprising. I think some of this is a natural recovery from the lows of the pandemic. But I think it also reveals how complicated this transition to more climate-friendly sources of energy is. It is not something that can be accomplished overnight.
This topic was based on a report that has just come out from the International Energy Agency, their Coal 2021 report. There was a really interesting breakdown of this by a London information analytics company called IHS Markit.
But essentially the IEA said "global coal demand is on track to exceed pre-pandemic levels this year and could reach an all-time high in 2022". "China's coal consumption, which accounts for more than half of the global total, is expected to increase by 4%" this year. Then India's is supposed to register a 13.4% increase this year.
Another thing was, they were talking about the outlook over the next few years and we're talking about, is this something that's just happening this year, and then we're going to see it die back down as we transition to more climate-friendly energy sources. I don't think it's going to be that simple, sad to say.
"Looking forward, the IEA anticipates global coal demand will increase by 125 million metric tons between 2021 and 2024." This report says that is "mainly due to rising electricity demand in Asia. Annual coal consumption is expected to rise by 135 million metric tons in China and 15 million metric tons in Southeast Asia during" that 2021-2024 period.
On a more positive note, "it is forecast to drop by 77 million metric tons in the U.S., and 101 million metric tons in the EU with more regions using gas and generating additional renewable power."
I think if anything what these statistics show is this isn't a quick fix, it makes sense that we're seeing a bit of an increase again when it was more at a low during the pandemic with people using less energy consumption.
But I also think this reveals we need to be making these changes, but it requires a lot of cooperation from a lot of different countries, and I don't think it's something that's going to happen as quickly as a lot of people would like, I know this is a big issue for a lot of folks in my generation and I feel pretty strongly about it.
But it's something that takes time to implement. To answer your original question, I think this might be a trend we see for a while where there's this imbalance in some places it's decreasing, but in other places it's growing.
Jason Hall: I think it's a reminder too that there's hundreds of millions of people all over the world that don't have reliable energy at the levels we have in the West --
Rachel Warren: Right.
Jason Hall: --and this expectation that, well, let's just throw up a bunch of renewables.
Rachel Warren: That won't work for everyone.
Jason Hall: It's not that simple, it's complex. You need the infrastructure, there is a lot about natural gas. Well, we're trying to build liquefaction to send that to other parts of the world. They don't have the resources developed in China and in Southeast Asia, they just do natural gas. It's really [laughs] complicated.
It really, is. I think is just a reminder of that, but it's also a reminder you start digging into those numbers Rachel, guess what?
There's progress in the developed world to move away from coal--
Rachel Warren: Yeah.
Jason Hall:--that's continuing to happen. There's a positive there. I think that's important to remember.