Global Coal Demand Likely To Plateau Before Gradual Decline Amid Energy Transition

As a traditional feedstock, coal is the cornerstone of electricity generation in many countries. At the same time, it is the single largest source of carbon dioxide emissions globally. This combination places it at the centre of international dialogues on energy.

Uncertainty ahead for global coal markets

The coal market worldwide will have to brace for uncertainty, as a range of different trends could shape the market in the years ahead. Energy systems around the world are undergoing change, as energy transition and decarbonisation become key themes for countries to pursue.

IEA projects peak and gradual decline

Global coal use has hit a ceiling and is set to begin a slow decline over the next five years, as renewables and liquefied natural gas (LNG) gain ground, according to the International Energy Agency (IEA).

Coal demand is expected to edge up 0.5% this year to a record 8,845 million tonnes before slipping 3% by 2030, according to the IEA’s annual coal report published recently.

Environmental concerns remain central

It is recognised that coal is the most polluting of all fossil fuels, and it remains the single largest source of carbon dioxide emissions globally. Burning it contributes to accelerating climate change, and many countries, including the UK, France and Spain, have eliminated or are about to phase out its use.

China remains dominant consumer

Yet coal remains a cornerstone of electricity generation in many countries, with China consuming more than the rest of the world combined.

Renewables overtake coal in power generation

Coal use has reached a ‘plateau’ as renewables scale up. Solar and wind are expanding fast enough to meet all new electricity demand globally, according to experts. Renewables, including solar, wind, hydro and smaller sources such as geothermal, generated more power than coal in 2025 for the first time.

China key to peak coal trajectory

Analysts have long struggled to call the moment at which peak coal will arrive, amid stubbornly strong consumption in China and India, even as advanced economies shutter mines and ramp up solar and wind. The IEA cautioned that its five-year outlook “is subject to significant uncertainties that could impact it materially.”

Much of the challenge in determining when the world will hit peak coal comes down to China, which accounts for more than half of global consumption and production. The IEA sees a slight decrease in China’s demand over the next five years, although “lower renewable energy dispatch or an acceleration in coal gasification projects could turn the slight drop into a small increase,” it said.

India sees mixed trends

The uncertainties are underpinned by China’s own approach to planet-warming pollution. There are signs that the country’s overall emissions have already peaked, and under its upcoming Five-Year Plan, the government will seek a peak in coal and oil use between 2026 and 2030.

In India, a strong monsoon season depressed power demand and boosted hydropower production. As a result, annual coal power generation is expected to decline in 2025 from 2024, halting an increase in production seen in recent years.

Import trends and domestic production

In fiscal year 2023–24, domestic coal-based power plants imported 23.9 million tonnes of coal for blending purposes, but the volume declined to 14.0 million tonnes in 2024–25. However, imported coal-based power plants expanded their imports by over 6 million tonnes to 48.6 million tonnes in 2024–25.

Compared with the annual production target of 1,080 million tonnes in 2024–25, India produced 1,058 million tonnes. In 2023–24, against a target of 1,012 million tonnes, production stood at 998 million tonnes.

Coal imports and self-reliance push

Coal is imported by both power and non-power sectors, such as steel and cement. In the last two years, imports ranged between 245 million and 265 million tonnes. According to the government, the country is moving towards coal aatmanirbharta (self-reliance).

Under Mission Coking Coal, the government has enhanced the production target to 140 million tonnes by 2030. While most of the country’s requirement is met through domestic sources, some high-grade coal, such as coking coal and low-ash thermal coal, is imported mainly by the steel industry and coal-based power plants.

Outlook for coal imports

Coal imports are expected to see a sharp decline globally over the next five years. In advanced economies, they are set to keep shrinking through 2030. Meanwhile, India faces a mixed outlook, with a strong push for domestic production tempered by the need for imports due to coal quality issues.

G. Chandrashekhar is an economist, senior journalist and policy commentator specialising in commodity markets. Views are personal.

Published on: Friday, January 09, 2026, 03:58 AM IST