Excerpts only. For the complete essay, see the original at Global Public Media.

A soon-to-be-released study by the Energy Watch Group in Germany on the future of global coal supplies has implications so surprising and far-reaching that energy policymakers may take years to digest it. This essay is intended to help speed that process. The report’s central conclusion is that minable global coal reserves are much smaller than is commonly thought, and that a peak in world coal production is likely within only ten to fifteen years.

I will first offer some context for appreciating these conclusions, by way of some general information about global coal usage. Then I will describe the basis for the report’s conclusions, and finally will attempt to draw out some of the implications (not discussed by the report’s authors) for world energy supply and climate policy.

…the use of coal is increasing dramatically in China as that nation rapidly industrializes (in 2005, China was responsible for 36.1 percent of world coal consumption, the U.S. for 9.6 percent, and India 7.3 percent). As a result of these factors, the global consumption of coal is today growing faster than that of oil or natural gas—a reverse of the situation in earlier decades.

…Looking to the future, many analysts who are concerned about emerging supply constraints for oil and gas foresee a compensating shift to lower-quality fuels. The conversion of coal to a gaseous or liquid fuel is feasible, and coal-gasification and coal-toliquids plants are being constructed at record rates.

This expanded use of coal is worrisome to advocates of policies to protect the global climate, some of whom place great hopes in new (mostly untested) technologies to capture and sequester carbon from coal gasification. With or without such technologies, there will almost certainly be more coal in our near future.

The EWG Coal Report

The Energy Watch Group report, “Coal: Resources and Future Production,” notes that

About 90% of coal reserves are concentrated in 6 countries: USA, Russia, India, China, Australia and South Africa. The USA alone holds 30% and is the second largest producer. China is by far the largest producer but contains only half of the reserves of the USA. Therefore the development of these two countries is a key for future coal production.

However, the report’s authors (Werner Zittel and Jörg Schindler) are of the opinion that “the data quality is very unreliable,” especially for China, South Asia, and the Former Soviet Union countries. Some nations (such as Vietnam) have not updated their “proved reserves” for decades, in some instances not since the 1960s. China’s last update was in 1992; since then, 20 percent of its reserves have been consumed, though this is not revealed in its official figures.

Even more striking is the fact that since 1986 all nations with significant coal resources (excepting India and Australia) that have made the effort to update their reserves estimates have reported substantial downward resource revisions. Some countries—including Botswana, Germany, and the UK—have downgraded their reserves by more than 90 percent. Poland’s reserves are now 50 percent smaller than was the case 20 years ago. Each new assessment (again, except in the cases of India and Australia) has followed the general trend. These downgrades cannot be explained by volumes produced in this period. The best explanation, according to the EWG report’s authors, is that nations now have better data from more thorough surveys. If that is the case, then future downward revisions are likely from countries that continue to rely on decades-old resource estimates. The report concludes: “the present and past experience does not support the common argument that reserves are increasing over time as new areas are explored and prices rise.”

…The EWG report’s authors, taking these factors into account, state: “it is likely that China will experience peak production within the next 5–15 years, followed by a steep decline.” Only if China’s reported coal reserves are in reality much larger than reported will Chinese coal production rates not peak “very soon” and drop rapidly.

The United States is the world’s second-largest producer, surpassing the two next important producer states (India and Australia) by nearly a factor of three. Its reserves are so large that America has sometimes been called “the Saudi Arabia of coal.” The U.S. has already passed its peak of production for high-quality coal (from the Appalachian mountains and the Illinois basin) and has seen production of bituminous coal decline since 1990. However, growing extraction of sub-bituminous coal in Wyoming has more than compensated for this. Taking reserves into account, the authors of the report conclude that growth in total volumes can continue for 10 to 15 years. However, in terms of energy content U.S. coal production peaked in 1998 at 598 million tons of oil equivalents (Mtoe); by 2005 this had fallen to 576 Mtoe.

This forecast for a near-term peak in U.S. coal extraction flies in the face of frequently repeated statements that the nation has 200 years’ worth of coal reserves at current levels of consumption. The report notes: “all of these reserves will probably not be converted into production volumes, as most of them are of low quality with high sulfur content or other restrictions.” It also points out that “the productivity of mines in terms of produced tons per miner steadily increased until 2000, but declines since then.”

…Given the nature of its findings, the EWG coal report should be regarded with utmost seriousness. Those findings must be examined carefully and checked against other studies (I am aware of a similar study under way in the Netherlands; as soon as it is available I plan to write a follow-up article to compare its results with those of the EWG). If the data and analysis described here hold up, the implications must be faced. World energy will begin to decline very soon, and there probably is no supply-side fix. The most important policies will be ones that have to do with proactive energy curtailment and systemic societal adjustment to lower consumption levels. Those policies will necessarily impact agriculture, transport, trade, urban design, and national electrical grid systems—and everything dependent on them, including global telecommunications.

In other publications I have advocated a Depletion Protocol for oil as a policy tool to enable societies to better adapt to the impending peak in global petroleum production. Depletion protocols for gas and coal, while not as critical (since these fuels are not traded globally to the same extent as oil), could also help with the difficult process of adaptation. Nations that are currently dependent on coal—China and the U.S. especially—would be wise to begin reducing consumption now, not only in the interests of climate protection, but also to reduce societal vulnerability arising from dependence on a resource that will soon begin to become more scarce and expensive.