Global spending on coal projects is expected to rise 10% this year as part of efforts to bolster energy security as Russia’s war on Ukraine adds pressure on fuel markets.
The International Energy Agency (IEA) expects around $115bn (£93bn) to be invested in coal supply chains this year, compared to around $105bn in 2021, about 10% more than the previous year.
The spending is being led by China and India, the IEA added, the former trying to avoid a repeat of the electricity rationing it suffered in 2021.
This comes despite international pledges made in October to “phase down” coal in power plants because of its carbon emissions.
“In some markets, energy security concerns and high prices are prompting greater investment in fossil fuel supply, particularly coal,” said IEA Executive Director Fatih Birol.
He called for a “massive increase in investment to accelerate clean energy”, arguing that energy security and global warming can be tackled “at the same time”.
The UK, Germany and the Netherlands are all relying on coal as a backup in case Russia goes further by cutting gas supplies to Europe this winter.
The IEA said these markets “do not necessarily drive up investment in coal supply”, with coal spending being held back in many areas by carbon regulations.
Global energy markets have been stretched since last summer as countries began to reopen after the pandemic amid global undersupply of natural gas.
High gas prices have caused many countries to turn to coal as an alternative fuel for power plants, although coal prices have also risen sharply.
Russia’s war on Ukraine has made matters worse as traders begin to shun one of the world’s biggest gas, coal and oil suppliers.
As high energy prices cause “pains” for economies, they are expected to more than double oil and gas sector revenues to $4 trillion in 2022, Dr Birol added.
He urged the sector to spend “windfall gains” on switching to cleaner energy, which now attracts around 5% of oil and gas sector spending, up from 1% in 2019.
Dr Birol said oil and gas spending was “caught between two visions of the future” – too high to control global warming, but not high enough if governments don’t also reduce demand by moving infrastructure so that they run on cleaner energy.