Coal's era starts to wane as world shifts to cleaner energy

[LONDON] It's the end of an era for coal.

Production of the fossil fuel dropped by a record amount in 2016, according to BP Plc's annual review of global energy trends. China, the world's biggest energy consumer, burned the least coal in six years and use dropped for a fourth year in the US, the company's data show.

Coal, the most polluting fuel that was once the world's fastest growing energy source, has been a target of countries and companies alike as the world begins to work toward the goals of the Paris climate agreement. Consumption is falling as the world's biggest energy companies promote cleaner-burning natural gas, China's economy evolves to focus more on services than heavy manufacturing and renewable energy like wind and solar becomes cheaper.

"The fortunes of coal appear to have taken a decisive break from the past," BP's Chief Economist Spencer Dale said at a briefing in London on Tuesday. The most important outcome of this "is carbon emissions, which saw little or no growth for a third consecutive year."

Global coal consumption dropped 1.7 per cent last year compared with an average 1.9 per cent yearly increase from 2005 to 2015, according to BP. China, which accounted for about half of the coal burned in the world, used 1.6 per cent less of the fuel, compared with an average 3.7 per cent annual expansion in the 11 preceding years.

"At the heart of this shift are structural, long-term factors," Mr Dale said. These include "the increasing availability and competitiveness of natural gas and renewable energy, combined with mounting government and societal pressure to shift away from coal towards cleaner, lower-carbon fuels."

Consumption of coal fell in every continent except Africa, the BP data show. In Asia, China's decline was partially offset by higher consumption in India and Indonesia, where the fuel is still so cheap and readily available that utilities prefer it over natural gas for electricity generation.

Germany, Europe's biggest user, consumed 4.3 per cent less coal. UK demand fell 52.5 per cent, the biggest decline among the world's major economies, according to BP's data.

Global carbon emissions, which grew at an annual average rate of about 2.5 per cent in the 10 years to 2013, remained stagnant in the past three years, Mr Dale said. While some of this reflects weaker economic growth, the majority reflects faster declines in "the average amount of carbon emitted per unit of GDP," he said.

Still, there needs to be a "significant fall" in emissions in order to meet the Paris climate goals, Mr Dale said.

The world consumed 1.6 per cent more oil last year, with India's use expanding 7.8 per cent, or 325,000 barrels a day, and China's 3.3 per cent, according to the data.

Demand from the Organization for Economic Cooperation and Development, a group of industrialised nations, grew 0.9 per cent in 2016, compared with an average annual decline of 0.9 per cent over the previous decade.

BLOOMBERG