02.01.2020 Author: Dmitry Bokarev

The Coal Industry and its Future

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Hydrocarbons are part of the foundation of modern civilization, and the production and sale of these natural resources is one of the most profitable businesses. It would be fair to say that any country with hydrocarbon deposits and a highly-developed mining industry can count them as major assets. These days however, some fossil fuels are valued less than others. The coal industry is currently going through a tough time.

When burnt, coal emits the most harmful air pollutants. According to the data available, burning this type of fuel for industrial purposes and for heating and electricity produces about 40% of the carbon dioxide that is emitted into the atmosphere and contributes to global warming.

Governments concerned about climate change and the environment are increasingly seeking to reduce their coal consumption, replacing it with oil or natural gas where possible. EU countries are known to be “ahead of the rest” when it comes to protecting the environment. They have long been working hard to develop “alternative energy”, and they are closing coal-fired power stations as well as their coal mines. In 2014-2018, France, Great Britain and Germany ended all of their coal mining.

The countries cutting back on coal consumption even include the industrial giant that is China. China needs a huge amount of fuel and is the world’s largest producer and consumer of coal, but this country, confronted with major environmental problems, has been forced to think about reducing coal and diversifying its energy sources.

At the end of 2015, the United Nations Climate Change Conference was held in Paris, which resulted in many countries adopting the Paris Climate Agreement. They pledged to fight global warming and limit carbon emissions. Among other things, a reduction in coal consumption is required to achieve this. The countries that have signed the Agreement include China and other major industrial countries — India, South Korea, etc. Russia has also joined them.

Many experts have viewed these events as just about the beginning of the end of the coal industry.

However, it is still too early for any talk of a complete end to coal burning: coal is still the cheapest hydrocarbon energy source, and it is also the easiest to transport and store. Every time oil prices go up, more coal is burnt. Even a country as rich and technologically advanced as Japan, which closed many of its nuclear power plants after the 2011 Fukushima Daiichi nuclear disaster and was forced to fall back on fossil fuels, quickly realized that it could not afford to limit itself to oil and gas and had to start buying coal.

This goes to show that the coal industry still has some long-term potential. This is also true for Russia, which has more than 1 trillion tons worth of coal reserves, and is one of the world’s largest exporters of this source of energy. Despite the general movement away from coal, proclaimed with a promise to abandon it in the Paris Agreement, Russia’s coal production has only increased since the 2015 United Nations Climate Change Conference, which exceeded 400 million tons in 2017. It was also the first year that Russia sold more coal abroad than it burnt to fulfill its own consumption needs.

The coal industry continues to be developed in Russia today. In July 2019, the Ural Mining Company announced it would be opening a new open-pit coal mine at the Chernokaltanskoye Coalfield in Kuzbass. Up to 1 million tons of coal are expected to be extracted from the mine per year, and it will have over a 60-year lifetime.

In the same month, the state-owned company Russian Railways announced that it would be temporarily lifting the export charge to transport Russian coal. This is another incentive for the Russian coal industry.

In August 2019, the draft for the Development Strategy of the Russian Coal Industry to 2035 was published on the website of the Ministry of Energy of the Russian Federation.

The document states that by 2035, Russia aims to increase workforce productivity in coal mining by 3-4 times; continue to develop existing coal mining companies and create new coal production hubs in Russia’s eastern regions; and begin production at new Arctic coal fields. According to the most optimistic forecast, Russian coal production is set to reach 668 million tons per year by 2035, and more than 66% of it will be exported.

This optimism among Russian coal miners is in sharp contrast with the predictions made after the Paris Climate Change Conference, portending the demise of the coal industry. These contrasting predictions are due to the fact that the main parties fulfilling the Paris Agreement are EU countries. At the same time, Russia expects Asian countries to be the main importers of Russian coal going forward. The largest buyers of Russian coal currently include South Korea, China and Japan — three of world’s top-four coal importers.

As has already been mentioned, all of these states have signed the Paris Agreement and aim to reduce their reliance on coal by switching to other forms of energy, but for purely economic reasons, they will not be able to do it overnight. The process could drag on for decades. Besides, formally signed the agreement does not guarantee compliance. At the end of 2019 for instance, the Institute for Energy Economics and Financial Analysis (IEEFA) accused China of not only continuing to develop its own coal industry, but of also having invested huge amounts of money to build coal-fired power plants in developing countries around the world. Thus, it would appear that China looks set to be supporting the coal business for a long time, including Russian exports.

At the same time, the draft for the Development Strategy of the Russian Coal Industry to 2035 which has previously been mentioned would indicate that Russia intends to reach more importers with its exports to India and South-East Asia, countries which also continue to rely on coal.

Thus, Russian coal mining companies expect their businesses will thrive, even if Europe abandons coal completely. However, here is the surprising thing: European countries are still continuing to buy Russian coal, and imports are even growing. In 2017-2018 for example, there was an increase in the amount of Russian coal imported by Germany.

Perhaps Europe will manage to abandon coal completely in the future. However, it remains to be seen how long these countries will be able to do without it. The problem is that modern technologies are still not advanced enough to enable people to make a radical global shift to alternative energy. The only viable substitute for fossil fuels is nuclear energy, but Europe wants to abandon it. The EU will therefore continue to rely on hydrocarbons, but just cleaner ones than coal: oil and natural gas. However, as Japan’s example has already illustrated, the choice of fuel is primarily dependent on the consumer’s buying power, and when faced with financial difficulties, European countries will be forced to return to coal. Since their coal mines will already be closed by then, they will have to import coal, most likely from Russia.

It looks like Russia’s coal industry will be around for a long time to come. The country has a firm foothold, and can look to the future with confidence.

Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook.”


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