A Guest Post by Dr. Minqi Li, Professor

Department of Economics, University of Utah

E-mail: minqi.li@economics.utah.edu

September 2018

This is Part 4 of the World Energy Annual Report in 2018. This part of the Annual Report provides updated analysis of world coal production and consumption, evaluates the future prospect of world coal supply and considers the implications of peak coal production for global economic growth.

This report uses Hubbert linearization to evaluate a region’s ultimately recoverable coal resources where a Hubbert linear trend can be meaningfully established, that is, where a clear downward trend of the annual production to cumulative production ratios can be identified and has been established for at least several years. Otherwise, this report uses alternative sources to establish a region’s ultimately recoverable coal resources, such as official reserves, official projections, or estimates made by energy research institutions.

Figure 14 World Historical and Projected Coal Production, 1950-2050

Figures are placed at the end of each section.

Coal Consumption by Major Economies, 1990-2017

According to the BP Statistical Review of World Energy, world coal consumption was 3,732 million tons of oil equivalent in 2017. Between 2007 and 2017, world coal consumption grew at an average annual rate of 0.8 percent.

Figure 1 compares the historical world economic growth rates and the coal consumption growth rates from 1991 to 2017. The coal consumption growth rate has an intercept of -0.031 at zero economic growth rate and a slope of 1.496. That is, coal consumption has an “autonomous” tendency to fall by 3.1 percent a year when economic growth rate is zero. However, an increase (or decrease) in economic growth rate by one percentage point is associated with an increase (or decrease) in coal consumption by about 1.5 percent. R-square for the linear trend is 0.45. In 2017, world coal consumption grew by 0.7 percent, a rate that is 1.9 percentage points below what is implied by the historical trend.

Figure 2 compares the per capita coal consumption in relation to per capita GDP for the world’s six largest national coal consumers and the European Union.

China is the world’s largest coal consumer. In 2017, China’s coal consumption was 1,893 million tons of oil equivalent, accounting for 51 percent of the world coal consumption. China’s per capita coal consumption peaked at 1.45 tons of oil equivalent in 2013. By 2017, China’s per capita coal consumption fell to 1.37 tons of oil equivalent.

India is the world’s second largest coal consumer. In 2017, India’s coal consumption reached 424 million tons of oil equivalent, accounting for 11 percent of the world coal consumption. From 1990 to 2017, India’s per capita coal consumption rose from 126 kilograms of oil equivalent to 317 kilograms of oil equivalent. If India’s per capita coal consumption continues to follow its historical trend in relation to per capita GDP, India’s per capita coal consumption will rise to 676 kilograms of oil equivalent by 2050 (when India’s per capita GDP is projected to rise to about 19,000 dollars). India’s population is expected to grow to 1.72 billion by 2050. Given these projections, India’s coal demand will rise to about 1.2 billion tons of oil equivalent by 2050.

The United States is the world’s third largest coal consumer. In 2017, the US consumed 332 million tons of oil equivalent, accounting for 8.8 percent of the world coal consumption. The US per capita coal consumption peaked at 1.92 tons of oil equivalent in 2000. The US coal consumption has declined sharply since the Great Recession of 2008-2009. By 2017, the US per capita coal consumption fell to 1.02 tons of oil equivalent.

The European Union is the world’s fourth largest coal consumer. In 2017, the EU coal consumption was 234 million tons of oil equivalent, accounting for 6.3 percent of the world coal consumption. The EU per capita coal consumption was 957 kilograms of oil equivalent in 1990. By 2017, the EU per capita coal consumption declined to 457 kilograms of oil equivalent.

Japan is the world’s fifth largest coal consumer. In 2017, Japan’s coal consumption was 121 million tons of oil equivalent, accounting for 3.2 percent of the world coal consumption. Japan’s per capita coal consumption rose from 632 kilograms of oil equivalent in 1990 to 939 kilograms of oil equivalent in 2008. In 2017, Japan’s per capita coal consumption was 950 kilograms of oil equivalent.

The Russian Federation is the world’s sixth largest coal consumer. In 2017, Russia’s coal consumption was 92 million tons of oil equivalent, accounting for 2.5 percent of the world coal consumption. Russia’s per capita coal consumption declined sharply from 1.23 tons of oil equivalent in 1990 to 685 kilograms of oil equivalent in 1998. By 2017, Russia’s per capita coal consumption fell to 639 kilograms of oil equivalent.

South Korea is the world’s seventh largest coal consumer. In 2017, South Korea’s coal consumption was 86 million tons of oil equivalent, accounting for 2.3 percent of the world coal consumption. South Korea’s per capita coal consumption surged from 569 kilograms of oil equivalent in 1990 to 1.67 tons of oil equivalent in 2011. In 2017, South Korea’s per capita coal consumption was 1.68 tons of oil equivalent.

Rising coal consumption in several major Asian economies such as Japan, South Korea, India, and Indonesia suggests that it is premature to declare that global economic growth has been decoupled from coal consumption.

Figure 1 World Coal Consumption and Economic Growth, 1991-2017

Linear Trend: Coal Consumption Growth Rate = -0.031 + 1.496 * Economic Growth Rate (R-square = 0.448)

Sources: World coal consumption from 1990 to 2017 is from BP (2018). Gross world product in constant 2011 international dollars from 1990 to 2016 is from World Bank (2018), extended to 2017 using growth rate reported by IMF (2018, Statistical Appendix, Table A1).

Figure 2 Per Capita GDP and Coal Consumption, Major Economies, 1990-2017

Sources: Per capita coal consumption and per capita GDP are calculated using data for coal consumption, GDP, and population. National and regional coal consumption from 1990 to 2017 is from BP (2018). National and regional GDP from 1990 to 2016 is from World Bank (2018), extended to 2017 using growth rates reported by IMF (2018, Statistical Appendix, Table A1, A2, and A4). National and regional population from 1990 to 2016 is from World Bank (2018), extended to 2017 by assuming that the 2017 population growth rates are the same as the 2016 growth rates. To project India’s per capita coal consumption, a log-linear relationship is estimated between the per capita coal consumption and per capita GDP for the period 1990-2017. India’s GDP and population projections from 2018 to 2050 are from EIA (2017, Reference Case, Table A3 and Table J4), adjusted to make the projected GDP and population levels in 2017 matching the levels reported by World Bank (2018).

China

China is the world’s largest coal producer. In 2017, China produced 3,523 million metric tons of coal (1,747 million tons of oil equivalent), accounting for 46 percent of the world coal production (in term of metric tons). China’s coal production peaked in 2013 at 3,974 million metric tons.

Although China’s coal production may have peaked in 2013, it remains premature to apply Hubbert linearization to China’s coal production as the annual production to cumulative production ratios have not yet settled on a relatively stable downward trend. This report assumes that China’s ultimately recoverable coal resources are the sum of historical cumulative production and the official reserves. China’s cumulative coal production up to 2017 was 82.1 billion metric tons (cumulative production up to 1980 is from Rutledge 2011, extended to 2017 using annual production data from BP 2018). China’s official coal reserves at the end of 2017 were reported to be 138.8 billion metric tons (BP 2018). The ultimately recoverable coal resources are estimated to be 220.9 billion metric tons.

Based on the above assumptions, China’s coal production is projected to rise to 3,807 million metric tons by 2025 before entering into permanent decline. By 2050, China’s coal production will fall to 1,968 million metric tons. Figure 3 shows China’s historical and projected coal production.

Figure 3 China’s Coal Production, 1950-2050

Sources: China’s historical coal production from 1950 to 1980 is from Rutledge (2011); coal production from 1981 to 2017 is from BP (2017). To project China’s coal production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

India

India is the world’s second largest coal producer. In 2017, India produced 716 million metric tons of coal (294 million tons of oil equivalent), accounting for 9.2 percent of the world coal production (in term of metric tons).

This report assumes that India’s ultimately recoverable coal resources are the sum of historical cumulative production and the official reserves. India’s cumulative coal production up to 2017 was 17.2 billion metric tons (South Asia’s cumulative coal production up to 1980 is from Rutledge 2011, which is assumed to be India’s cumulative coal production up to 1980 and extended to 2017 using India’s annual production data from BP 2018). India’s official coal reserves at the end of 2017 were reported to be 97.7 billion metric tons (BP 2018). The ultimately recoverable coal resources are estimated to be 114.9 billion metric tons.

Figure 4 compares India’s historical and projected coal production and consumption. India’s coal production is projected to rise to 1,426 million metric tons by 2050. India’s coal consumption is projected to rise from 1,032 million metric tons (424 million tons of oil equivalent; 1 ton of oil equivalent = 2.43 tons of India’s coal) in 2017, to 1,184 million tons in 2020, 1,730 million tons in 2030, 2,314 million tons in 2040, and 2,822 million tons in 2050. Under the projections, India’s net coal imports (consumption less production) will rise from 316 million metric tons in 2017, to 391 million tons in 2020, 665 million tons in 2030, 1,010 million tons in 2040, and 1,396 million tons in 2050. This will be equivalent to 18 percent of the world coal production in 2017.

Figure 4 India’s Coal Production and Consumption, 1950-2050

Sources: India’s historical coal production from 1950 to 1980 is from Rutledge (2011); historical production from 1981 to 2017 and historical consumption from 1965 to 2017 is from BP (2018). To project India’s coal production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017. India’s future per capita coal consumption is projected by assuming that per capita coal consumption will grow in accordance with the historical relationship between per capita coal consumption and per capita GDP (see Figure 2). Future coal consumption is then calculated using per capita coal consumption multiplied by the projected population. India’s population from 2018 to 2050 is projected using growth rates implied by the US Energy Information Administration’s population projections (EIA 2017, Reference Case, Table J4).

The United States

The United States is the world’s third largest coal producer. In 2017, the US produced 702 million metric tons of coal (371 million tons of oil equivalent), accounting for 9.1 percent of the world coal production (in term of metric tons).

The US coal production peaked in 2008 at 1,063 million metric tons. The US coal production fell by 38 percent from 2008 to 2016. The US Energy Information Administration projects that the US coal production will stabilize in the coming years and production will be around 670 million metric tons by 2050 (EIA 2018, Reference Case, Table A1).

The US cumulative coal production up to 2017 was 76.4 billion metric tons (cumulative production up to 1980 is from Rutledge 2011, extended to 2017 using annual production data from BP 2018). Applying Hubbert linearization to the annual production to cumulative production ratios implied by the projected US coal production from 2041 to 2050, the US ultimately recoverable coal resources are estimated to be 189.5 billion metric tons and the remaining recoverable coal resources are estimated to be 113.1 billion metric tons. By comparison, the US coal reserves at the end of 2017 were reported to be 250.9 billion metric tons (BP 2018).

Figure 5 shows the historical US coal production and the future production projected by EIA.

Figure 5 US Coal Production, 1950-2050

Sources: The US historical coal production from 1950 to 1980 is from Rutledge (2011); coal production from 1981 to 2017 is from BP (2018). Projected US coal production from 2018 to 2050 is from EIA (2018, Reference Case, Table A1), adjusted to make the projected coal production level in 2017 matching the production level reported by BP (2018).

Australia

Australia is the world’s fourth largest coal producer. In 2017, Australia produced 481 million metric tons of coal (297 million tons of oil equivalent), accounting for 6.2 percent of the world coal production (in term of metric tons).

Figure 6 projects Australia’s annual production to cumulative production ratios against the historical cumulative coal production. Hubbert linearization is applied to the annual production to cumulative production ratios from 1985 to 2017. Regression R-square is 0.927. Where the downward linear trend meets the horizontal axis indicates that Australia’s ultimately recoverable coal resources will be 44.8 billion metric tons. Australia’s cumulative coal production up to 2017 was 14.2 billion metric tons. Thus, Australia’s remaining recoverable coal resources are estimated to be 30.6 billion metric tons. The parameters from the Hubbert linear trend are used to project Australia’s future coal production.

Figure 7 shows Australia’s historical and projected coal production. Australia’s coal production is projected to peak in 2032 at 589 million metric tons.

Figure 6 Australia’s Cumulative Coal Production

Sources: Australia’s cumulative coal production up to 1980 is from Rutledge (2011); extended to other years using annual production data from BP (2018).

Figure 7 Australia’s Coal Production, 1950-2050

Sources: Australia’s historical coal production from 1950 to 1980 is from Rutledge (2011); coal production from 1981 to 2017 is from BP (2018).

Indonesia

Indonesia is the world’s fifth largest coal producer. In 2017, Indonesia produced 461 million metric tons (272 million tons of oil equivalent), accounting for 6 percent of the world coal production (in term of metric tons).

This report assumes that Indonesia’s ultimately recoverable coal resources are the sum of historical cumulative production and the official reserves. Indonesia’s cumulative coal production from 1981 to 2017 was 5.3 billion tons of oil equivalent (Indonesia’s cumulative coal production before 1981 is assumed to be zero). Indonesia’s coal reserves at the end of 2017 were reported to be 22.6 billion metric tons (BP 2018). The ultimately recoverable coal resources are estimated to be 27.9 billion metric tons.

Based on the above assumptions, Indonesia’s coal production is projected to peak in 2031 at 773 million metric tons. Figure 8 shows Indonesia’s historical and projected coal production.

Figure 8 Indonesia’s Coal Production, 1980-2050

Sources: Indonesia’s historical coal production from 1980 to 2017 is from BP (2018). To project Indonesia’s coal production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

The Russian Federation

The Russian Federation is the world’s sixth largest coal producer. In 2017, Russia produced 411 million metric tons (206 million tons of oil equivalent), accounting for 5.3 percent of the world coal production (in term of metric tons).

In 1988, Russia’s coal production reached the Soviet-era peak of 440 million metric tons. By 1998, Russia’s coal production collapsed to 235 million metric tons. Since then Russia’s coal production has steadily recovered. Russia’s annual coal production to cumulative coal production ratios have been rising in recent years, making it impossible to apply Hubbert linearization.

This report assumes that Russia’s ultimately recoverable coal resources are the sum of historical cumulative production and the official reserves. David Rutledge (2011) defined the coal production region of “Russia” as the former Soviet Union excluding Ukraine but plus Mongolia and North Korea. I use cumulative coal production by Rutledge’s “Russia” up to 1950 as Russian Federation’s cumulative coal production up to 1950. From 1950 to 1984, I assume Russia Federation’s annual coal production to be 68.7 percent of the annual coal production of Rutledge’s “Russia”. From 1985 to 2017, Russia’s annual coal production is from BP (2018).

Russia’s cumulative coal production up to 2017 was 22.9 billion metric tons. Russia’s coal reserves at the end of 2017 were reported to be 160.4 billion metric tons (BP 2018). The ultimately recoverable coal resources are estimated to be 183.3 billion metric tons.

Based on the above assumptions, Russia’s coal production is projected to rise to 647 million metric tons by 2050. Figure 9 shows Russia’s historical and projected coal production.

Figure 9 Russia’s Coal Production, 1950-2050

Sources: Russia’s annual coal production from 1950 to 1984 is assumed to be 68.7 percent of the annual coal production by Rutledge’s “Russia” (Rutledge 2011); Russian’s annual coal production from 1985 to 2017 is from BP (2018). To project Russia’s coal production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

South Africa

South Africa is the world’s seventh largest coal producer. In 2017, South Africa produced 252 million metric tons of coal (143 million tons of oil equivalent), accounting for 3.3 percent of the world coal production (in term of metric tons).

Figure 10 projects South Africa’s annual production to cumulative production ratios against the historical cumulative coal production. Hubbert linearization is applied to the annual production to cumulative production ratios from 1990 to 2017. Regression R-square is 0.987. Where the downward linear trend meets the horizontal axis indicates that South Africa’s ultimately recoverable coal resources will be 18.5 billion metric tons. South Africa’s cumulative coal production up to 2017 was 10.3 billion metric tons. Thus, South Africa’s remaining recoverable coal resources are estimated to be 8.2 billion metric tons. By comparison, South Africa’s coal reserves at the end of 2017 were reported to be 9.9 billion metric tons (BP 2018).

The parameters from the Hubbert linear trend are used to project South Africa’s future coal production. Figure 11 shows South Africa’s historical and projected coal production. South Africa’s coal production peaked in 2014 at 262 million metric tons and is projected to decline to 110 million metric tons by 2050.

Figure 10 South Africa’s Cumulative Coal Production

Sources: Africa’s cumulative coal production up to 1980 is from Rutledge (2011), which is assumed to be South Africa’s cumulative coal production up to 1980 and extended to other years using South Africa’s annual production data from BP (2018).

Figure 11 South Africa’s Coal Production, 1950-2050

Sources: Africa’s historical coal production from 1950 to 1980 is from Rutledge (2011), which is assumed to be South Africa’s coal production from 1950 to 1980; South Africa’s annual coal production from 1981 to 2017 is from BP (2017).

Rest of the World

Rest of the world is defined as the world total excluding the seven largest coal producers. In 2017, rest of the world produced 1,180 million metric tons of coal, accounting for 15 percent of the world coal production (in term of metric tons). Rest of the world’s coal production peaked in 1987 at 1,945 million metric tons.

Figure 12 projects the rest of the world’s annual production to cumulative production ratios against the historical cumulative coal production. Hubbert linearization is applied to the annual production to cumulative production ratios from 1950 to 2017. Regression R-square is 0.91. Where the downward linear trend meets the horizontal axis indicates that the rest of the world’s ultimately recoverable coal resources will be 192.3 billion metric tons. Rest of the world’s cumulative coal production up to 2017 was 147 billion metric tons. Thus, the rest of the world’s remaining recoverable coal resources are estimated to be 45.3 billion metric tons. The parameters from the Hubbert linear trend are used to project the rest of the world’s future coal production. Figure 13 shows the rest of the world’s historical and projected coal production.

Figure 14 shows the historical and projected world coal production. World cumulative coal production up to 2017 was 375 billion metric tons. World ultimately recoverable coal resources are estimated to be 992 billion metric tons. World remaining recoverable coal resources are estimated to be 617 billion metric tons. By comparison, the world coal reserves at the end of 2017 were 1.04 trillion metric tons (BP 2018).

World coal production is projected to peak in 2028 at 8,417 million metric tons and decline to 6,101 million metric tons by 2050.

Figure 12 Rest of the World’s Cumulative Coal Production, 1950-2017

Sources: Rest of the world’s cumulative coal production up to 1980 is calculated using data from Rutledge (2011); cumulative production ending in other years is calculated using annual production data reported by BP (2018).

Figure 13 Rest of the World’s Coal Production, 1950-2050

Sources: Rest of the world’s historical coal production from 1950 to 1980 is from Rutledge (2011); annual coal production from 1981 to 2017 is from BP (2018).

Figure 14 World Historical and Projected Coal Production, 1950-2050

Sources: Historical coal production from 1950 to 1980 is from Rutledge (2011); annual coal production from 1981 to 2017 is from BP (2018).



