A Decade After Paris

Nearly a decade after the signing of the Paris climate accord, it was widely believed that coal use would be rapidly reduced. World leaders had been heard promising that coal would be phased out in pursuit of the 1.5 °C warming limit. It had been declared that coal dependency would be a thing of the past. In 2016, President Obama had urged that “We’ve got to accelerate the transition away from old, dirtier energy sources,” and in 2021, U.K. Prime Minister Johnson had proclaimed that the death knell for coal had been sounded.

  • Energy experts had then predicted that coal use was in permanent decline, a forecast which was widely accepted.
  • By 2020, the International Energy Agency (IEA) had stated that global coal demand had peaked in 2013, asserting that China was no longer driving demand and pointing to climate policy as the cause of coal’s loss of momentum.
  • However, all such predictions were proven seriously flawed, as coal demand was shown to be growing—rather than declining—even ten years beyond Paris.

In fact, usage has almost doubled since 2000 and quadrupled since 1950—revealing that 16,700 tonnes of coal have been mined every minute, enough to fill seven Olympic pools.

Cheap, Abundant And Stable

The IEA suddenly revised its forecasts as coal usage surged again post-2020, repeatedly underestimating demand. While growth is now predicted to plateau between 2024 and 2027, demand is still expected to remain at a record high of around 8.8 billion tonnes.

  • Coal has been shown to remain cheap and abundant, especially across China, India, and Indonesia, where electricity demand has been expanding rapidly.
  • Wind and solar have been installed at record pace but have not achieved enough grid reliability to fully replace coal. Although the cost of renewables has fallen, coal has been favored because it can be stockpiled and dispatched whenever needed, producing intense heat constantly.
  • Black-swan events such as the COVID‑19 pandemic—and the heavy economic recovery that followed in China—had been credited with boosting coal demand, as infrastructure-led investment was prioritized.

When Russia’s invasion of Ukraine disrupted European gas supply, energy security concerns were elevated, and coal was called upon as a fallback. As gas prices soared, coal was found to be cheaper and more available, leading to its use in power production.

"Unexpected Shocks" - Or Serious Miscalculations?

IEA officials have asserted that without such unprecedented shocks, the future coal trajectory would have aligned more closely with prior forecasts. As a result, language was changed from predicting an imminent peak to discussing a plateau instead. Even in the U.S., where coal demand had once declined, new support has been offered under the “beautiful, clean, coal” banner, and ESG disinvestment from coal-linked assets has been reversed or stalled.

  • While several wealthy nations—such as the U.K., Austria, and Portugal—have completely phased out coal, their reductions have been more than offset by surging demand within China and India. India has been described as drawing three-quarters of its electricity from coal.
  • Despite billions of dollars invested in renewables, that country’s economic strategy has hinged on expanding coal to ensure universal electricity access and support for its manufacturing ambitions. Coal India’s output has been reported as rising by 6–7% annually to reach 1.5 bn tonnes by 2030, with peak coal not expected until around 2035.
  • China’s power demand is being noted to have grown faster than GDP since 2020. Between 2021 and 2024, China’s electricity demand was recorded as increasing by nearly 20 %, partly to power EV production, data centres, and cooling systems.
  • In many cases, that surge in demand has been met with coal generation, even as renewable energy used to offset some of the growth. Although diversification efforts have been initiated since 2021, coal mine openings have continued, including seven new mines in Shanxi last year.

Concerns have been expressed that rising temperatures and increasing air‑conditioning demand will continue to stress grids and necessitate coal back‑up.

Wish-Casting Instead Of Forecasting

Though international climate efforts have been noted to have waned, some progress has still been made. China has been credited with pushing export-driven renewable industries, while internal global pressure has been reduced.

  • Nevertheless, coal remains responsible for approximately 30% of CO₂ emissions since the Industrial Revolution, and is a major source of methane, a greenhouse gas with particularly high warming potential.
  • A major concern has been the youthful age of Asia’s coal power fleet, which has often been seen as both modern and cheap to run. Many existing coal plants are more economical to operate than building new generation alternatives, prompting activists to call for their accelerated closure using carbon-credit funding.
  • Although the IEA currently projects a plateau up to 2027, with a slight peak likely before 2030, many independent forecasters have warned these estimates remain overly optimistic. A comprehensive review claimed a 97% likelihood that Chinese coal consumption in 2026 will exceed IEA expectations.

Some have dismissed the forecasts as being “wish-casting,” heavily skewed toward best-case scenarios, with actual coal use expected to continue growing at 0.5–1 % annually.

It Doesn't Translate Into Returns

Many green exchange-traded funds (ETFs) have been observed to fail dramatically, with lofty promises of climate-friendly exposure being undercut by poor returns or questionable holdings.

  • Investors should remain wary of any thematic ETF that appears too good to be true, as performance has often lagged behind broader indices and greenwashing concerns have frequently been raised.
  • In numerous cases, climate-themed funds have been found to include companies with minimal alignment to sustainability goals, raising doubts about both transparency and efficacy.

Disclaimer

Please note that Benchmark does not produce investment advice in any form. Our articles are not research reports and are not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Dominik Vanyi / Unsplash.