IDEAS21

It is commonly (mis)believed that the world has abundant supplies of coal remaining, and that the main problem with coal is CO₂ emissions. This is certainly the view of the IPCC. However, in the past few years several studies have questioned this view, noting that many countries’ coal reserve estimates have been downgraded in recent years.

The German-based Energy Watch Group produced a report on coal in 2007, in which they forecast a global production peak as early as 2025.

An article by Patzek and Croft, published in the international journal academic Energy in May this year, makes for even more jaw-dropping reading. The authors use multi-Hubbert models and data from various sources (including the International Energy Agency) to forecast global coal production. Unlike the other studies, however, these authors use the energy content of coal, rather than tons produced. Energy content is much more relevant for economic activity, as it includes the effect of declining ore grades over time.

Patzek and Croft state that “The global peak of coal production from existing coalfields is predicted to occur close to the year 2011.” Note that their forecast does not include new coal from new mines. However, even if new mines are developed (which they surely will be), it is doubtful whether sufficient new mines will be developed quickly enough to offset the decline from existing mines. Patzek and Croft state that “numerous major new mines would have to be brought online within half a decade to arrest the predicted decline of global coal production.” The peak and decline of oil production will make it more costly to develop new coal mines.

The authors forecast a fairly bell-shaped production profile: “After 2011, the production rates of coal and CO2 decline, reaching 1990 levels by the year 2037, and reaching 50% of the peak value in the year 2047.”

If the forecast proves to be reasonably accurate, the implications are profound. As the authors put it, “If we are right, major restructuring and shrinking of the global economy will follow.”

Coal is used to generate about 40% of the world’s electricity, and is crucial for the manufacture of steel. After the peak, coal prices will sky-rocket as competition for sharply falling supply intensifies. Countries that get priced out of the coal import market will face electricity blackouts. Bear in mind that there are only about 6 significant coal exporting countries in the world.

One of these is South Africa, which would stand to benefit substantially in terms of the balance of payments and tax revenues. However, Patzek and Croft estimate that SA’s own coal production in energy units peaked in 2007! The authors state that “The base-case in this study includes all coal-producing regions with any significant production history”; thus it would include the relatively underdeveloped Waterberg Coal Field, which has been supplying the Matimba power station for some years.

An article by Dr Chris Hartnady, forthcoming in the SA Journal of Science, forecasts peak SA coal production (in tons) in 2020. Further work will need to be done to convert his forecast into comparable energy units; this would likely bring forward his peak date estimate.

In any event, sooner or later domestic supply will peak and anticipated rising domestic consumption of coal in SA will have to compete with rising demand for coal exports - a classic example of the “export land model” developed by Oil Drum contributors.

Moreover, the above forecasts do not take energy return on energy invested (EROEI) into explicit account. EROEI for coal has been declining since the early days of mining, since the best ore grades and most easily accessible deposits are generally mined earlier on. Declining EROEI will exacerbate the impacts of falling coal production, as more energy will be required to deliver each successive unit of coal energy.

In short, it is imperative that the world and South Africa embrace energy conservation and efficiency, and accelerate the development of alternative energy sources.