Global Energy Shortages Drive Renewed Reliance on Coal

Why It Matters

The renewed coal reliance jeopardizes global emissions targets and raises energy‑price volatility, forcing policymakers to balance short‑term security with long‑term climate objectives.

Key Takeaways

• Oil flow disruptions push Asia, Europe toward coal
• Global coal use up 1.3 bn tons since 2020
• Indonesia prioritizes domestic coal, tightening export supply
• South Korea relaxes coal limits amid low LNG, slow renewables
• Italy delays coal plant closures to 2038, reversing climate pledge

Pulse Analysis

The latest oil shock—sparked by the U.S.–Israeli strike on Iran and the ensuing closure of the Strait of Hormuz—has exposed the fragility of global energy supply chains. With roughly 20 percent of world oil flow stalled, nations that depend heavily on Middle‑Eastern imports are scrambling for alternatives. Coal, abundant and inexpensive, offers an immediate stopgap, prompting a measurable uptick in consumption across Asia and parts of Europe. This geopolitical pressure illustrates how quickly energy security concerns can override climate policy, especially when renewable capacity remains under‑developed.

Beyond the immediate supply crunch, the coal resurgence carries profound market implications. Indonesia’s decision to divert domestic coal away from export markets tightens global supply, nudging spot prices upward and squeezing power generators that had previously shifted to cheaper gas or renewables. In South Korea, low‑LNG availability and sluggish renewable roll‑out have led regulators to relax emissions‑related coal caps, while Italy’s 13‑year postponement of plant closures signals a broader willingness to trade long‑term decarbonisation for short‑term stability. Investors are therefore reassessing risk profiles for coal assets, which may see a brief revival despite the sector’s overall decline.

Looking ahead, the episode underscores a critical dilemma for policymakers: how to safeguard energy reliability without derailing climate commitments. Accelerating renewable deployment, expanding storage, and diversifying import routes are essential to prevent a permanent backslide to coal. Meanwhile, carbon‑pricing mechanisms and stricter emissions standards could mitigate the environmental cost of any temporary coal use. For the private sector, the window creates opportunities in clean‑energy financing, grid‑modernisation, and low‑carbon technologies that can deliver both resilience and compliance with the Paris agenda.