Dirty Secret

“What is wanted is not the will to believe, but the will to find out, which is the exact opposite.” – Bertrand Russell

Perhaps the best evidence that a market development was predictable is to have predicted it. Almost exactly a year ago, we took to these pages to make the point that the European energy crisis—in particular, Germany’s response to it—would have significant ramifications across the developing world. The Global South, after years of being lectured about the need to forgo fossil fuels in its pursuit to increase the standard of living for its citizens, watched with interest as Germany burned coal in copious amounts to get through its emergency. We noted that these actions would almost certainly lead to a global coal renaissance:

Ignoring the path function of progress (and eschewing nuclear technology) coalesced into the very cause of coal’s dramatic global renaissance. Faced with the choice between a guaranteed calamity today or increasing the risk of one in the distant future, the developing world watched what Germany did instead of listening to what it said, and is now acting accordingly. Last we checked, there are roughly two orders of magnitude more people in the bottom 99% than in the top 1%, and those vast populations will pursue the just and innately human endeavor to improve their quality of life.

If we don’t understand why coal is so valuable, we have no hope of beating our addiction to it. Coal is cheap, reliable, and easy to store for indefinite periods. Replacement technologies that fail across these critical dimensions have no hope of decreasing global demand for coal.

Nothing stops a party barge | Getty

In December, we further hypothesized that the recent carbon pilgrimage known as COP28 marked the peak of the Environmental, Social, and Governance (ESG) movement, outlining what we believed to be the unspoken grand bargain reached behind closed doors by the real power brokers of the world:

Although the Biden administration is hyping the toughness of [the EPA’s methane handling] crackdown—and we fully expect industry leaders to feign opposition to it—this new rule and the methane agreement struck at COP28 are early signs of a practical grand bargain between governments and the fossil fuel industry over climate change. The use of coal will be minimized in the West, replaced by natural gas. The developing world will continue to leverage coal to climb the prosperity ladder. Carbon capture and sequestration will be used to minimize direct CO2 emissions globally, and industry will do its best to eliminate methane emissions. Nuclear power will be accelerated to further decarbonize electricity grids, and the West will continue to tinker around with solar, wind, and electric vehicles, pretending that those can eventually play a meaningful role in the energy future.

Wink, wink | COP28/Christopher Pike

As 2023 came to a close, data behind the global demand for coal began to roll in. Despite trillions being squandered on the development of wind and solar energy, the dirtiest of the fossil fuels turned in another record year. We turn to Reuters for the hard numbers:

Global coal use is expected to reach a record high in 2023 as demand in emerging and developing economies remains strong, the International Energy Agency (IEA) said in a report on Friday.

Demand for coal is seen rising 1.4% in 2023, surpassing 8.5 billion metric tons for the first time as usage in India is expected to grow 8% and that in China is seen up 5% due to rising electricity demand and weak hydropower output, the IEA said.

In the European Union and United States, however, coal use is set to drop by around 20% each in 2023, the report said.

Not to worry, though. The same IEA that was forced to fess up to the realities of coal’s resurgence solemnly assures the public that demand will still roll over. The elusive apex is now predicted to be achieved in 2026. That the organization continues to peddle such claptrap in the face of overwhelming evidence to the contrary only further erodes its diminishing reputation as an arbiter of energy truth. A basic perusal of the latest data and a rudimentary understanding of realpolitik cast serious doubt on this latest IEA forecast. Let’s engage in a little of both.

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