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The great coal hole

There used to be a joke about taking coal to Newcastle but these days the laughing stock is getting the stuff out. Newcastle in New South Wales, Australia, may be the biggest coal export terminal in the world’s biggest coal-exporting country, but even it is having trouble keeping up with demand. The line of ships waiting to load coal can stretch almost to Sydney, 150 kilometres to the south. At its peak last year, there were 80 vessels in the queue, each forced to lie idle for up to a month.

The delays have been lengthening since 2003 – and not just because of the port’s limited capacity in the face of soaring demand. Gnawing doubts are also beginning to emerge about supply, not just in Australia but worldwide, and not only because of logistics but also because of geology. In other words, coal may soon be running short.

Ask most energy analysts how much coal we have left, and the answer will be a variant on “plenty”. It is commonly agreed that supplies of coal will last for well over a century; coal is generally seen as our safety net in a world of dwindling oil. But is it? A number of recent reports suggest that coal reserves may be hugely inflated, a possibility that has profound implications for both global energy supply and climate change.

The latest “official” statistics from the World Energy Council, published in 2007, put global coal reserves at a staggering 847 billion tonnes. Since world coal production that year was just under 6 billion tonnes, the reserves appear at first glance to be ample to sustain output for at least a century – well beyond even the most distant planning horizon.

Mine below the surface, however, and the numbers are not so reassuring. Over the past 20 years, official reserves have fallen by more than 170 billion tonnes, even though we have consumed nothing like that much. What’s more, by a measure known as the reserves-to-production (R/P) ratio – the number of years the reserves would last at the current rate of consumption – coal has declined even more dramatically. In February 2007, the European Commission’s Institute for Energy reported that the R/P ratio had dropped by more than a third between 2000 and 2005, from 277 years to just 155. If this rate of decline were to continue, the institute warns, “the world could run out of economically recoverable …reserves of coal much earlier than widely anticipated”. In 2006, according to figures from the BP Statistical Review of World Energy, the R/P fell again, to 144 years. So why are estimates of coal reserves falling so fast – and why now?

One reason is clear: consumption is soaring, particularly in the developing world. Global coal consumption rose 35 per cent between 2000 and 2006. In 2006, China alone added 102 gigawatts of coal-fired generating capacity, enough to produce three times as much electricity as California consumed that year. China is by far the world’s largest producer of coal, but such is its appetite for the fuel that in 2007 it became a net importer. According to the International Energy Agency, coal consumption is likely to grow ever faster in both China and India.

Another less noticed reason is that in recent years many countries have revised their official coal reserves downwards, in some cases massively, and often by far more than had been mined since the previous assessment. For instance, the UK and Germany have cut their reserves by more than 90 per cent and Poland by 50 per cent. Declared global reserves of high-quality “hard coal” have fallen by 25 per cent since 1990, from almost 640 billion tonnes to less than 480 billion – again more than could be accounted for by consumption.

At the same time, however, many countries including China and Vietnam have left their official reserves suspiciously unchanged for decades even though they have mined billions of tonnes of coal over that period.

Taken together, dramatic falls in some countries’ reserves coupled with the stubborn refusal of others to revise their figures down in the face of massive production suggest that figures for global coal reserves figures are not to be relied on. Is it possible that the sturdy pit prop of unlimited coal is actually a flimsy stick?

That is certainly the conclusion of Energy Watch, a group of scientists led by the German renewable energy consultancy Ludwig Bölkow Systemtechnik (LBST). In a report published in 2007, the group argues that official coal reserves are likely to be biased on the high side. “As scientists we were surprised to find that so-called proven reserves were anything but proven,” says lead author Werner Zittel. “It is a clear sign that something is seriously wrong.”

Since it is widely accepted that major new discoveries of coal are unlikely, Energy Watch forecast that global coal output will peak as early as 2025 and then fall into terminal decline. That’s a lot earlier than is generally assumed by policy-makers, who look to the much higher forecasts of the International Energy Agency, which are based on official reserves. “The perception that coal is the fossil resource of last resort that you can come back to when you run into problems with all the others is probably an illusion,”............