Asia Turns Back to Coal as Iran War Disrupts Energy Supplies

BANGKOK — Rising tensions in the Middle East are reverberating across Asia’s energy markets, prompting a shift back toward coal as disruptions to oil and natural gas supplies increase. The war in Iran is squeezing global Liquefied Natural Gas (LNG) availability, exposing a vulnerability for many Asian nations heavily reliant on imported fuels, particularly those transported through the critical Strait of Hormuz – a waterway handling roughly 20% of the world’s oil and gas trade.

The move toward coal, while a short-term solution to energy security, carries significant implications for air quality, climate goals and long-term sustainability. LNG had been positioned as a “bridge fuel” in the transition from more polluting sources like oil and coal to cleaner, renewable energy options. While cleaner burning than coal, LNG still contributes to greenhouse gas emissions, including methane, a potent climate change driver. The United States has been actively working to expand LNG exports to Asia, but current geopolitical realities are complicating that effort.

Coal’s Resurgence Across the Continent

Several Asian countries are already increasing their reliance on coal to compensate for LNG shortfalls. India, bracing for a particularly hot summer, is burning more coal to meet escalating demand. South Korea has lifted caps on electricity generation from coal-fired power plants. Indonesia is prioritizing the utilize of its domestic coal supply, potentially reducing availability for export. Thailand, the Philippines, and Vietnam are all increasing their use of coal-fired power generation.

This trend raises concerns about worsening air quality in major Asian cities, slowing the transition to renewable energy sources, and increasing the region’s overall carbon footprint. Experts emphasize that coal represents a temporary fix, while renewable energy sources offer a more sustainable long-term solution. Julia Skorupska of the Powering Past Coal Alliance warns that this crisis serves as a stark reminder of the risks associated with continued dependence on fossil fuels. “This kind of crisis is a real sort of warning,” she said.

A Matter of Availability and Emergency Planning

Coal’s appeal lies in its accessibility and widespread availability within Asia, making it a readily available backup when renewable energy sources or gas supplies fall short, according to Sandeep Pai, an energy expert at Duke University. China, the world’s largest consumer and producer of coal, has been steadily increasing its coal power generating capacity since 2021, citing energy security concerns. Despite significant investments in clean energy, China’s national policy still supports continued coal use.

India, the second-largest coal consumer and producer, is preparing for a scorching summer and anticipates peak electricity demand of 270 gigawatts – nearly double Spain’s total electricity production capacity. The country currently has enough coal reserves to last approximately three months, with some stockpiles specifically allocated for small businesses.

Recent shipments of Liquefied Petroleum Gas (LPG) – totaling over 92,700 tons – have navigated the Strait of Hormuz to India, but these are likely to be directed towards industries like fertilizer production rather than power generation, Pai noted. Advocates for coal, such as Michelle Manook of FutureCoal, argue that the situation would be even more dire without coal’s availability, emphasizing the need for a diversified energy portfolio. “The lesson has to be diversity,” she said.

Indonesia’s Domestic Focus and Regional Impacts

The situation is further complicated by Indonesia, the world’s largest coal exporter, which is now prioritizing domestic energy needs over exports. This shift could tighten regional coal supplies and drive up global prices, according to Putra Adhiguna of the Energy Shift Institute. Coal prices are determined on a global market, leaving importing countries vulnerable to price fluctuations and supply disruptions.

Vietnam, facing weather-related energy shortages, has already increased its coal imports and is now considering sourcing coal from the United States and Laos, as reported by energy market tracker Argus Media. The price of Newcastle coal, a benchmark for Asian coal markets, has risen by 13% since the start of the conflict. This price increase will disproportionately impact Southeast Asia, a region heavily reliant on coal for power generation, including countries like Vietnam, the Philippines, and Thailand.

The Long-Term Costs of Coal Reliance

Increased coal use risks undermining long-term efforts to transition away from coal-fired power. Indonesia, for example, is already struggling to meet its targets for early coal plant retirement due to financing delays. The cost of coal power in Indonesia has increased by 48% since 2020 due to aging plants and rising costs, leading to a 24% increase in subsidies to the national utility, reaching approximately 5% of the national budget. Jakarta’s promotion of LNG as a transition fuel is now being challenged by the renewed reliance on coal, signaling that the shift to gas may not be as straightforward as initially anticipated, Adhiguna said.

South Korea, which has pledged to phase out most coal plants by 2040 and halve its emissions by 2035, is temporarily allowing increased coal use when air pollution is low and LNG supplies are limited. However, achieving its net-zero goals requires a significant expansion of renewable energy capacity – approximately 8 gigawatts of novel wind power annually. Renewable energy currently accounts for only 10% of South Korea’s electricity mix, compared to a global average of 32%, according to the Institute for Energy Economics and Financial Analysis (IEEFA). Over the past decade, South Korea has invested 13 times more in fossil fuels than in renewables, with 60% of export finance directed towards LNG.

Air Quality and Public Health Concerns

Burning coal releases fine particulate matter that poses significant health risks, including heart disease, stroke, lung cancer, and respiratory illnesses, according to the World Health Organization (WHO). Air pollution is a widespread problem across Asia, exacerbated by seasonal agricultural burning. In India, all 1.4 billion citizens breathe air with unsafe levels of particulate matter, and the government has temporarily suspended air quality rules to address a gas shortage. Vietnam also faces severe air pollution challenges, with PM2.5 levels far exceeding WHO limits. Lan Nguyen, a shopowner in Hanoi, expressed concern for her son’s asthma, stating, “I worry for my son’s lungs every day.”

The current energy crisis underscores the need for a more diversified and sustainable energy strategy in Asia. While coal may offer a temporary solution to immediate energy security concerns, it comes at a significant cost to public health and the environment. A long-term transition to renewable energy sources is crucial for mitigating these risks and ensuring a more sustainable future.

You can find more information about global energy markets at the International Energy Agency and air quality data from the World Health Organization. For updates on geopolitical events impacting energy supplies, refer to Reuters.