The End of Cheap Coal? A Techno-Economic Analysis until 2030 Using the COALMOD-World Model

Abstract

Questions about the future availability of inexpensive coal supplies are rising. In this paper a numerical model is developed to investigate the evolution of the international market for steam coal used for electricity generation. The "COALMOD-World" model is an equilibrium model that computes future trade flows, infrastructure investments and prices until 2030. The model includes the major domestic markets together with the globalized seaborne market and incorporates geological, technical and economical data and mechanisms. Two scenarios are explored: one with a continuously increasing global demand and another where the demand stabilizes after 2015. Rising demand in India and China will drive an increase of the international seaborne trade as well as a shift of global trade flows toward Asia. In the case of increasing global demand an end of cheap coal will not be caused by geological reserve constraints but rather by infrastructure constraints. Stabilizing future coal demand would be beneficial to both the climate and the global energy supply costs by keeping coal relatively cheap.