Earlier this month, the European Union (EU) decided to end all Russian coal purchases by August 2022. In 2020, the EU imported 49 million tons of Russian coal in 2020, and the trade is worth an estimated €8 billion per year. As a result, there has been a sudden interest and increase in the planned usage of coal, despite deep concerns regarding climate change and the push for greener energy solutions.
For example, the Greek government claimed it would increase coal mining operations and extend the function of its cola-fired power plants until 2028. 10 percent of Greece’s power is derived from lignite, the world’s dirtiest form of coal. Poland has one of the highest rates of usage, as 70 percent of its electricity is generated from coal. The move to coal puts in question the EU’s goal of becoming carbon neutral by 2049.
Russia is the third-largest coal exporter in the world, accounting for 45% of total EU coal imports. Russian coal accounts for 65 percent of total imports for Poland, Italy, German and the Netherlands respectively. The EU receives 70 percent of its thermal coal from Russia – which is used to generate electricity and heat. 30 percent of the EU’s Russian coal imports constitute metallurgical coal, which is used to make iron and steel.
Increase demand from the EU will drive up coal prices, adding to inflation pressures and increase the cost of living for Europeans as they struggle with energy bills this year. Germany spends the most on coal – €24116m as of 2019.
The Russia/Ukraine conflict continues to manifest worldwide implications. According to Reuters, Russian and Indian official met last week in attempts to resole an impasse over the shipping of coking coal to Indian steelmakers. There has been a surge in prices as Australia, India’s top supplier of coking coal raised its prices from $200 per ton to $700 per ton. India imports about 85% of its coking coal, totaling 50 to 55 million tons per year.
The Indian government plans to reduce its import dependence to 65% by 2030.
India is a major purchaser of Russian goods and has yet to place any bans or sanctions on Russian imports. The largest South Asian country is caught between Western and Russian interests, as problems with payment processing and logistics due to Russian sanctions are pushing Indian steel mills to look for alternative sources like the US – a major factor in driving up prices.
