The worldwide energy crisis is pushing nations to revert to coal.

Five years ago, more than 40 countries committed to reducing and eventually phasing out unabated coal power by 2030-2040 during the COP26 UN Climate Summit, with many institutions vowing to cease international coal financing. Three years later, the Group of Seven (G7) nations—comprising the United States, UK, Canada, France, Germany, Italy, and Japan—formally agreed to transition away from unabated coal power generation between 2030 and 2035, representing a significant commitment from the world’s largest economies. However, the rules are being changed, and during crises, reliance on coal resurfaces. Global coal demand as a key energy source is escalating again due to the ongoing energy crisis linked to the war in Iran, causing countries that once prioritized cleaner energy to revert to coal as a dependable and cost-efficient alternative.

Governments around the globe are urgently adjusting their energy policies to address supply shortages and rising natural gas prices. India relies on imports for approximately 60% of its LNG via the precarious Strait of Hormuz, and as a result of high gas prices, the nation is increasingly focusing on cheaper, domestic coal.

India is experiencing record coal consumption amidst a nationwide heatwave, which has driven power demand to unprecedented levels, with temperatures exceeding 45°C in certain areas. The peak power demand in India has reached a historic high of 257 GW, with coal-fired plants supplying over 75% during peak times. Authorities have directed coal plants using imported fuel to operate at maximum capacity and have ordered the restart of idle gas-fired plants to support the energy grid.

Similarly, South Korea is significantly increasing its coal-generated electricity by more than one-third and shifting away from LNG. This has resulted in a notable rise in coal imports, with imports from Russia alone increasing by 95% in the first quarter of the year. The Korean government has lifted the spring regulatory cap that had traditionally limited coal-fired power plants to 80% capacity. The utilization of nuclear reactors has also been increased to around 80% to mitigate supply risks.

Coal is also resurging in environmentally conscious Europe. In March, Chancellor Friedrich Merz stated that Germany might need to slow its phase-out of coal plants to safeguard the backbone of its industry against unrealistic closure targets. The call for a slower phase-out arises from delays in auctioning and constructing new hydrogen-ready gas-fired power stations, which were meant to act as reliable backups for wind and solar energy. Industry representatives have been urging lawmakers to temporarily allow coal-fired power plants in "reserve mode" to return to the regular market to alleviate energy price surges. Berlin's climate goals don't always align with the immediate requirements of energy security. Although the federal government has recently proposed new draft laws for subsidies for gas-fired power plants to support green energy development, grid operators still depend on coal for stability in renewable energy supply.

Germany’s 2020 Coal Exit Law mandates a gradual shutdown of coal and lignite power plants, with a final deadline set for 2038. However, the country's plan to substitute coal with up to 15 gigawatts of hydrogen-ready gas power plants is significantly delayed, potentially creating a shortfall in stable electricity capacity.

Meanwhile, Italy's lower house of parliament voted this year to postpone its permanent coal phaseout deadline by 13 years, moving from 2025 to 2038. Lawmakers justified this reversal of the 2017 phaseout commitment due to escalating geopolitical tensions and oil supply challenges in the Middle East. The lifetime of Italy's last four coal stations—mainly owned by Enel S.p.A—has been officially extended, and the government now views these facilities as emergency resources that could be reactivated if natural gas and oil prices stay high.

Coal is regarded as the primary contributor to global temperature rise, accounting for around 40% of all greenhouse gas emissions and 70% of increases related to energy combustion. Its substantial carbon footprint makes it the most polluting major power generation source, emitting twice the CO2 of natural gas per unit of energy produced. Nevertheless, the current resurgence of coal is unlikely to derail the clean energy transition primarily due to decreasing renewable energy costs. The Levelized Cost of Energy (LCOE) for solar and onshore wind is now much lower than coal, ranging from $24 to $96 per MWh compared to $68 to $166 per MWh for new coal plants.