* GDP growth in emerging markets still linked to coal
* But falling coal quality, environmental to slow growth
* CCS won't turn coal into a sustainable source of energy
By Henning Gloystein
LONDON, Nov 12 Global coal demand will soar in
the short term as emerging markets rely on it to power economic
expansion, but its declining quality and rising environmental
awareness will dent demand in the longer term, Axa Investment
The asset management arm of life insurer Axa said
coal has been the clear winner of the past decade, with supply
and demand growing constantly, but warned that the boom of the
last decade might not last long into the future.
"Coal has a bright future in the short term, but that will
not last long in our view," Axa said in a report published on
The report said that coal "still has a stranglehold on power
generation in developing countries", where tackling energy
poverty is a prime concern, because of its comparatively low
cost per energy unit produced.
"From the standpoint of energy security, coal-fired units
remain a winner thanks to the widespread availability of the
The chief executive of the World Coal Association said that
economic growth and coal markets remained closely linked.
"No one has been able to delink the growth of GDP from the
growth of energy, and coal in particular," association CEO
Milton Catelin told Reuters.
But coal has a competitive edge over fuels such as natural
gas only as long as pollution control regulations are light, Axa
said, adding that environmental awareness was rising fast in
"For the next round of rapidly growing economies, the
incentive bias towards coal will be shorter-lived than expected
(and) stricter pollution controls may render many new
coal-burning installations obsolete," the study said.
"Current air pollution regulations will rapidly prove
insufficient to keep populations and agriculture from suffering
from the social costs associated with coal."
Axa also said growth in the coal sector was threatened by
the falling quality of the mined product.
"The number of coal sources continues to multiply, but the
quality of reserves is decreasing. This represents a major
long-term risk," the report said.
The Global Coal Association said, however, a rise in energy
efficiency of new coal-fired power stations could address this
"Coping with degrading quality could actually be a godsend
as it would provide the incentive for much-needed upgrades in
coal-fired power plants," Catelin said.
The Axa report disagreed, warning that efficiency gains
would be limited as a result of the decreasing trend in global
coal supply quality.
"Efficiency will not be enough to recoup investments when
supplies decrease in quality," the report said.
Axa also said that carbon capture and storage (CCS)
technology, which would capture CO2 produced from power plants
before it enters the atmosphere and store it underground, would
not be able to improve the environmental footprint of coal-fired
"CCS will not turn coal into a sustainable source of energy
for power generation. The polluting effects of coal are not
limited to CO2 alone. CCS technologies are energy-intensive and
could take decades to mature."
(Reporting by Henning Gloystein; editing by Jane Baird)