Escalating conflict in the Persian Gulf has sent shockwaves through global oil and gas markets, disrupting supplies and driving up prices. In an unexpected twist, this turmoil has given coal—long considered the dirtiest fossil fuel—its most significant revival in years. As nations scramble for affordable and reliable energy, coal is re-emerging as a fallback option, threatening to undermine years of climate progress.
For decades, international climate negotiators have worked to phase out coal, citing its outsized role in global carbon emissions. According to the International Energy Agency (IEA), coal was responsible for nearly 40% of global CO2 emissions from energy in 2023. The task of eliminating coal was already daunting, due to rising energy demand in Asia, a renewed emphasis on energy self-sufficiency, and stalling efforts to shift emerging economies onto greener power sources.
The current crisis, however, marks the second major gas supply crunch in just over four years, following the disruptions caused by Russia’s invasion of Ukraine in 2022. Now, both Europe and Asia are turning back to coal as gas prices soar. In 2025, global coal demand rose to 8.85 billion metric tons, a figure that had previously been forecast to decline by 1.4% through 2027. This reversal is not only stalling progress on emission reductions but also risks a long-term setback for climate goals.
Nowhere is this shift more pronounced than in Asia, where major economies are grappling with both supply uncertainties and rising energy costs. Japan, the world’s second-largest importer of liquefied natural gas (LNG), recently announced plans to expand the use of less-efficient coal power plants to diversify its power generation. In 2025, Japan generated approximately 30% of its electricity from coal, compared to just 20% from renewables. Bangladesh and India, meanwhile, are relying heavily on coal plants to offset gas shortages, with India’s coal-fired power generation reaching a record 1,250 terawatt-hours during the last fiscal year—a 7% year-on-year increase.
This trend is mirrored across the region. In South Korea and Taiwan, existing coal fleets are being ramped up to compensate for tight LNG supplies. Newcastle coal futures, the benchmark price for Asian coal, have surged by nearly 33% since the start of this year, reaching their highest levels since 2024. For India, the world’s second-largest coal consumer, authorities have instructed major plants to defer maintenance and operate at full capacity through the summer to meet soaring demand driven by rising temperatures. Shares in Coal India, the country’s largest coal producer, hit a new peak in early 2026, reflecting the fuel’s renewed importance.
The reverberations of the gas supply shock are also being felt in Europe. Countries such as the Netherlands, Poland, and the Czech Republic are contemplating increased coal use if gas prices remain elevated. Germany is considering reactivating mothballed coal-fired plants to stabilise electricity prices. European gas prices have climbed to around €54 per megawatt-hour, up from an average of €40 in 2024, pricing many industrial clients out of the market.
While Europe has made substantial progress in phasing out coal— Bloomberg NEF reports a 45% reduction in coal capacity since 2015—renewable energy has yet to fully bridge the gap. Power analysts at the London Stock Exchange Group estimate that if gas prices persist at current levels, European countries could generate 20% more electricity from coal this summer compared to last year.
Experts warn that this energy supply shock could have lasting consequences. “If you’re sitting in Asia, going through this again, it’s possible you change your strategy long term—rely more on coal for longer, build out your renewables faster, and reduce your exposure to natural gas,” notes Samantha Dart, global co-head of commodities research at Goldman Sachs. Fatih Birol, director of the IEA, adds, “High energy prices will lead governments, industries, and households to look at other options. I wouldn’t be surprised if there were, at least temporarily, upward pressure on the use of coal both for electricity generation and the industrial sector.”
China, the world’s largest coal consumer, appears to be more insulated from the crisis due to its longstanding campaign to diversify energy sources and boost domestic coal production. In 2025, China’s coal consumption climbed to approximately 4.5 billion metric tons, accounting for over half of global coal use. Meanwhile, the United States has seen little change in gas prices due to robust shale production, but recent political support for coal—including a $1-billion investment in a new power project—signals that even established economies are not immune to the temptation of coal.
The resurgence of coal use has far-reaching environmental consequences. Burning coal produces roughly twice the carbon dioxide emissions per unit of energy as natural gas, and is a major source of air pollutants such as sulphur dioxide and particulate matter. If current trends persist, global energy-related CO2 emissions could rise by 300 million metric tons in 2026, according to IEA estimates, potentially derailing the world’s ability to meet the Paris Agreement’s target of limiting warming to 1.5°C.
To mitigate these impacts, policymakers and industry leaders are accelerating investments in renewable energy, energy efficiency, and carbon capture and storage (CCS) technologies. The European Union has earmarked over €250 billion for clean energy initiatives through 2030, while China continues to lead in renewable energy installations, adding more than 200 gigawatts of solar and wind capacity in 2025 alone. Additionally, countries are exploring CCS projects to reduce emissions from existing coal plants, with global CCS capacity projected to reach 300 million metric tons annually by 2030.
Governments are also responding with measures to stabilise energy markets and accelerate the clean energy transition. India has introduced incentives for renewable energy storage, while Japan and South Korea are investing in hydrogen and ammonia co-firing technologies to reduce their dependence on coal. The United States is expanding tax credits for clean power and CCS under the Inflation Reduction Act.
Despite these efforts, experts caution that the current setback may delay the global peak in coal demand. “My gut tells me that in 2026 it’s certainly not going to decrease in line with projections that were using pre‑war assumptions,” says Doug Arent, senior fellow at the WRI Polsky Center for the Global Energy Transition. “The most important thing is to keep the lights on and your productivity moving.”
The global energy crisis has exposed the fragility of the transition away from fossil fuels, with coal making a comeback in response to supply shocks and soaring gas prices. While this may help nations weather immediate shortages, it poses serious risks to climate goals and public health. The challenge now is to strengthen policy commitments, scale up investments in renewables and emissions-reducing technologies, and ensure that the world remains on track to a sustainable, low-carbon future.
