The Ephemeral Glimmer: Why the “Coal Comeback” is a Distraction for Energy Investors
The narrative of a sweeping global “return to coal” in the wake of the recent Iran conflict, while widely discussed, appears fundamentally overblown. New analysis reveals that any increase in global coal power output this year will likely be far more limited than anticipated, peaking at a mere 1.8% even under a “worst-case” scenario. For astute energy investors, this data underscores a crucial point: the prevailing sentiment favoring a coal resurgence fails to align with underlying market dynamics and long-term investment trends. Instead, the current energy crisis, ironically, is accelerating the economic appeal and deployment of clean energy solutions.
Indeed, current market intelligence for 2026 indicates no discernible “return to coal” to date. While select nations, including Japan, Pakistan, and the Philippines, have signaled intentions to ramp up coal usage amidst disrupted gas flows, these measures are projected to yield only a marginal uptick. More broadly, the ongoing decline of coal power in various regions and a potential slowdown in global electricity demand growth could very well see overall coal generation continue its downward trajectory this year. Industry experts are unequivocal: “The big story isn’t about a coal comeback.” Any fleeting increase in coal utilization serves merely to mask a deeper, structural decline, with clean energy projects emerging as demonstrably more attractive investment vehicles during periods of fossil fuel volatility.
Geopolitical Tremors and the Illusion of Coal’s Revival
The geopolitical landscape shifted dramatically following the US-Israeli actions against Iran, precipitating disruptions across global gas markets. Iran’s blockage of the Strait of Hormuz, a critical chokepoint in the Persian Gulf, directly impacted a significant portion of the world’s liquified natural gas (LNG) trade, primarily destined for Asian consumers. This bottleneck has naturally led to scarcer and more expensive gas supplies, with prices remaining elevated above pre-conflict levels.
In response, at least eight countries spanning Asia and Europe—including Japan, South Korea, Bangladesh, the Philippines, Thailand, Pakistan, Germany, and Italy—announced plans to either bolster coal-fired electricity generation or delay existing coal phase-out schedules. These declarations inevitably fueled a surge in media commentary predicting a substantial “return to coal.” Some analyses lamented this as a setback for climate objectives, while others even prematurely celebrated coal’s supposed resurrection. However, investors must consider whether these short-term policy responses translate into a meaningful, sustainable shift in the global energy mix.
This situation echoes the aftermath of Russia’s 2022 invasion of Ukraine, which similarly prompted predictions of a European coal boom due to interrupted gas supplies. In reality, after a temporary spike in 2022, European Union coal consumption quickly reverted to its long-term decline, hitting a historic low by 2025. This historical precedent offers a stark reminder that knee-jerk policy adjustments often fail to alter established energy transition trajectories.
Drilling Down: The Limited Scope of Gas-to-Coal Switching
So far, empirical evidence for 2026 largely contradicts the “return to coal” narrative. March data from the Centre for Research on Energy and Clean Air confirms that global coal power generation remained static. The notable decline in gas-fired generation during this period was offset overwhelmingly by significant increases in solar and wind power, not by coal. While some governmental coal policy shifts were announced late in March and may not be fully reflected, a deeper analysis provides a crucial forward-looking perspective.
A comprehensive assessment by energy think tank Ember evaluated the potential impact of coal policy changes and market responses across 16 key countries, alongside the 27 EU member states, collectively accounting for 95% of 2025’s total coal power generation. This analysis modeled a maximum “worst-case” scenario for gas-to-coal switching driven by high gas prices, alongside potential returns of idled coal plants and delays in planned closures.
Ember’s findings project that these combined factors could lead to an increase of 175 terawatt-hours (TWh), or 1.8%, in coal use for 2026 compared to 2025. Importantly, this increase is measured against what would have occurred without the energy crisis; it does not negate the broader trend of declining coal generation, which saw a 0.6% (63 TWh) drop in 2025. Approximately three-quarters of this potential global increase stems from anticipated gas-to-coal switching within China and the EU. Further, albeit smaller, increases could materialize in India and Indonesia, with more modest contributions from South Korea, Bangladesh, and Pakistan. Conversely, widely publicized policy shifts in Japan, Thailand, and the Philippines are expected to have negligible, if any, impact on coal power generation in 2026.
Dave Jones, chief analyst at Ember, emphasizes that the 1.8% figure represents an absolute upper bound. He cautions, “This would only happen if gas prices remained very high for the rest of the year and if there were sufficient coal stocks at power plants. The real risk of higher coal burn in 2026 comes not from coal units returning…but rather from pockets of gas-to-coal switching by existing power plants, primarily in China and the EU.” Moreover, Jones posits a strong possibility that global coal power could continue its decline this year, especially if the energy crisis begins to temper overall electricity demand growth.
The Undeniable Reality: Structural Decline and Renewable Dominance
Expert consensus within the energy sector aligns with Ember’s findings, reinforcing the notion that any “coal comeback” is a temporary blip rather than a structural shift. Even before the current crisis, coal typically offered lower operational costs than gas. This meant that coal-dependent Asian economies, already running their coal plants at high utilization rates, possess limited additional capacity to displace LNG imports with further coal generation.
Christine Shearer, who oversees the global coal plant tracker at Global Energy Monitor, notes that in Europe, the pool of countries where gas-to-coal switching remains viable is shrinking rapidly. “In Europe, coal fleets are smaller, older and increasingly uneconomic, while wind, solar and storage are becoming more competitive and widespread,” she states. Italy’s decision to delay its coal phase-out from 2025 to 2038, for example, is dismissed by the ECCO think tank as “ineffective and costly,” particularly given that coal currently accounts for only about 1% of the nation’s power.
Crucially, there is no evidence of a structural “return to coal” that would genuinely undermine long-term climate objectives. No new coal plants have been announced in recent weeks. Suzie Marshall, a policy advisor at E3G, clarifies that while “we’re seeing possible delayed retirements and higher utilisation [of existing coal plants], as understandable emergency measures to keep the lights on, [this is] not investment in new coal projects…Any short-term increase in coal consumption that we may see in response to this ongoing energy crisis is merely masking a longer-term structural decline.”
The energy crisis has, in fact, acted as a significant accelerant for cost-competitive solar, wind, and battery storage solutions. Numerous new renewable energy projects have been announced since the conflict began, notably in India, Japan, and Indonesia. Shearer contends that far from signaling a “sustained coal comeback,” the Iran war actually “strengthens the case for renewables,” solidifying their position as the more secure long-term energy pathway. Jones concludes that Ember expects “little change in overall fossil generation, but with a small rise in coal and a fall in gas” in 2026, largely due to maximizing existing gas-to-coal switching potential outside the US. For investors, the resounding message is clear: “The big story isn’t about a coal comeback. It’s about how the relative economics of renewables, compared to fossil fuels, have been given a superboost by the crisis.”
