Due to the physical gas shortage, Asian countries have become more active in utilizing coal-fired power plants. Europe is also turning to dirty coal, but for a different reason - to save costs. However, this is proving problematic, as the EU has closed too many coal stations. In contrast, those Asian nations that resisted the European environmental agenda and maintained their coal capacities are now reaping the benefits.
Against the backdrop of a severe gas shortage and rising prices due to the Middle Eastern conflict, Asian countries are hastily shifting to coal-fired power plants. The blockage of the Strait of Hormuz and the halt of LNG production in Qatar have removed one-fifth of the global LNG supply from the market.
The economies most affected are those where a high share of gas is combined with import dependence and a weak reserve of coal, nuclear, or hydroelectric generation, says Vladimir Chernov, analyst at Freedom Finance Global. This primarily includes Singapore, where the share of gas in electricity generation is around 94%, Thailand at 64%, Bangladesh at 66%, and significantly Taiwan at about 40% gas share.
"Bangladesh is experiencing a particularly tough situation. The country has been forced to purchase spot LNG cargoes at prices between $20.76 and $28.28 per million British thermal units, compared to around $10 in January, restrict diesel sales, ration gas, and halt some fertilizer plants in the name of electricity. In Thailand and the Philippines, authorities have already postponed the retirement of old coal units and are seeking more coal, because otherwise the risk of rising tariffs and shortages would be even greater," notes Chernov.
Japan and South Korea are also feeling price pressure; however, they are in a better position than South Asian countries, as they have retained both coal capacities and more flexibility in fuel options. "Japan and South Korea have the greatest ability to shift from gas to coal during price shocks. On the other hand, countries that relied on imported LNG as a 'clean and reliable' transitional resource are now receiving the main lesson of the crisis. LNG is cleaner than coal in emissions but is not always more reliable in terms of price and physical availability," Chernov remarks.
The supply crisis undermines trust in LNG as a reliable fuel and demonstrates that it is dangerous for Asian countries to abandon coal, while the EU is trying to impose its environmental agenda and levy taxes on coal usage.
At the same time, the EU is also increasing its coal usage, but not due to a gas shortage in the Eurozone, but because gas prices have skyrocketed. "The EU is currently grappling with the high cost of gas and the social price of climate policy. In the first two weeks of the war in the Middle East, gas prices in Europe rose by approximately 50%, prompting the European Commission to discuss emergency measures to contain prices. The economics of switching from gas to coal in Europe have become attractive again, but the effect is limited because a significant portion of coal capacities has already been shut down. The window for a broad return to coal in Europe is noticeably smaller than in Asia," the interlocutor explains.
Countries that did not capitulate to European pressures and did not abandon coal usage are currently celebrating.
"China and India are suffering less from the gas shock precisely because their energy systems are largely coal-dependent. In this context, China appears to be one of the most rational players in terms of energy system reliability, albeit not the most environmentally friendly," says Chernov.
By 2025, the authorities of China officially solidified their course for the construction of coal-fired power plants as a safeguard for peak demand and unstable wind and solar generation. China’s investments in coal generation exceeded $54 billion in 2025 (IEA data).
"The current crisis does not make coal the 'fuel of the future,' but it demonstrates that for large systems without storage and flexible capacities, abandoning backup thermal generation would be too risky," states Chernov.
"In China, the share of coal generation is nearly 60%, while in India it exceeds 70%. Furthermore, coal supplies to these countries are not dependent on transit through the Strait of Hormuz, as Indonesia and Russia are their sources of imports in both cases. Regarding coking coal, Mongolia is the main supplier for China, while Australia, the USA, and Russia are for India," says Sergey Tereshkin, CEO of Open Oil Market.
Amidst growing demand for coal, prices have also risen. However, compared to gas, the situation is not yet critical. The price of thermal coal in Newcastle, Australia, reached $135 per ton on March 18, which is a third higher than in February when prices hovered around $100 per ton. Yet in 2022, even monthly average prices for thermal coal exceeded $350 per ton, notes Tereshkin.
Nevertheless, even such a price increase can provide financial support for Russian coal producers.
"Rising Asian and European prices improve the export economy and may temporarily support the cash flow of Russian companies. However, the industry remains in a very challenging situation.
Russian coal exports fell by 8% in 2025 to 213 million tons, prompting the government to launch support measures due to high transportation costs, sanctions, and weak profitability.
"Even now, the key limitation for Russia is not demand, but export capacity. Eastern logistics and the throughput capacity of the network remain the main bottleneck for coal exports. Thus, Russia may generate revenue, but primarily through price rather than a sharp increase in physical exports," says Vladimir Chernov. Additionally, the budget will receive more taxes, but the effect will be weaker than in oil and gas. The coal sector is not in a position to quickly capitalize on the global price surge to the fullest extent, the expert adds.
Once the Middle Eastern crisis subsides, countries will return to the debates about transitioning to renewable energy sources. This crisis may serve as an argument for Asian countries in their opposition to the European Union's environmental taxes.
"The political argument for Asia will become significantly stronger. When the EU talks about climate goals and carbon costs, Asia can now respond that it was import dependence on 'transitional' gas that created systemic risks, while coal capacities saved the grid in a critical moment. Moreover, within Europe itself, amidst the shock, there are already calls to soften carbon burdens and extend free quotas for industry," notes Vladimir Chernov. However, legally this does not mean the repeal of European climate mechanisms; the EU is unlikely to abandon its stance, he believes. Yet Asia will have a compelling argument that too rapid a phase-out of coal generation without cheap replacement networks and domestic backup capacities could result in an energy collapse rather than an environmental victory.
Source: Vedomosti
