*This is part two of a two-part article on coal's future. For part one, A war on an inferior fuel, click here.
In 2012, the International Energy Agency warned that more than two-thirds of the currently known fossil fuel reserves will have to remain in the ground, unburned, through 2050 if there is to be any chance of limiting global warming to 2 degrees.
Climate campaigners have begun a disinvestment campaign to persuade investors to boycott energy companies whose business model relies on commercialising fossil fuel reserves.
The Carbon Tracker Initiative in Britain and Bill McKibben's 350.org in the United States have sought to emphasise the long-term risks of investing in fossil fuel companies. McKibben is pressing the pension funds and endowments of US cities, universities and religious institutions to avoid owning shares in them.
Last month, mining company BHP Billiton fought off an attempt by an independent to secure election to its board of directors. Ian Dunlop, a former Shell executive and past chairman of the Australian Coal Association, warned the company risked over-investing in developing coal assets that could never be produced because of climate targets (BHP's stroll to oblivion, November 14).
Given that coal generates far higher CO2 emissions than either natural gas or oil, it is the top target for climate campaigners.
Leaving coal reserves unburned would severely disadvantage countries like China and India with fast-growing energy needs but relatively few oil and gas resources of their own.
Besides, leaving coal in the ground and switching to gas would quickly strain global gas resources and result in a sharp rise in prices.
The pressure is to find more environmentally acceptable ways to continue using coal. Replacing the current fleet of coal-fired power plants with the most modern generation of ultra-supercritical generators could cut emissions by up to 30 per cent. For deeper cuts, carbon capture and storage, which is not currently economic, will be required (Carbon capture slowing: study, October 11).
Supercritical and ultra-supercritical coal-fired generators squeeze far more energy from the same amount of coal combustion.
The first supercritical plant was installed in the 1960s and the first ultra-supercritical one in the 1990s. But of 1610 GW of coal-fired generation installed globally, 77 per cent still employ subcritical steam cycles, 20 per cent supercritical steam cycles, and just 3 per cent are equipped with the most modern ultra-supercritical technology.
Since the first ultra-supercritical plant went online two decades ago, another 570 GW of very inefficient subcritical plants have been installed.
If power generators had all installed the most modern designs, 60 billion tonnes of CO2 emissions would have been avoided, roughly two years worth of manmade global warming gases, according to the Coal Industry Advisory Board.
For the coal industry and its supporters, the challenge is to ensure that new coal-fired generation is the most efficient available, and provide government financial support to help CCS become competitive.
For many climate campaigners, however, that is not enough. Coal combustion should be phased out unless it can be coupled with CCS to capture all of the resulting emissions.
The result is enormous uncertainty about the long-term outlook for the industry.
"The magnitude of future coal demand growth hinges critically on the actions that governments take to address these issues, taking into account their aspirations for energy security, affordability and improved access to modern energy," according to the IEA.
In 2011, the world consumed around 5.5 billion tonnes of coal. By 2035, consumption could rise to as much as 7.8 billion tonnes on current policies, or 6.3 billion tonnes if governments take modest further measures to combat climate change.
However, if governments are really serious about limiting global warming to 2 degrees, coal combustion will have to fall to just 3.6 billion tonnes, according to the IEA.
"The wide divergence in outcomes for coal in the three scenarios ... reflects primarily the different degrees of stringency of the policies adopted to promote energy efficiency, reduce greenhouse emissions and improve local air quality," the IEA explained.
More than any other fossil fuel, the coal industry's outlook remains highly uncertain, and almost entirely dependent on policy choices, which is why the fight over its future has become so bitter.
John Kemp is a markets analyst for Reuters.
Originally published by Reuters. Reproduced with permission.