Just as we’ve got used to the idea that the moment of ‘peak oil‘ might be upon us (at the moment 2005 is the year of highest oil production) new figures suggest that the figures for world coal reserves might have been inflated. The widely held view that we are sitting on hundreds of years’ supply of coal may be wrong. This could be good news for climate change.

Largely disregarded in the excitement over the oil price, coal prices have doubled over the last year. The price of imports to Europe is now running at $140 per tonne, while the there are reports that the long-term contract price for coking coal could rise from current $90 per tonne to $225-250 per tonne.

According to Reuters:

“The extremely high prices we’ve seen recently for both thermal coal and coking coal have been driven by the supply/demand imbalance,” Preston Chiaro [of Rio Tinto] told the Reuters Summit in London. “Coal supply/demand tightness won’t ease for many years due to limited infrastructure and strong demand.”

Some of the problems are down to flooding in Australia, and distribution infrastructure issues, but others may be more fundamental.

As David Strahan wrote in an article in The Guardian,

The latest “official” statistics from the World Energy Council put global coal reserves at the end of 2006 at a staggering 847bn tonnes. Since world coal production that year was just under 6bn tonnes, the reserves-to-production (R/P) ratio – the theoretical number of years the reserves would last at the current rate of consumption – is well over 100 years. … However, a clutch of recent reports suggest that coal reserves may be hugely inflated.

Coal consumption has been rising fast – and estimates of the length of time reserves will last have been falling as a result. But the German group Energy Watch, typically sceptical of official figures, reckons that even these lower estimates are on the high side, noting that “so-called proven reserves were anything but proven”. China’s reserves have remained unchanged since 1992, even they’ve mined about a fifth of their coal since then. In contrast, in the UK, where the amount of coal mined has been negligible, estimates have been revised down sharply. According to Strahan, Energy Watch calculates – having done a country by country analysis – that coal production will rise until it peaks in 2026, then fall away rapidly.

David Rutledge – of Caltech – has come to similar conclusions using a completely different method. He’s developed regional production projections based on the models King Hubbert used to calculate peak oil, drawing on historical patterns of coal production trends. (He explains his methodology in some detail in a long article in The Oil Drum, complete with a spreadsheet that allows the competent – and curious – to try it for themselves at home). Trends data suggests that the global reserves figures may overstate likely production by a factor of around two (i.e. half as much coal will be mined than is suggested by reserves data).

The upside of this – if Rutledge’s projections are right – is that when compared with the IPCC’s climate change scenarios, the CO2 effects of burning the coal that he projects will be mined produces a peak atmospheric concentration of 460ppm – just above the 450ppm level where climate scientists believe there is likely to be runaway climate change effects.

David Strahan quotes Rutledge as saying: “In some sense, this is good news. We are likely to hit 450ppm without any policy intervention.”

Is there a problem with this? Well, it is possible that the ‘low coal production’ analysis is wrong, so the precautionary principle probably ought to apply, at least until we understand climate change dynamics a bit better. But if he is right, it suggests that cheap fossil energy is going to be a thing of the past within a couple of decades, and certainly rather sooner than most people assume – which adds some urgency to the development of large scale renewable energy sources, if we want to maintain our present lifestyle.

There’s a good blog description and review here, by David Roffey.

And a longer, more technical article by David Strahan in Energy Watch.