Due to the physical gas shortage, Asian countries are more actively utilizing coal-fired power plants. Europe is also transitioning to dirty coal, but for a different reason – to save costs. Unfortunately, this situation is problematic as the European Union has shut down too many coal plants. Conversely, the countries in Asia that did not succumb to the European environmental agenda have retained their coal capacities and are now benefiting.
In light of the severe gas shortage and rising prices due to the Middle Eastern conflict, Asian countries are urgently switching 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.
Economies with a high share of gas, combined with import dependence and weak coal, nuclear, or hydro reserve capacity, are suffering the most, says Vladimir Chernov, analyst at Freedom Finance Global. This includes Singapore, where gas accounts for about 94% of electricity, Thailand with 64%, Bangladesh at 66%, and significantly, Taiwan with a gas share of around 40%.
“Bangladesh's situation is especially dire. The country has been forced to buy spot LNG cargoes at $20.76-$28.28 per MMBtu compared to around $10 in January, restricting diesel sales, rationing gas, and shutting down some fertilizer plants for electricity production. In Thailand and the Philippines, authorities have already postponed the phasing out of old coal units and are looking for more coal, otherwise tariff increases and risks of shortages would be even higher,” notes Chernov.
Japan and South Korea are also facing price pressures, but they are in a better position than South Asian countries since they still have coal capacities and more flexibility in fuel switching. “Japan and South Korea have the greatest ability to shift from gas to coal during a price shock. Countries that bet heavily on imported LNG as a 'clean and reliable' transitional resource are now learning a critical lesson from this crisis. LNG may have lower emissions than coal, but it is not always more reliable regarding price and physical availability,” remarks Chernov.
The supply crisis undermines confidence in LNG as a reliable fuel. It shows that it is risky for Asian countries to abandon coal, even as the EU seeks to impose its environmental agenda and force them to pay taxes on coal usage.
At the same time, the EU is also increasing its coal usage, not because of a gas shortage in the Eurozone, but because it has become extremely expensive. “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 Middle Eastern war, gas prices in Europe rose by about 50%, prompting the European Commission to discuss emergency measures to contain prices. The economics of switching from gas to coal in Europe has become appealing again, but the effect is limited since a significant portion of coal capacity has already been shut down. The room for a broad return to coal in Europe is now noticeably smaller than in Asia,” says the source.
Countries that have resisted European pressure and continued using coal are now celebrating.
“China and India are suffering less from the gas shock precisely because their energy systems are significantly based on coal. In this context, China appears less environmentally friendly, but one of the most rational players in terms of energy system reliability,”
– says Chernov. In 2025, Chinese authorities officially committed to building coal-fired power plants as a backup for peak demand and the unstable output from wind and solar sources. China's investment in coal generation exceeded $54 billion in 2025 (according to IEA data).
“The current crisis does not make coal the 'fuel of the future,' but it demonstrates that for large systems without storages and flexible capacities, abandoning back-up thermal generation would be too risky,” believes Chernov.
“In China, the share of coal generation is nearly 60%, while in India, it exceeds 70%. Additionally, energy coal supplies to these countries do not depend on transit through the Strait of Hormuz, as the import sources in both cases are Indonesia and Russia. Regarding coking coal, Mongolia is the primary supplier for China, while India relies on Australia, the USA, and Russia,” says Sergey Tereshkin, CEO of Open Oil Market.
Against the backdrop of rising coal demand, prices have also increased. However, compared to the scarce gas, the situation is not yet critical. On March 18, the price of energy coal in Newcastle, Australia, was at $135 per ton. This is a third higher than in February when prices hovered around $100 per ton, but in 2022, even monthly average energy coal prices exceeded $350 per ton, notes Tereshkin.
Nevertheless, for Russian coal producers, even this price increase heralds financial support.
“The rise in Asian and European prices improves the export economy and may temporarily support cash flow for Russian companies. However, the sector remains in a very difficult state.
Russian coal exports fell by 8% in 2025 to 213 million tons, and the government had to implement support measures due to high transport costs, sanctions, and low profitability.
“Even now, the key limitation for Russia is not demand, but export capacity. Eastern logistics and the transport capacity of the rail network remain the main bottleneck for coal exports. Thus, Russia may earn, but primarily through price rather than a sharp increase in physical exports,” says Vladimir Chernov. Moreover, the budget will receive more taxes, but the effect will be weaker than in oil and gas. The coal sector is currently not in a state to capitalize fully on the global price surge, the expert adds.
When the Middle Eastern crisis is over, countries will return to debates about transitioning to renewable energy sources. This crisis may become an argument for Asian countries in their confrontation with the EU's environmental taxes.
“The political argument for Asia will be significantly stronger. When the EU discusses climate goals and carbon costs, Asia can now respond that it is the dependence on imported 'transitional' gas that created systemic risks, and coal capacities saved the grid at a critical moment. Moreover, even within Europe, following the shock, there are already calls to ease the carbon burden and extend free quotas for industries,” states Vladimir Chernov. However, legally, this does not mean the cancellation of European climate mechanisms: the EU is unlikely to abandon its position, he believes. But Asia will have a compelling argument that a too-rapid abandonment of coal generation without inexpensive network replacements and its own reserve capacities may not result in an ecological victory but rather an energy collapse.
Source: Vedomosti
