On Saturday, Newcastle coal—an index for Asia­­—cost $203 a ton, the highest level since 2008. Then on Tuesday, the price of coal on the AP12 benchmark—which covers Northwest Europe—topped $275, marking a 63% increase over the last four weeks, and hitting an all-time high.

The peak in coal costs is, in part, a natural corollary of the booming price of all energy as countries, desperate for fuel, cast a wide purchasing net to get what they can. That price hike itself is due largely to a post-pandemic spike in demand coupled with a pandemic-era lull in supply.

Even the U.K., in the depths of an energy crisis, ended a two-month coal-free streak last month to ensure power supply for homes. But in Asia, coal remains the leading choice of power supply, so the sudden surge in coal futures is a bigger problem in the region than it is in Europe.  

Reuters reports that in India over half of the country’s 135 coal-fired power plants have only enough feed stock to last just three days, threatening to cause widespread power outages across the country.

Coal generates 70% of electricity in India and the country normally produces three-quarters of its own needs, but domestic production has dipped this year due to heavy rains that have flooded mines and transport routes.

Meanwhile, the surging cost of coal imports has discouraged power producers from shopping overseas. In August, India’s coal imports dropped 30% as the cost of the commodity climbed 40% to all-time highs—buoyed by soaring demand from India’s rival and neighbor to the northeast.

“The coal shortage is largely ignited by China,” says Sabrin Chowdhury, senior commodities analyst at Fitch Solutions. China has clamored for coal as the country responds to a power crisis caused by “a confluence of factors,” Chowdhury says.

Like in India, demand for power boomed in China during the pandemic. Chinese factories churned out goods destined for the West, where consumers went on shopping sprees during lockdown and hospitals maximized orders for PPE.

Also like India, China’s domestic coal production has been in decline. Under Beijing’s push to create a net zero carbon economy by 2060—as well as an earlier government mandate to eliminate overcapacity in the sector—officials have instructed coal producers to wind down operations.

But now that China’s manufacturing hubs are reeling from power outages, Beijing has demanded domestic coal producers reverse course and increase production to ensure energy supplies during winter.

The China Banking and Insurance Regulatory Commission (CBIRC) on Tuesday instructed banks to prioritize lending to coal mines and power plants to secure China’s energy supplies. Chinese mines have responded by vowing to ramp up production.

“There is sufficient coal production capacity in China to meet the current power demand,” Chowdhury says. “China will now bring online capacity that was previously shut down, no matter the high costs, in order to mitigate the immediate crisis.”

Evidently, in times of trouble, coal remains a firm favorite for power production. The instruction from the CBRIC for domestic banks to divert financing to coal production landed a week after President Xi Jinping told the UN that China would halt funding for coal projects overseas. But, Xi has given China until 2026 before it starts cutting coal consumption itself.

Hopefully, the current energy crisis won’t throw the country off schedule.   

Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett49

CARBON COPY

Nobel work

The Royal Swedish Academy of Sciences on Tuesday awarded the Nobel prize in physics to three scientists— Syukuro Manabe, Klaus Hasselmann and Giorgio Parisi—for their work on climate change. All three scientists were recognized for their work on modeling the consequence of variable action in complex physical systems, such as the effect carbon dioxide emissions have on global temperatures. The Guardian

Primary polluters

The team at CarbonBrief released data Tuesday on the world’s leading countries as measured by historical carbon emissions, accumulated from 1850 to 2021. Unsurprisingly, the U.S. leads the pack, accounting for 20% of global carbon emissions during that time frame, although China’s race from seventh to second place—contributing 11% of total emissions in total—is remarkable. CarbonBrief has a video showing the dramatic race to pollute. CarbonBrief

ESG ain't easy

According to the European Banking Authority (EBA), banks in Europe are dropping clients that could increase their exposure to climate risk, as EU regulators impose stricter controls on lending to polluting industries. But the EBA—the industry watchdog—is wary that banks' swift divestment over climate risks could result in polluting industries seeking more funding from less-regulated corners of the financial market. Bloomberg

California oil

A pipeline managed by Amplify, a Texas-based oil company, split and spilled 123,600 gallons of oil into the Pacific off the coast of California this past week—the worst California oil spill, in terms of volume leaked, since 2015. The Amplify pipeline carries oil from aging offshore rigs, which were installed by Shell in the 1980s. The risk of future spills increases as the infrastructure ages and corrodes, although executives at Amplify say a ship's anchor snagging the pipeline likely caused the rupture. Investigations into the cause, as well as Amplify’s delayed response, are ongoing. New York Times

Hydro runs dry

Drought is making hydropower less reliable and exacerbating power shortages. In Sweden, an unusually dry summer has reduced the country’s reservoirs to their lowest level in more than a decade, while gas prices reach new heights. Sweden, which exports hydro energy to other European countries including the U.K., is trying to convince industrial power users to save energy as winter nears and fuel demand increases. The same situation has already played out in China, where the government diverts water from the lush south to irrigate its arid north—draining reservoirs that feed hydro stations, which power factories, which the government has now ordered to close. Bloomberg

IN CASE YOU MISSED IT

How leaders from Coca-Cola, FedEx, Sony, and General Motors are tackling climate change by Kristine Gill

No signs of stopping: Gas prices in Europe just hit another record by Katherine Dunn

Europe’s messy transition to clean energy is making some investors very rich by Sophie Mellor

Big Tech needs to tackle its water addiction by David Lynch

Firefighters enlist high-tech tools to stave off the West’s increasingly destructive blazes by Kevin T. Dugan

CLOSING NUMBER

17

More than half of the people on Earth at risk of exposure to life-threatening heat stress caused by climate change live in India, according to new research in the Proceedings of the National Academy of Sciences. Urban areas magnify the effect of extreme heat, as natural land cover is replaced by concrete—which absorbs heat. India has 17 of the 50 cities most affected by heat stress. Authors of the report say their study “calls into question the future sustainability…of the planet’s urban settlements.”