Due to the physical gas shortage, Asian countries are increasingly turning to coal-fired power plants. Europe is also shifting towards dirty coal, but for a different reason – to save costs. The results are not encouraging, as the EU has closed too many coal plants. In contrast, Asian countries that resisted the European environmental agenda and retained their coal capabilities have benefited greatly.
Amid a severe shortage and rising gas prices due to the Middle Eastern conflict, Asian countries are hastily transitioning to coal-fired power generation. The blockade 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 percentage of gas combined with import dependency and weak reserves of coal, nuclear, or hydro generation have suffered the most, says Vladimir Chernov, an analyst at Freedom Finance Global. This primarily 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 is in a particularly tough situation. The country has been forced to purchase spot LNG cargos at prices of $20.76 to $28.28 per MMBtu compared to around $10 in January, restrict diesel sales, regulate gas usage, and halt some fertilizer plants in favor of electricity. In Thailand and the Philippines, authorities have already postponed the retirement of old coal units and have begun seeking more coal, as otherwise, the increase in tariffs and risk of shortages would be even greater," notes Chernov.
Japan and South Korea are also facing price pressures, but they are in a better position than South Asian countries, as they both maintain coal power capacities and have greater flexibility in fuel utilization. "Japan and South Korea possess the greatest ability to shift from gas to coal in response to price shocks. However, countries that relied on imported LNG as a 'clean and reliable' transitional resource are now learning a crucial lesson from this crisis. LNG may have lower emissions than coal, but it is not always more reliable in terms of price and physical availability," observes Chernov.
The supply crisis undermines trust in LNG as a reliable fuel. It reveals that for Asian countries, abandoning coal could be dangerous, while the EU attempts to impose its environmental agenda and enforce taxes on coal usage.
Meanwhile, the EU is also increasing its coal usage, not because it is facing a gas shortage, but because gas prices have skyrocketed. "The EU is now grappling with the high costs of gas and the social price of climate policy. In the first two weeks of the Middle Eastern war, gas prices in Europe surged by about 50%, prompting the European Commission to discuss urgent measures to contain prices. The economics of transitioning from gas to coal in Europe has once again become attractive, but the effect is limited, as a significant portion of coal capacity has already been closed. The space for a wide-scale return to coal in Europe is already noticeably smaller than in Asia," adds the interviewee.
Countries that resisted European pressures and did not abandon coal are now celebrating.
"China and India are suffering less from the gas shock precisely because their energy systems are largely reliant on coal. In this story, China emerges as one of the most rational players in terms of the reliability of its energy system,"
– says Chernov. In 2025, Chinese authorities officially confirmed the policy of building coal power plants as backup for peak demand and unstable wind and solar production. 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 shows that for large systems without storage and flexible capacities, abandoning backup thermal generation would be too risky," believes Chernov.
"In China, coal generation accounts for nearly 60%, while in India it exceeds 70%, and the deliveries of thermal coal to these countries are unaffected by transit through the Strait of Hormuz, since the sources of imports in both cases are Indonesia and Russia. As for coking coal, Mongolia is the main supplier for China, while Australia, the USA, and Russia supply India," says Sergey Tereshkin, General Director of Open Oil Market.
Amid rising demand for coal, prices have also increased. However, compared to the scarce gas, the situation is not overly critical yet. The price of thermal coal in Newcastle, Australia, was $135 per ton on March 18, up a third from February when prices hovered around $100 per ton. Yet, in 2022, even the average monthly prices for thermal coal were above $350 per ton, Tereshkin notes.
Nonetheless, for Russian coal producers, even this price increase could provide financial support.
"The rise in prices in Asia and Europe improves the export economy and may temporarily support cash flow for Russian companies. Yet, the industry remains in a very challenging state."
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 logistics. Eastern logistics and the transport capacity of the network remain the main bottleneck for coal exports. Therefore, Russia will be able to earn more, primarily through price rather than a sharp increase in physical exports," says Vladimir Chernov. Additionally, the budget will receive more tax revenues, but the effect will be weaker compared to oil and gas. The coal sector is currently not in a position to quickly capitalize on the global price surge to its fullest, the expert adds.
When the Middle Eastern crisis ends, countries will return to discussions about transitioning to renewable energy sources. This crisis could serve as an argument for Asian countries against the EU's environmental taxes.
"The political argument for Asia will become noticeably stronger. When the EU speaks of climate goals and carbon costs, Asia can now respond that the import dependence on 'transitional' gas created systemic risk, and coal power capacities saved the grid at critical moments. Moreover, amidst the shock, demands are already being made in Europe to ease carbon burdens and extend free quotas for industry," remarks Vladimir Chernov. However, legally this does not imply the cancellation of European climate mechanisms: the EU is unlikely to abandon its stance, he believes. But Asia will have a significant argument to suggest that a too-rapid phase-out of coal generation without affordable replacement networks and adequate reserve capacities could lead to not just an environmental defeat but an energy collapse.
Source: Vedomosti
