Due to the physical gas shortage, Asian countries have begun utilizing coal power plants more actively. Europe is also shifting to dirty coal, but for a different reason: to save costs. This transition has not been effective—too many coal plants have been shut down in the EU. Conversely, countries in Asia have benefited, having resisted the European ecological agenda and maintained their coal capacities.
Amidst significant shortages and rising gas prices due to conflicts in the Middle East, Asian countries are urgently transitioning to coal power plants. The blockade of the Strait of Hormuz and the halt in LNG production in Qatar have removed one-fifth of the global LNG supply from the market.
Economies that have a high reliance on gas combined with import dependency and weak reserves of coal, nuclear, or hydro generation have been significantly affected, says Vladimir Chernov, an analyst at Freedom Finance Global. This includes Singapore, where gas accounts for about 94% of electricity, Thailand with a 64% share, Bangladesh at 66%, and to a large extent, Taiwan with around 40% gas dependency.
"Bangladesh is facing a particularly harsh situation. The country has had to purchase spot LNG cargoes at prices ranging from $20.76 to $28.28 per million BTUs, compared to around $10 in January. They have also restricted diesel sales, rationed gas, and halted some fertilizer plants to conserve electricity. Thailand and the Philippines have already postponed the retirement of old coal units and are seeking more coal, as otherwise, tariff increases and the risk of shortages would be even higher," notes Chernov.
Japan and South Korea are also experiencing price pressures, but they are in a better position than South Asian countries due to their retained coal capabilities and greater flexibility in fuel switching. "Japan and South Korea have the greatest ability to transition from gas to coal in response to price shocks. Those countries that relied on imported LNG as a 'clean and reliable' transitional resource are now learning a crucial lesson from this crisis. LNG may be cleaner than coal in terms of emissions, but it is not always more reliable in terms of price and physical availability," observes Chernov.
This supply crisis undermines trust in LNG as a reliable fuel and shows that abandoning coal is risky for Asian countries. Meanwhile, the EU is attempting to impose its ecological agenda and enforce taxes on coal usage.
The EU itself is also increasing coal use, not due to a gas shortage in the Eurozone, but because gas prices have soared. "The EU is currently battling the high cost of gas and the social implications of climate policy. During the first two weeks of the war in the Middle East, gas prices in Europe rose by approximately 50%. As a result, the European Commission is already discussing emergency measures to cap prices. The economics surrounding the transition from gas to coal in Europe have once again become appealing, 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 noticeably less than in Asia,” explains the analyst.
Countries that did not yield to European pressure and maintained coal usage are now celebrating.
"China and India are suffering less from the gas shock precisely because their energy systems are predominantly coal-based. In this scenario, China, while not the most environmentally friendly, appears to be one of the most rational players in terms of energy system reliability."
— says Chernov. In 2025, the Chinese authorities officially cemented their strategy to build coal-fired power plants as a safeguard for peak demand and unstable wind and solar output. China's investments in coal generation exceeded $54 billion by 2025 (IEA data).
"The current crisis does not make coal the 'fuel of the future,' but it indicates that for large systems without storage and flexible capacities, abandoning backup thermal generation would be too risky," Chernov believes.
"In China, the share of coal generation is nearly 60%, while in India it exceeds 70%. Moreover, energy coal supplies to these countries are not dependent on transit via the Strait of Hormuz, as their sources of import are Indonesia and Russia in both cases. As for coking coal, Mongolia is the primary supplier for China, while India gets its supplies from Australia, the US, and Russia," says Sergey Tereshkin, CEO of Open Oil Market.
Amid rising demand for coal, prices have also increased. However, compared to the increasingly scarce gas, the situation is still manageable. The price of energy coal in Newcastle, Australia, was $135 per ton on March 18, a third higher than in February when prices hovered around $100 per ton. However, in 2022, even average monthly coal prices surpassed $350 per ton, notes Tereshkin.
Nonetheless, for Russian coal producers, even this price increase offers some financial support.
"The rise in Asian and European prices enhances the export economy and may temporarily support cash flow for Russian companies. However, the industry remains in a very challenging state."
Russian coal exports fell by 8% to 213 million tons in 2025, prompting the government to implement support measures due to high transportation costs, sanctions, and weak profitability.
"Even now, the main limitation for Russia is not demand, but export capabilities. Eastern logistics and throughput capacity remain the primary bottleneck for coal exports. As a result, Russia may earn through pricing rather than a sharp increase in physical exports," explains Vladimir Chernov. Additionally, the budget will receive more tax revenue, but the effect will be weaker than in the oil and gas sectors. The coal sector is currently not in a position to fully capitalize on the global price surge, the expert adds.
When the Middle Eastern crisis concludes, countries will return to debates about transitioning to renewable energy sources. This crisis may provide Asian nations with leverage against the EU's environmental taxes.
"The political argument for Asia will become significantly stronger. When the EU discusses climate targets and carbon costs, Asia can now respond that dependency on imported ‘transitional’ gas has created systemic risk, while coal capacities saved the grid during critical moments. Moreover, even in Europe, amidst this shock, there are already calls to ease carbon burdens and extend free quotas for industry," says Vladimir Chernov. However, legally, this does not imply a cancellation of European climate mechanisms: the EU is unlikely to abandon its agenda, he believes. But Asia will have a compelling argument that too rapid a transition away from coal generation without affordable alternative grid solutions and backup capacities could lead not to environmental victories, but energy collapses.
Source: Vedomosti
