Investing.com — While North America and Europe have been reducing their dependence on coal for decades, emerging markets are still heavily dependent on it, note analysts at Wells Fargo (NYSE:).
The bank said in a memo this week that China and India, now the world’s biggest coal consumers, have seen their consumption rise even as Western economies turn to renewable energy.
Since 2005, coal consumption in North America and Europe has halved, while in India it has almost tripled. Together, China, India and Southeast Asia now account for roughly 75% of global coal demand, up sharply from 25% in 1990.
“Coal remains a predominant energy source in much of the world, despite its environmental drawbacks,” Wells Fargo analysts wrote, noting that affordable and reliable fuel sources are essential to support economic growth in emerging markets.
For example, according to data from the Energy Institute, coal represents 53% of China’s domestic electricity consumption. Although China has started investing in green energy, Wells Fargo predicts that this shift will take some time before renewables become dominant.
The analysts acknowledged that while the future is moving towards greener fuels, the global energy transition is likely to create investment opportunities that still involve hydrocarbons.
“We expect fossil fuels to remain the main source of energy for many emerging economies,” they explained.
Wells Fargo believes that as demand continues in these markets, it will likely support higher oil prices and further strengthen investment in these sectors.
