Price, not policy, continues to be the key driver impacting investment in coal supply infrastructure, as coal project financing grew by 15pc last year, the Paris-based IEA said in its World Energy Investment 2020 report.
The agency said that coal supply investment follows typical commodity boom and bust cycles, citing Australia as an example. Changes in investment spending between 2011 and 2019 in the world's largest coal exporter by value are closely aligned to price signals from the preceding period, whereby a decrease in the coal price results in reduced investment, and vice versa.
"On this basis, downward pressure on the coal price in 2020 is likely to be a primary factor affecting investment decisions in 2021," the IEA said.
But economic signals continue to encourage investment in new coal projects, with China and India leading the way in sanctioning new infrastructure. This is because coal still represents more than a third of global electricity generation, remains the second-largest fuel in the global energy mix after oil and is the second-largest traded bulk commodity after iron ore, the IEA said.
Investment in the coal supply sector — mining and related infrastructure but not coal-fired power plants — grew by 15pc in 2019 to $90bn (€81.8bn). China was the key contributor to this growth, followed by Australia.
China's National Energy Administration and the National Development and Reform Commission approved 201mn t/yr of new coal mining capacity last year, up from 68mn t/yr in 2018 and 28mn t/yr in 2017.
But the agency noted that the process of gaining approval and finance for new coal supply investment "is getting harder and longer", owing to a large drop in global coal-fired power generation last year, energy transitions and public opposition to coal projects. And overall coal supply investment represented just 5pc of total energy sector investment last year, despite coal accounting for more than a quarter of the world's primary energy.
