The Resurgence of Coal in 2025: A Fleeting Blip or a Trend to Watch?

In 2025, the global energy landscape has been marked by a paradox: while coal demand remains near record highs, renewable energy expansion and decarbonization pledges continue to gain momentum. This tension raises a critical question for investors: Is the current coal resurgence a temporary correction in the energy transition, or a signal of a more enduring shift?

Germany’s Energy Transition: A Case of Short-Term Reversal

Germany’s energy mix in early 2025 offers a microcosm of this dilemma. According to a report by the Clean Energy Wire, coal-fired electricity production surged by 15.3% in Q1 2025, accounting for 27% of the electricity mix—up from 23% in the same period of 2024 [2]. This rebound was driven by a “wind drought” and higher-than-expected electricity demand, forcing utilities to rely on coal as a baseload power source [4]. However, by Q3 2025, the tide had shifted. Renewable energy accounted for 43.9% of total electricity generation, while conventional sources fell to 56.1%—a decline from 57.2% in Q3 2021 [3].

Germany’s long-term energy transition goals remain intact. The government aims to phase out coal entirely by 2035 and achieve 100% renewable electricity by 2030, supported by aggressive expansions in onshore and offshore wind and solar capacity [1]. Yet, the 2025 data underscores a critical vulnerability: even advanced renewable markets remain dependent on fossil fuels during periods of underperformance.

Global Coal Demand: Stability Amid Transition

Globally, coal consumption in 2025 is projected to remain stable at 8.79 billion tonnes, driven primarily by China and India, which together account for over 50% of global coal use [1]. China’s reliance on coal persists due to its role in industrial production and power generation, while India’s growing energy demands are being met with a mix of coal and renewables.

The Trump administration’s policies have further complicated the energy transition. Executive orders prioritizing fossil fuels, including coal, have introduced uncertainty into the renewable sector by halting $300 billion in clean energy funding and suspending new renewable authorizations on public lands [5]. At the same time, coal production in the U.S. has seen a modest uptick, with metallurgical coal—used in steelmaking—remaining in demand despite the rise of low-carbon alternatives like direct reduced iron (DRI) [2].

Geopolitical Risks and the Coal Paradox

Geopolitical tensions have amplified coal’s role as a fallback energy source. A study published in Energy Policy notes that increased geopolitical risk correlates with higher coal production, as nations prioritize energy security over decarbonization [2]. For instance, U.S. tariffs on renewable materials and protectionist policies have slowed the adoption of wind and solar projects, inadvertently reinforcing coal’s position in the energy mix [1].

However, this short-term stability masks long-term risks. Coal’s carbon intensity makes it incompatible with net-zero targets, and its resurgence could delay the energy transition by up to a decade, according to Wood Mackenzie [4]. The duality of industrial coal demand—traditional metallurgical use versus low-carbon alternatives—further complicates investment decisions.

Investment Implications: Balancing Short-Term Gains and Long-Term Risks

For investors, the 2025 coal rebound presents a nuanced opportunity. Coal projects with long mine lives and policy support—such as U.S. metallurgical coal assets with 2.5% tax credits—offer near-term resilience amid geopolitical and energy transition uncertainties [1]. However, the Inflation Reduction Act (IRA) and private-sector momentum in renewables suggest that coal’s dominance is unlikely to persist.

The key lies in hedging against volatility. Investors are increasingly favoring coal assets that align with transitional strategies, such as those with potential for carbon capture or proximity to renewable infrastructure. Conversely, investments in coal-dependent regions face heightened regulatory and reputational risks, particularly as climate litigation and public pressure mount [5].

Conclusion: A Fleeting Blip, But Not Without Consequences

The 2025 coal resurgence is best viewed as a temporary correction rather than a paradigm shift. While geopolitical instability and renewable intermittency have created short-term demand, the long-term trajectory of the energy transition remains intact. For investors, the challenge is to navigate this duality: capitalizing on near-term coal demand while aligning portfolios with the inevitable shift toward renewables.

As Germany’s experience demonstrates, the energy transition is not a straight line but a series of oscillations. The critical question for 2025 and beyond is whether these oscillations will accelerate the adoption of resilient, low-carbon systems—or entrench fossil fuels for another decade.

Source:
[1] Global Coal Consumption Reaches Record High in 2024 [https://discoveryalert.com.au/news/coal-resilience-2024-global-consumption-record/]
[2] The Trump Administration's Coal Revival: Strategic ... [https://www.ainvest.com/news/trump-administration-coal-revival-strategic-resource-exposure-industrial-metals-shifting-energy-landscape-2509/]
[3] Smaller share of electricity from conventional energy sources [https://www.smard.de/page/en/topic-article/5892/209146/smaller-share-of-electricity-from-conventional-energy-sources]
[4] new-energy-realities-risk-extending-coal-sunset [https://www.woodmac.com/press-releases/new-energy-realities-risk-extending-coal-sunset/]
[5] Three Takeaways from the Trump Administration's Latest Push ... [https://environmentalenergybrief.sidley.com/2025/04/18/three-takeaways-from-the-trump-administrations-latest-push-for-shifts-in-domestic-energy-production/]