1 Chapter I Introduction 1.1 Background Global Coal Demand Around the World Coal is one of the most common fossil-fuel energy sources around the world. Its affordability is one of the key points that make coal become as famous as it is today amongst energy producers. Figure 1.1 Fossil Fuel Demand in the STEPS, 1990 – 2050 (International Energy Agency, 2022) As it can be seen from figure 1.1, coal still become one of the common fossil fuels that amounted to around 20% from overall fossil fuel demand in EJ. Looking at the coal demand specifically, most of the demand from coal are coming from China as seen in figure 1.2. Other than China, India and Other Asia Countries also become the primary demand for coal until 2025. Figure 1.2 Global Coal Consumption, 2000 – 2025 (International Energy Agency, 2022) 2 The changes in demand from 2022 until 2025 can be seen in figure 1.3. Based on that chart, it shows that the increase in demand is driven mostly by China and India. India has the highest changes in demand compared to China and Other Asia Countries. Figure 1.3 Changes in Global Coal Consumption, 2020 – 2025 (Source: IEA Coal Report, 2022) Net Zero Carbon Transition and its Effect for Global Coal Demand China and India are two largest coal consumers in the world as seen in figure 1.2. As the two largest consumers they could be said to be a market maker for coal demand around the globe. Most of the coal demand comes from coal-fired power plants. One of the key points in the Paris agreement is to limit global warming to below 2 o C above pre- industrial level therefore the phase-out of coal-fired power plant will play a pivotal role. In the Paris agreement there are several scenarios that usually describe the coal-fired power plant phase-out strategy such as rapid phase-out and lower phase-out. This phase- out strategy will impact the global market demand of coal itself whether the decline in demand will be higher or lower. Energy Transition Nowadays, energy is one of the hot topic that being discussed across the globe. The global economy's heavy reliance upon fossil fuels is under increasing threat by the dual challenges of supply security and climate change (Bahadori et al., 2013). Worldwide coal reserves are projected to be depleted by sixty years later (Musa et al., 2018). Scientific and public concerns about the insatiable consumption of fossil fuel and how 3 this is inextricably linked to hastened global climate change have fueled contemporary political debate and policy-making (Jordaan et al., 2017). Transitioning from fossil fuels to renewable energy is recognized internationally as being instrumental to tackling these aforementioned dual challenges (Chapman et al., 2018). As one of the developed country, China is also expected to do energy transition as a form of commitment to lower global warming to below 2 o C. PT.ABCoal Coal Market Portion PT. ABCoal is one of the largest coal mining productions in Indonesia. It amounted to around 25 – 30 million tons of coal produced in a year. The market portion of their coal sales is around 25% for domestic as a necessity from the government and the other 75% of its portion to export market. The domestic sales are based on the government policy that obliges coal mining producers to sell 25% of yearly production to the domestic market. Other than that, due to the condition of disparity between domestic price and export price, coal producers prefer to explore export market. Meanwhile, around half of their export portion are sold to China and India, and the other half of export portion are sold to other southeast Asia or east Asia country such as Vietnam, Taiwan, etc. Looking at the export countries distribution for PT.ABCoal, it can be said that most of their revenue have dependencies with China coal market. Thus, this dependency will lead to an unsustainable market if there are any disruption within China. 1.2 Company Profile PT.