The recent lay-offs in the coal industry are something Australia doesn’t need right now.

But there are various, swirling trends at play that mean a ground shift for the coal business. Cleaning up the environment is one; the fact that the Japanese are stepping up their thermal coal purchases from South America, because it’s cheaper than some other sources, is another.

On the positive side, India is apparently set to overtake China in the coal-importing stakes and the Philippines’ largest utility is talking about building four new coal-fired power stations.

As for coking coal, the first six months of the year saw continuing price weakness. The prices last year mirrored the collapse in iron ore, but have not followed the latter back up. As The Steel Index noted this week, coking coal has different market dynamics to those of iron ore, mainly due to the large metallurgical coal resource within China itself.

The world economy will continue to play out and affect coal prices on that level.

But it’s the environment question that is also pulling at the tail of the industry.

Just add that to the pile weighing down coal, the other components being increased competition from shale gas, a weak global economy and ample coal supply.

US President Barack Obama is invoking executive power to require new controls on emissions from thermal power stations. As Thomas Pugh at London’s Capital Economics pointed out, while the Obama statement did not actually introduce new policy, this focus on the costs of climate change will only add to the headwinds facing coal prices.

The US Environmental Protection Agency (EPA) has proposed new rules requiring that any new power station emit less than 1000 pounds of carbon-dioxide per megawatt-hour. As Pugh noted, this would effectively ban the construction of new coal plants that did not use expensive and — and unproven — carbon-capture and storage technology.

“Even without being passed, the EPA’s proposed legislation has effectively prevented any new coal-fired power plants from being built,” he added. There simply won’t be investors willing to back such a chancy proposition.

Now we have China implementing at least seven carbon-trading schemes and indicating limits will be imposed on the amount of coal used.

One big problem for China is water. Not only does this issue affect coal mining and processing, which use vast amounts of water, but coal-fired plants are very thirsty beasts, too. It is claimed that more than half of China’s industrial use of water is coal-related, whether it be mining, coal washing, cooling thermal-generation plants, coal-to-chemicals or coke production. About 80% of China’s ammonia production is synthetic ammonia produced from coal.

Thermal power generation uses about half of all coal consumed by China.

When you place coal in the context of all water use (not just industrial) then the industry absorbs one-sixth of China’s consumption, according to a recent report from HSBC.

“This is not sustainable; water tables are declining and in some areas coal mining is already constrained,” the bank said in its latest China Coal and Power report.

In extreme cases, lack of water could see power stations being closed by 2030. (And remember, water is used in 97% of China’s power generation if you add in gas and its vast network of hydro power stations.)

Part of the problem is that much of China’s coal is in the north, which has just slightly more than 20% of China’s available water. HSBC points out that China has about 15,000 coal mines; roughly 70% of these are located in water-scarce regions and 40% are estimated to already be facing severe water shortages.

Even Mongolia is affected by the environmental issue. It is reported this week that the Mongolian Ministry of Environment and Green Development has announced the closure of Tsagaan Khad, a coal customs stockyard on the Mongolian side of the border with China, citing environment damage from coal haulage, although no one was quite sure how soon the closure would be implemented.

Overall, the China picture is not clear. Changes can’t happen overnight. After all, coal supplies 80% of China’s electricity. Even with the rapid growth of nuclear, wind, solar and shale gas as feedstocks for power plants, coal is going to be vital over the foreseeable future.

But the global trends are something that the Australian coal industry — and anyone concerned about Australia’s economic wellbeing — should be watching very closely.

However, there does not seem to be the same environmental alarm in India.

A report on Bloomberg notes that India may well overtake China as the world’s largest coal importer because it has fewer energy options with which to battle its already chronic power shortages now holding back economic growth, and India is depleting its natural gas resource at what has been described an alarming rate.