South Korea's move to ditch coal rings alarm bells for Australian exporters

Energy experts say South Korea's pledge to phase out thermal coal should be a wake-up call for Australia's fossil fuel industry.

This week South Korea - a major customer of Australian thermal coal exports - joined Powering Past Coal Alliance (PPCA), committing to abandon all its coal power by 2040.

The move was lauded by environment campaigners who have pushed major industrial nations to ditch fossil fuels and replace them with renewable energy sources.

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South Korea is the world's fourth largest importer of coal, which is used to power its industrial base and heat homes.

But the country's steelmakers have been building steel plants that do not use coal, resulting in a gradual drop in demand for the fossil fuel.

But South Korea's decision and similar moves by other nations also brings big implications for Australian coal exporters.

The value of Australian coal exports to South Korea is worth about $2.4 billion a year, data analytics company Kpler said.

The Australian Office of the Chief Economist has forecast a near 15 per cent decline in global thermal coal demand in the three years to 2027.

Thermal coal, along with iron ore, liquified gas and coking coal, make up Australia's four largest commodity exports from last year.

Climate Energy Finance director Tim Buckley said those major exporters would be "terminally challenged" over coming decades as countries shifted to renewable energy to meet commitments under the 2015 Paris agreement.

"This should send a strong reminder to Australia as the second largest exporter of thermal coal behind only Indonesia that our key trade partners are responding to climate science and their treaty obligations," he said.

"Australia needs to pivot our export focus to low emissions industries of the future, in particular exporting green iron and aluminium, critical minerals and lithium hydroxide to help our key trade partners jointly deliver on their decarbonisation objectives."

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