Coal is the most abundant and commonly used energy carrier in the world. In coal-producing countries, coal is often the cheapest fuel for electricity and heat production. Prices of steam coals offered by exporters on international markets reflect current economic and market conditions and are also related to the prices of other fossil fuels like crude oil and natural gas. International coal-market observations and analyses lead to the conclusion that steam-coal prices depend only on heating value. In Polish practice, steam-coal prices are calculated using a price formula in which coal price is a function of three quality parameters: net calorific value, ash content and sulphur content, and a price of 'basic' or 'reference' coal (which means: coal of defined quality). This paper presents the results of international coal-market analyses of relationships between coal price and quality and describes the Polish coal-pricing system. A new solution, relevant to domestic coal mines and power plants, is presented to improve and simplify the conditions of bilateral settlements of coal deliveries. (C) 2003 Elsevier Science Ltd. All rights reserved.