Charcoal is an alternative item to coal. You can make the charcoal by using any kind of wooden log in the furnace and then this charcoal can be used as a fuel for the furnace.
This guide will list down the complete method to make charcoal. The first step to take is to get 2 pieces of wooden log. Chop down any tree in order to obtain the wooden logs.
After picking up the wooden logs, make your way towards the furnace. Use these wooden logs on the furnace to make charcoal.