Ng Weng Hoong
Once praised as the fount of eternal growth, China has become the bearer of bad news for the coal industry. The world’s second largest economy is beating up its once beloved fuel with a combination of slower growth, weak energy demand, a persistent supply glut, industrial accidents, currency devaluations and tightening environmental restrictions.
Since taking office in 2013, President Xi Jinping has set a target to reduce China’s 66% dependence on coal for power generation to 62% by 2020, and for renewables to displace fossil fuels and generate 20% of the country’s energy supply by 2030. Xi’s push to clean up China’s heavily polluted environment also calls for a reduction of the country’s carbon intensity, or greenhouse gas emissions per unit of GDP, by 40 – 45% from 2005 levels by 2020, and by 60 – 65% by 2030.
As a result of slower economic growth and the government’s green initiatives, China’s coal imports have plunged by 37.5% to under 100 million t in 1H15, while domestic production has fallen by 5.8% to less than 1.8 billion t, according to the China National Coal Association (CNCA). Domestic coal sales for 1H15 slumped 8.1% to 1.6 billion t, while full-year consumption is likely to fall short of the record 4 billion t reported for 2013.
Chinese coal miners, not among the most competitive in the global industry, are reeling from financial losses with no respite in sight. According to the Xinhua news agency, more than 70% of Chinese coal firms reported a combined loss exceeding 48.4 billion yuan in 1H15 with a worse showing expected in the second half (US$1 = 6.4 yuan).
China will remain dependent on coal for years, says IEA.Despite these hurdles, the International Energy Agency (IEA) insists China’s coal consumption will continue to grow through 2030.
Citing Chinese government documents, the IEA said China expects to remain the world’s largest consumer and producer of coal over the next 15 yr, although its importance will likely shrink according to policy focus and state support for a more energy-efficient, low-carbon economy.
Coal accounts for the bulk of China’s energy-related pollution as measured by the projected rise in carbon emissions from around 2.7 billion t in 2000 to more than 7.2 billion t in 2013. The government expects it to hold steady at between 7.5 and 7.7 billion t from 2020 and 2030 as the other two fossil fuels – oil and gas – will take a bigger role in China’s energy mix. The combined oil and gas share in China’s fossil fuels emissions is seen rising from around 10% in 2000 to 16% in 2013 and to just under 25% by 2030.
Despite the projected energy growth slowdown over the next 15 yr, the IEA said China expects to still produce 2.5 times as much energy-related carbon emissions as the US, the world’s second largest polluter, in 2030. In an earlier report, the Paris-based agency had forecast that China’s coal demand would grow by 2.6% a year through the rest of this decade.
China’s massive coal-fired power sectorCoal’s well-established role and importance to China’s economy will prove difficult to dislodge, however much the government and environmentalists may yearn and plan for a green economy, said analysts.
China’s electricity demand is projected to increase by 75% over the next 15 yr to become twice as large as the world’s second-largest global electricity market: the US. The bulk of that electricity demand will still be met by coal-fired power plants constructed since the turn of the century. The IEA expects those plants to produce 4.9 billion t of carbon emissions by 2030.
“The scale and age of China’s existing coal-fired power generation capacity highlights the risk of high carbon lock-in to its energy supply infrastructure,” said the IEA. Around 95% of China’s existing coal capacity is projected to still be in operation in 2030, with another 345 GW of net new capacity to be installed by that year.
Given the continuing importance of the country’s coal-based industrial structure, China faces ‘financial vulnerabilities’ and ‘challenges’ as it adjusts to a new era of significantly slower economic growth, according to separate reports by the World Bank and the International Monetary Fund (IMF).
After growing by more than 10% a year in the first decade of this century, the World Bank expects the Chinese economy to expand by 7.1% in 2015 and by 6.9% in 2017, while the IMF has a more downbeat projection for 6.8% this year and 6.3% in 2016. Both institutions put a positive gloss on the slowdown in describing the world’s second largest economy as entering a new phase of more balanced and sustainable growth.
Disputing this positive conclusion, three European scientists, Jan Christoph Steckel, Ottmar Edenhofer and Michael Jakob, do not think China will give up on its smokestack industries for the sake of sustainable development.
In a new study for the Berlin-based Mercator Research Institute on Global Commons and Climate Change (MCC), the authors found that many developing countries have been consuming more coal, disregarding all promises to help the world curb its greenhouse gas output. Cost is a major driver especially with coal prices having fallen to a recent new eight-year low. Australia’s thermal coal sold for less than US$64/t in July – less than a third of its peak of US$193 in July 2008.
“Relatively low coal prices are an important reason countries choose coal to satisfy their energy needs,” the scientists wrote in a joint paper that was published in the Proceedings of the National Academy of Sciences of the United States of America (PNAS). “Many countries in Asia and Africa are making major investments in new coal infrastructures, giving rise to a veritable renaissance of coal."
In a 2014 study, Eric Lawson of Princeton University found that China built an average of two 600 MW coal-fired power plants a week between 2005 and 2011. While the pace of construction has dropped, he wrote that China is still planning to add one 600 MW coal plant every 10 days through 2024. If so, the Chinese economy will remain heavily dependent on coal for its electricity supply for decades.
About the author: Ng Weng Hoong is Asia correspondent for World Coal.
Read the article online at: https://www.worldcoal.com/special-reports/06112015/chinas-coal-slide-3124/