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China’s Coal Emissions Rollercoaster: Time to Stop the Ride

Mar 03, 2020

“China Plans More Coal-Powered Energy” reads one headline. Just below it, published on the same day, sits “China Plans to Reduce Coal Power Production.” The last several years of China’s energy policy have been whiplash inducing, alternating between triumphs in renewable energy and dramatic increases in coal production. It is difficult to know who to believe or what to expect.  

What is clear, however, is that China’s decisions on coal matter, not only for domestic economics or central heating, but for the global environment. Coal is the largest source of electricity globally, and this use alone contributes to 30 percent of the world’s carbon emissions. In 2017, China was responsible for just over half of the world’s coal consumption. The emissions giant is well aware of the issues with coal, which range from serious air pollution that hurts GDP with its associated health costs to being a major contributor to climate change. In its 13th Five Year Plan (FYP), China pledged to cap coal use at 58 percent of total energy consumption by 2020; in 2018 the nation had reached 59 percent, and the government projects that they will reach the mandatory target on time. At the same time, the nation pledged to peak energy use around 2030. 

Despite this, China’s coal story is not one of steady decline. Since Reform and Opening in the 1980s, the central government has controlled the development of new coal plants nationwide. By the early 2010s, the years-long approval process was leading to backups, so the authority to authorize coal plants was distributed to the provinces in 2014 in an effort to stimulate the economy and speed up power plant construction. The provinces began green-lighting coal projects at record-speed, trying to meet ambitious economic growth targets set by the central government. Just two years later, concerned by the sudden jump in coal capacity, the central government took back approval powers, but many of the plants authorized in the interim are still under construction. A total of 121 gigawatts is in the pipeline, a dramatic increase from the 38 and 35 gigawatts installed in 2016 and 2017, respectively, and more than the total 105 gigawatts the rest of the world has planned. This amounts to a 4.5 percent increase in capacity in the 18 months leading up to last June. Nevertheless, increased energy demand has allowed China to continue to increase its coal use while simultaneously making the targets outlined in the 13th FYP. 

In December the central government extended the rollercoaster by issuing a report showing that more than half of the coal plants owned by the five largest state-owned enterprises (SOEs) operate at a loss, in part due to overcapacity. Together, these SOEs use 44 percent of the country’s coal. The State-owned Assets Supervision and Administration Commission (SASAC) is beginning a pilot project to merge the companies’ assets and shut down unprofitable plants in the northwest, and some are predicting that a quarter to a third of capacity in the area will go offline by 2021. 

It seems that even the latest push to close unprofitable plants will not result in a net decrease in coal use. China is clearly still planning to rely on coal for the bulk of its energy supply, and the central government is working to balance the need for economic growth and energy production with concerns about overcapacity. Ultimately, the country’s “will they or won’t they” approach on domestic coal consumption is wasting valuable time and distracting from the need to invest heavily in renewable energy. The central government needs to set ambitious new targets to draw down coal in the 14th FYP instead of continuing to invest in new plants that will pollute the air and contribute to climate change for the next 40 years. The SASAC’s efforts to shut down plants and reduce overcapacity should be the norm, not a small course correction in a construction boom. It is clear that existing plants are a drain on the economy—several coal power stations have already filed for bankruptcy—and it is time for China to move on from its pattern of using coal construction to boost employment. The country, and the climate, cannot afford it. 

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