Why China needs to cap its coal consumption

Energy efficiency should be China's answer to both its energy supply and environmental problems. China should promote renewable and clean energy sources, upgrade its coal power production and encourage a low-carbon power system by capping coal's absolute contribution to the energy mix. But any decision to cap coal consumptionis likely to face many obstacles and challenges.

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"Energy efficiency should be China's answer to both its energy supply and environmental problems."
Yuan Jiahai, Associate Professor with North China Electric Power University

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Air pollution is a long-standing environmental problem in China. In recent years, a series of record-breaking haze outbreaks brought unprecedented domestic and international attention to China's worsening air quality.

In January 2013, extreme haze covered around 1.3 million square kilometres in northern and eastern China. Around 800 million people were affected.

In Beijing, the highest daily average concentration of fine particulate matter (PM2.5, or particles less than 2.5 micrometres in diameter) reached around 600 micrograms per cubic metre. This was more than 20 times the World Health Organization's (WHO) recommended value of 35 micrograms per cubic metre.

In response to the intensified public concern over the notorious air pollution, the Chinese government declared a 'war against air pollution'. They announced a new Action Plan for Air Pollution Control in September 2013.

The plan aims to reduce national urban suspended particulate matter (PM10) levels by at least 10 per cent of 2012 levels by 2017. In particular, it aims to reduce PM2.5 concentrations in three major eastern metropolitan areas: Beijing–Tianjin–Hebei, the Yangtze River Delta and the Pearl River Delta by 25, 20 and 15 per cent respectively.

Fossil fuel energy use is regarded by many as the prime culprit of air pollution in China. According to a recent study by China Coal Cap Research Team, coal alone contributes to at least 60 per cent of airborne pollutant emissions.

Unsurprisingly, the plan's priority is to impose restrictions on the growth of coal use. Because nearly 50 per cent of coal is used for power generation in China, the electric power industry is the top priority for a coal cap.

But some stakeholders think otherwise. They frequently argue that China's pollutant control standards for coal-fired power plants are the strictest in the world. In the USA, Germany, the UK and other developed economies, coal was historically a main primary energy source and now is exclusively used for power generation.

Electricity producers argue that because coal is employed more efficiently in the electricity industry than in others — including steel and cement production or industrial process heating — more coal used in power generation can improve air quality.

In 2012, 78 per cent of China's energy came from coal. If coal's absolute contribution to power is capped at current levels and China's energy supply increases in line with current trends, then coal power will supply 68 per cent of total electricity demand in 2020, decreasing to 58 per cent in 2030 and 45 per cent in 2050.

In this scenario, clean and renewable energy could experience fantastic growth in China, supplying up to 48 per cent of electricity demand by 2050. But even if the near-zero pollutant emissions standard are fully implemented in all of China's coal-fired power plants by 2030, the reduction of the main pollutants (sulphur dioxide, nitric oxide, nitrogen dioxide and PM2.5) will not be sufficient to sustain the WHO's recommended PM2.5 concentration level.

Bad air quality is just one outcome of increasing reliance on coal power. Another is water shortage. A serious water crisis could certainly damage the drought-affected western provinces where most of China's new coal-fired power plants are being installed.

Continuing growth in coal generated power will may also impact upon global climate change. If carbon dioxide emissions double in the power sector alone, this may spoil any efforts to stabilise greenhouse gas emissions in other sectors and other nations.

The government should consider improving energy efficiency through upgrading coal power while continuing to switch to lower-carbon power. For decades, ensuring a sufficient energy supply was the top concern, while efficiency improvements were largely ignored. It would be easy to find 0.5 to 1 per cent reductions in annual electricity demand. Upgrading China's coal power and closing inefficient small plants is a good start. Switching to a lower carbon system can lead to more benefits.

The fundamental solution is further investment in renewable and clean energy: wind, solar and perhaps — more controversially — nuclear power. The Chinese government should consider a policy scenario in which non-fossil sources account for 31, 46 and 64 per cent of total power supply by 2020, 2030 and 2050 respectively. Gas is expected to quickly develop into a primary power source and provide the vital flexibility for the power system.

Will the coal cap plan be cost-effective? Levying a pollution tax to remedy the coal consumption externality and subsidising renewable energy will certainly push up the cost of power. Total costs could rise by around $US80 to $US100 billion between 2020 and 30. But the payoff is great.

In the long run, slashing fuel costs and abating carbon emissions, while encouraging new industries and creating new jobs, will surely justify the costs incurred.

Yuan Jiahai is Associate Professor with North China Electric Power University (NCEPU).

This story originally appeared on the website of the East Asia Forum. It is an abridged version of a paper presented by the author on January 21 2015.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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