China's Coal Use Imperils Climate Pledge

A comprehensive study of the world coal market suggests China will face major challenges in meeting its commitment to cap greenhouse gas emissions by 2030.

China's annual coal consumption of nearly 4 billion metric tons accounts for about half of the world's use of the high-polluting fuel, comprising the biggest single source of man-made carbon dioxide (CO2).

In November, the United States and China reached a groundbreaking agreement on more ambitious CO2 reductions by the two leading emitters, ending years of wrangling over relative responsibilities and stages of development.

Under the agreement, the United States pledged to cut CO2 emissions by 26-28 percent from 2005 levels by 2025, while China promised to reach a peak in its releases by "around 2030" or sooner if possible.

China is also working to double the share of non-fossil fuels in its energy mix to "around 20 percent," reducing its heavy reliance on coal.

To hit the 2030 targets, China would have to stop the growth of coal use considerably earlier, capping consumption by "around 2020," according to a Tsinghua University study released in November.

More will be needed

But in its annual Medium-Term Coal Market Report this month, the Paris-based International Energy Agency (IEA) said China would not reach a plateau in coal consumption during its forecast period through 2019 and probably beyond.

Additional coal will be needed for years to meet energy demand until capital-intensive projects for nuclear power and other non-fossil sources can shoulder more load, the IEA said.

"Therefore, longer-term trends might suggest peak coal in China during the next decade. However, we do not see that peak in the outlook period unless economic growth is much lower than assumed," said the report.

The IEA's medium-term finding is in keeping with longer- range estimates from its annual World Energy Outlook, also released in November, which forecast continuing growth in China's coal demand until 2030.

The latest study concludes that the peak in coal use could be reached by 2019 only in case of unexpected circumstances, such as a sharp reduction in economic growth to 3 percent starting in 2015 from 7.3-7.4 percent this year.

Based on current trends, the agency sees coal demand growth slowing markedly to an annual rate of 2.6 percent through 2019, compared with a 9.7-percent growth rate over the past decade, due in part to energy efficiency efforts and a decelerating economy.

But even slower growth means China will be burning more than 100 million tons of additional coal with each passing year.

In 2013, China's coal demand rose by 196 million tons to 3.894 billion tons, an increase of 5.3 percent, or more than double the global growth rate of 2.4 percent, the IEA said.

Uncertainty over goal

At an online press conference, the IEA's executive director, Maria van der Hoeven, voiced uncertainty about meeting the CO2 goal by 2030.

"We think that this is a really very, very large step forward but ...  the devil is, of course, in the details, and the question is how are they going to manage that," she said in response to a question from RFA.

Van der Hoeven acknowledged that China is the fastest growing country in developing renewable energy and also praised its energy efficiency drive.

"But at the same time, they are not yet stabilizing their coal consumption," she said, although growth rates have started declining from high levels.

The critical issue is when China's consumption will peak and start to come down, easing pressure on CO2 emissions.

"Not between now and 2019. The big question is will it be before 2030 or after 2030," said van der Hoeven.

"I know that there are a lot of plans there, but plans are not enough," she said.

A flexible limit?

In November, the State Council, or cabinet, announced an energy strategy that would cap coal consumption at 4.2 billion tons in 2020, but it was unclear whether that limit would be permanent or adjusted upwards for future years to allow for energy demand growth.

The IEA forecasts have sparked some online debate from experts who believe a peak in China's coal use is still possible by 2020.

The environmental group Greenpeace noted in a posting at energydesk.greenpeace.org that China's coal consumption has already dropped by 1.2 percent in the first nine months of 2014 from the year-earlier period, according to industry estimates.

In the first eleven months, coal production of 3.513 billion tons fell 2.1 percent, Reuters reported, citing the website coalstudy.com.

The decline may be the result of a combination of factors, including weak power demand growth and a 22-percent jump in hydropower output in a wet year.

Last week, a National Energy Administration (NEA) official estimated that the share of coal in China's total energy mix dropped from 65.7 percent to 64.2 percent in 2014, the official Xinhua news agency reported.

The IEA studies come as China's government considers policies to implement the 2030 goal, which could be part of a new five-year energy plan.

Pledge may still be binding

China has countered criticism that its CO2 pledge is not legally binding by arguing that it will be, once the plan is approved by the National People's Congress (NPC).

In November, Xie Zhenhua, vice-chairman of the National Development and Reform Commission (NDRC) planning agency, said the goal would also be made legally binding by including it in the next three Five-Year Plans of the government, the official English-language China Daily reported.

Speaking at the two-week United Nations climate change conference in Lima, Peru, Xie indicated that China would announce more detailed CO2 plans in the first quarter of 2015.

Some steps are likely to coincide with previous plans to fight smog in China's cities and cut both energy use and carbon emissions per unit of gross domestic product (GDP).

In November, Xie said China had lowered carbon emissions per unit of GDP by 28.5 percent from 2005 levels as of 2013, Xinhua reported.

In the first three quarters of the past year, the country reduced carbon "intensity" by 5 percent, Xie said.

Longer-term plans to limit CO2 emissions in terms of total volume may rely on a combination of administrative measures and reforms.

Efforts may increase demand

China has already turned to administrative steps by ordering the closure of all coal-burning power plants in Beijing by 2017.

But power needs may restrain similar directives to curb coal use throughout the country.

The IEA noted that some anti-pollution efforts might actually lead to increased coal demand.

New ultra-high voltage lines between coal production bases and distant cities may require more energy to offset transmission losses, for example.

It is unclear how much of a role pricing will play in future coal use.

Following its annual Central Economic Work Conference this month, the government issued a statement that called for speeding up a series of reforms, including pricing, in the coming year, but it did not specify whether these would cover coal and other energy sources.

Coal still the cheapest fuel

Although benchmark coal prices in China have crept up since October, they remain at five-year lows, down about 15 percent for the year, thanks to oversupply and slower economic growth.

While demand for cleaner but costlier natural gas for power may almost double by 2019, coal is expected to remain China's highest-polluting but lowest-priced fuel.

In 2013, coal-fired power accounted for 75-80 percent of China's total generation, the IEA study said.

The government has been considering a carbon tax that would reduce incentives for coal use since early 2012, according to state media reports.

But the option of simply capping coal consumption could prove problematic for the government, which faced heavy criticism for administrative measures aimed at meeting five- year energy efficiency targets in 2010.

As the end of the year approached, local officials tried to meet the central government's goal by imposing brownouts and power outages on businesses, homes, and even hospitals, artificially lowering energy use in relation to GDP to produce a more favorable efficiency ratio.

The public outcry over the practice prompted the then-director of the NDRC, Zhang Ping, to take the blame for the fiasco.

"I must apologize for these acts because we, as the responsible department, did not give proper guidance," said Zhang, as reported by China Daily at the time.

The NDRC promised that such arbitrary cuts to meet emissions targets would not happen again.