China's Energy Agency Rocked by Coal Power Report

Investigators blast National Energy Administration in policy clash.
An analysis by Michael Lelyveld
China's Energy Agency Rocked by Coal Power Report In this Nov. 28, 2019 file photo, smoke and steam rise from a coal processing plant in Hejin in central China's Shanxi Province.

After years of complaints from environmental advocates, China seems to be headed for an interagency showdown over the construction of new coal-fired power plants.

In a blistering report released on Jan. 29, the government's Central Environmental Inspection Team (CEIT) blasted the National Energy Administration (NEA) for allowing new coal power projects at a time when President Xi Jinping has pledged greater efforts to combat climate change.

Findings from the supervisory team's investigation were reported by the Ministry of Ecology and Environment (MEE) and posted on both the MEE and NEA websites in what appeared to be a highly unusual "naming and shaming" attack on a government agency.

"Never before has a high-level central government agency been inspected and openly criticized for multiple 'failures' related to energy development," the environmental website said.

The CEIT investigators charged that the NEA had not put environmental protection "at a high level," leading to uncoordinated decisions on project approvals.

"New coal power capacity at key areas for air pollution was not strictly controlled, leading to what should be built was not built and what shouldn't was built," Reuters quoted the report as saying.

The inspectors cited divisions within the NEA and failure to implement "Xi Jinping's thoughts on ecological civilization."

"Some comrades of the National Energy Administration believe that the most important thing in the energy sector is to ensure supply." Those officials raised concerns that environmental requirements will increase industry costs, the inspectors said.

Other officials were said to believe that industry is "not yet qualified" to meet environmental requirements. Still others argued that the energy sector's problems have been caused by other agencies or localities, the CEIT said.

The result is that "coal power installations are still increasing in 12 provinces (and provincial-level municipalities), and the energy industry is more intensively distributed in key areas for air pollution prevention and control," the report said.

The CEIT ordered the NEA to formulate a "rectification plan" and submit it to the Communist Party of China (CPC) Central Committee and the cabinet-level State Council within 30 working days.

March madness

The deadline appears to coincide with the start of China's annual legislative sessions in early March and the possible presentation of the government's 14th Five-Year Plan for 2021-2025. The timing may signal that decisions regarding the NEA have already been made.

In a Carbon Brief interview, Daniel Gardner, a Smith College history professor and an expert on China's environmental affairs, suggested that the agency's existence may be on the line.

"This is a strong, unambiguous censure of the NEA, which leads me to wonder whether the stage is being set to reduce its authority or, perhaps, even to eliminate the agency altogether and move its administrative responsibilities elsewhere," Gardner said.

By publicly cracking the whip at the NEA, the supervisory group has also highlighted its authority as a direct report to Vice Premier Han Zheng, a member of the powerful Politburo.

The NEA has been a target of several corruption crackdowns. Most notably in 2019, Nur Bekri, described as an architect of China's coal policy, was given a life sentence for bribery after leading the NEA from 2014 to 2018.

But the CEIT report and the sequence of events may raise questions about who is really responsible for the decisions on building new coal-fired plants.

The NEA is subordinate to both the State Council and the National Development and Reform Commission (NDRC), the central government's top planning agency.

The greenlighting of new coal projects has arguably been the product of government policy rather than the exclusive responsibility of the NEA.

"It's mainly a problem at the NEA/NDRC level, but also at the provincial and local level, which is a classic problem of policy in China," said Mikkal Herberg, energy security research director for the Seattle-based National Bureau of Asian Research.

The MEE lacks power to force policy change without outside support, like that from the CEIT inspectors, Herberg said. Power also rests with the NDRC, but so do conflicts over policy,

"The number one priority for the NDRC above all else is always jobs and economic growth, especially the case during the pandemic year," Herberg said by email,

So, when push comes to shove, the environmental goals usually get watered down or ignored when they really get in the way of boosting growth," he said.

The conflict over policy goals has been playing out for years.

In a report this month, the Global Energy Monitor (GEM) and the Center for Research on Energy and Clean Air (CREA) said that last year, "China built over three times as much new coal power capacity as all other countries in the world combined -- the equivalent of more than one large coal plant per week."

In the history of coal plant approvals over the past decade, environmental groups have been warning since 2014 about the consequences of the central government's decision to devolve the approval authority for new projects to provincial and local governments as a way to speed development by cutting red tape.

The NDRC subsequently tried to slow down the wave of approvals as generating overcapacity rose and utilization rates fell to 50 percent or less.

Coal as stimulus

But reports for the past year have highlighted the government's policy of allowing more coal projects to go forward in the interests of local employment and stimulus for the economy.

The conflicts between development and environmental policies have come to a head with Xi's surprise announcement in September that China would accelerate its timetable for cutting emissions, reaching a peak before 2030 and achieving "net-zero" carbon neutrality before 2060.

Progress over the past year has been stymied, first by China's drive to assure economic recovery from the COVID-19 crisis and then by an unusually cold winter and high energy demand.

Total power consumption rose 3.1 percent last year to 7.5 trillion kilowatt hours (kWh), while thermal power generating capacity increased 4.7 percent to 1,245 gigawatts (GW), according to NEA data reported by Reuters.

Despite Xi's recent pledges to cut carbon emissions, "the growth in coal plant development has been enabled by lax central government oversight, including the loosening of restrictions on new coal plant builds and permits across most Chinese provinces," the GEM report said.

It is unclear whether the CEIT crackdown will lead to project cancellations.

Despite surplus capacity, China has 247 gigawatts (GW) of new coal power generation under development, including 88.1 GW under construction and 158.7 GW proposed for construction, GEM said.

The new projects are likely to extend overcapacity for decades, turning the plants into "stranded assets" that will be unable to pay a return on investment.

In a November report, CREA estimated that China's operating fleet of coal plants should be reduced by 38 percent by 2030 in order meet Xi's net-zero goal.

"Instead, coal and power interests are pushing to increase the country's coal fleet into the 14th Five-Year Plan ..., potentially adding over 200 GW of new coal power at an estimated investment of U.S. $200 billion (1.28 trillion yuan)," the GEM report said.

Ultimately, the conflicts over economic and environmental policies come together at the top levels of the party and the government.

"I suspect that Xi and Han ... have become uncomfortable about the really bad optics of rising coal output and coal- fired power building that has been highlighted by the increasingly active climate community in China and outside," said Herberg.

"I would expect a bunch of coal-fired power projects to be cancelled soon," he said.


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