Coal Use Set To Soar

As problems mount, the Chinese government grapples with huge volumes of coal.
By Michael Lelyveld
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An ultra-high voltage power station in Wuhan, central China's Hubei province, Jan 8, 2011.
An ultra-high voltage power station in Wuhan, central China's Hubei province, Jan 8, 2011.
AFP China Xtra

Despite measures to rein in runaway growth, China's government expects a jump in consumption of high-polluting coal in the coming five years.

China is already the world's leading coal user by far, burning three times as much as the second-place United States.

Last year, the country produced an estimated 3.3 billion tons of coal and added 145 million tons more in net imports, according to China Coal Monthly, an industry publication, and the National Development and Reform Commission (NDRC).

Yet, despite an astonishing 57-percent surge since 2005, China hopes to keep annual consumption to only "within 4 billion tons" during the next five-year period through 2015, said NDRC director Zhang Ping on Jan. 7.

The target suggests slower growth but still a substantial increase for an environment already clouded by stifling volumes of coal.

Zhang said the NDRC is trying to "hold back the fast growing speed of coal consumption," but specific measures are still being discussed, Caixin Online reported last month.

Consumption control

Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations in New York, said the question is whether the government has the ability to control consumption and pollution caused by coal.

"I don't think willingness is the issue so much as capacity," said Levi.

"Most in China would be happy to have lower pollution, but it's very difficult for them to get a handle on things, particularly at the national level, because the degree of control they have over these industries is relatively limited."

By any measure, China's coal consumption is colossal.

In 2009, when China became a net coal importer for the first time, the country burned 46 percent of all the coal used in the world, the U.S. Energy Information Administration says.

In recent years, China's government has introduced several policy changes, but none has slowed the growth of the nation's primary fuel, despite pollution concerns.

One key program has promoted mergers to help eliminate thousands of smaller and more dangerous mines.


Although safety officials have yet to report fatalities for 2010, the country closed 1,693 small mines and phased out 155 million tons of outdated production last year, China Industry Daily News said.

Mines with annual production of under 300,000 tons have been cut to fewer than 10,000, the paper reported.

Under the 12th Five-Year Plan, to be finalized in March, the government will organize 14 "large-scale coal bases" that will account for 90 percent of China's production, said Zhang.

But while mergers may improve production, it is unclear whether they will have any effect on growth.

"Consolidation isn't going to limit growth, but it's probably going to increase efficiency," Levi said. "It certainly isn't something you'd do in order to limit growth."

There are also questions about how well the merger initiative has worked. Over the years, many closed mines have reportedly reopened to meet soaring demand. It remains to be seen how many have been shut down for good.

Energy tax

Other steps may be better designed to cool the growth of production.

The NDRC plans to impose a nationwide energy resource tax of 2 to 5 percent on coal prices after experimenting with a pilot program in Xinjiang last year.

The country's second-largest base, in Shanxi Province, is considering an annual production cap of 1 billion tons by 2015, taking effects of the new tax into account.

Since the tax would raise revenues for local governments, the coal-producing provinces may see the benefit of more gradual growth. The previous resource tax was based on weight.

"Now local governments will be motivated to let their resources drain slowly, in light of future price increases," said Lin Boqiang, director of energy research at Xiamen University, according to the Global Times affiliate of People's Daily.

Whether the logic works or not, China will face huge challenges to transport rising volumes of coal.

Traffic jam risk

On Jan. 30, the central government announced plans to expand its inland waterway network to handle over 3 billion tons of cargo annually by 2020, the official Xinhua news agency said.

The work may be aimed at reducing the risk of monster traffic jams, like those that paralyzed truck transport on a major highway between Beijing and Inner Mongolia last August.

The government also believes it can ease transport problems by shifting more steel production to coastal provinces, the official English-language China Daily reported.

Under the draft Five-Year Plan, coastal areas would produce 40 percent of the nation's steel by 2015, replacing smaller plants with more merged mills.

The plan could ease access to imported ore and boost bargaining power to lower import prices, but it could also create more transport problems for coal supplies from mining centers in Shanxi, Inner Mongolia, and Xinjiang.

As with the coal industry mergers, the government appears to be more concerned with gaining efficiency than with limiting expansion.

"China is clearly struggling to balance environmental consequences and immediate economic growth," Levi said.





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