A Five-Part Strategy to Cap and Cut China's Coal Consumption

It is hard to miss the staggering statistics when it comes to coal in China, which now consumes nearly as much coal as the rest of the world combined. Unrestricted growth in coal consumption in the last decade has led to the worst air pollution in recent memory, with citizens in northern and central China breathing in higher levels of hazardous air pollution this past winter than if they were living in an airport smoking lounge. Coal mining and combustion also cause serious water and soil pollution, including the release of toxic metals like mercury and arsenic. Unless things change, there are plans to build even more coal-fired power plants in the future -- some 558 GW worth, which would be a 73% increase over China’s 2011 thermal power plant capacity.

Credit: EIA.gov

The impacts of coal mining and consumption on China’s environment, public health and the economy are already astronomical: from January’s “airpocalypse” to the existence of “cancer villages” and 3.5% in GDP losses (in 2010 alone), this dirty and unsustainable energy source has catapulted to the center of attention among Chinese citizens and leaders alike. Given coal’s heavy costs, China’s leaders are paying close attention to coal and have sought now seek to reduce coal consumption and pollution by introducing a suite of policy measures, including:   

  • Establishing pilot carbon emissions trading programs in five cities (Shanghai, Beijing, Shenzhen, Tianjin, and Chongqing) and two provinces (Guangdong and Hubei). Shenzhen’s carbon trading program starts June 17 and will cover 638 companies responsible for 38% of the city’s emissions. China is also continuing to develop its low carbon pilot cities and provinces program.
  • Capping total energy consumption at 4 billion tons of coal equivalent by 2015, although this is a non-binding target and no penalties are in place yet for non-compliance.
  • Considering a tax on resources, including coal, in order to account for the environmental costs of coal and shift investment towards clean energy.
  • Finalizing new emissions control limits for six heavily-polluting industries. China’s power sector accounts for about 50 percent of its coal consumption and emissions, and heavy industries such as iron and steel, cement and coal chemicals also constitute a large share, causing major climate and air pollution.
  • Planning regional coal consumption cap pilots in key regions such as Beijing-Tianjin-Hebei, the Pearl River Delta, the Yangtze River Delta and the Shandong city cluster as part of China’s “Twelfth Five Year Plan for Air Pollution Prevention and Control in Key Areas (in Chinese).” The pilots are aimed at bringing much-needed regional cooperation and coordination to reduce key air pollutants by 2015, including cutting PM 2.5 by 5-6 percent. But as with the total energy consumption cap, the details and penalties for non-compliance are still unclear.

While these are all critically important policy measures, the underlying challenge remains that China consumes too much coal overall, and much more needs to be done to reduce coal consumption to a level compatible with China’s and the world’s long-term sustainable development. Global carbon dioxide levels have now passed 400 ppm and will continue to grow rapidly if countries do not wean off fossil fuels and scale up cleaner energy sources. And as the world’s biggest emitter of carbon dioxide—spewing out 10 billion out of the global total of 38.2 billion tons in 2011—China is a key player in the future of sustainable development.   

Although scaling up alternatives to coal may seem a formidable task, we believe China can develop the policies and technologies needed to cap and then cut its coal consumption in the next decade. We are working with government researchers, academics, NGOs and others to develop an effective and enforceable coal cap policy that will address the severe pollution and health impacts from coal while providing cleaner energy sources for China’s economy. Such a program could begin at the city and regional levels, where coal consumption cap policies are already being developed, and ultimately scale up to a national binding target that is incorporated into China’s future Five Year Plans.

Here are five key components of NRDC’s coal cap strategy:

1. Work with the largest coal consuming sectors and regions to help them develop integrated plans for capping coal use through more efficient technologies, fuel switching and closing outdated production capacity. In order to address coal consumption, it will be important to work with the largest coal-consuming sectors (power, iron and steel, cement, and chemicals) to find ways to scale up more efficient technologies such as combined heat and power that can reduce coal consumption. These sectors should be required to install and operate pollution control and emissions monitoring equipment when consuming coal, and should be incentivized to switch from coal to natural gas and renewables in order to reduce their emissions. Plants with smaller and less efficient boilers and other equipment should be phased out or required to use natural gas.

Similarly, those cities and regions that face the worst air pollution from coal should be the focus of efforts to pilot coal consumption caps and to develop plans and policies for capping and reducing coal consumption in the next five years by scaling up clean energy sources and developing lower carbon economies that do not rely as much on heavy industry for development.  

Focusing on these key sectors and regions and showing that they can begin to limit their coal consumption will help to develop the policies and experience needed to reach a national coal cap policy.

2. Strengthen enforcement of coal consumption and emissions targets and standards through improved data and enforcement tools. Strengthening data on coal production and consumption and emissions from coal consuming facilities is key to providing a foundation for implementing a coal consumption cap and related policies such as a resource tax or carbon trading, and for enforcing emissions standards. Online emissions monitoring systems should be installed on all power plants and industrial facilities over a minimum size, with public reporting of data and penalties for false or inadequate reporting.  

It is also important to strengthen the use of pollution permits and environmental impact assessments to manage the impacts of high coal-consuming projects. These tools should provide a way for the government and the public to supervise emitters’ compliance with coal consumption targets and pollution standards, pushing them to find ways during project planning to reduce emissions and health impacts to the lowest extent possible, including by reducing consumption of coal and increasing use of cleaner energy sources. 

3. Continue to scale up energy efficiency and renewable energy: China has made significant progress in energy efficiency but still requires about twice as much energy as the world’s average to produce one unit of GDP.  We have been working to scale up demand side management programs to improve efficiency in industry, and have also been promoted policies and standards to improve building energy efficiency in China. Meanwhile, China is already the world’s largest investor in renewable energy, leads the world in wind power capacity and solar hot water heating, and plans to increase its use of non-fossil energy (nuclear and renewables) to 15 percent of primary energy consumption by 2020 (including 200 GW of wind power and 50 GW of solar power).  However, China still faces technical, economic and regulatory challenges that are preventing it from fully utilizing its efficiency and renewable resources, which will require cooperation and support from international partners to help develop best practices for market transformation. 

4. Develop responsible standards and best practices for shale gas and nuclear power development: China reportedly has nearly 50 percent more “technically recoverable” reserves of shale gas than the U.S., and has ambitious plans to develop its unconventional gas resources. While natural gas is much less polluting during combustion than coal, unregulated hydraulic fracturing (or “fracking”) consumes a significant amount of water and has the potential to cause water pollution, high methane emissions, and other environmental damage. We’re working with policymakers in China to learn from best practices for environmental protection in the U.S., so that China can develop this resource as safely as possible. Similarly, we are providing policy recommendations to help strengthen China’s nuclear safety regulatory system post-Fukushima.

5. Help to implement carbon trading and carbon tax pilot programs: In addition to mandatory coal consumption cap targets for local governments and enterprises, it will be important to begin to develop market and fiscal mechanisms such as carbon trading and/or a carbon tax, in order to price carbon to send a signal to the market to shift investment from fossil fuels to low-carbon energy sources. Developing these market and fiscal measures to price carbon will depend on accurate data on coal consumption and regulation of emitters. It will also be important that government revenues from pricing carbon through either carbon trading or a carbon tax be used to provide incentives for energy efficiency and renewable energy in order to spur the investments needed to scale up low-carbon energy.

Establishing a binding coal consumption cap policy adds a critically important lever to existing climate and energy policies in China. Capping coal will not be an easy task, and will require both applying pressure and providing incentives for both industry and government officials to act. Doing so will not only clean up China’s air but also conserve water and land resources, reduce water pollution, and alleviate transportation pressures, all of which will help secure a healthier future for China’s citizens, environment and economic growth.  

This blog post was co-written with Christine Xu.


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