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Yes, China Can Quit Coal. Here’s How.

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China Power | Environment | East Asia

Yes, China Can Quit Coal. Here’s How.

China must begin to challenge its coal dependence, starting by dismantling particularly inefficient policies that have encouraged new coal construction.

Yes, China Can Quit Coal. Here’s How.
Credit: Depositphotos

Fifty-three miners remain missing or dead after a vast section of wall collapsed at an open-pit coal mine in China’s Inner Mongolia Autonomous Region on February 22. The wave of earth and rock – over a third of a kilometer wide by one geologist’s estimate – buried dozens of heavy mining vehicles and their operators in a landslide tens of meters deep.

The tragedy shines a spotlight on China’s coal mining sector, where hundreds of coal miners perish each year in accidents. Combined with the toll that coal use in China exacts upon public health, climate, and the environment, this accident reaffirms the wider benefits of shifting the Chinese economy away from coal-fired energy.

In the near term, China’s main challenge is peaking coal use in the power and heat sector, the dominant source of growth in coal demand and emissions. This will happen when annual growth in clean power generation exceeds growth in total power demand, an inflection point that China is on track to reach in the next few years, thanks to powerful policies to help expand wind and solar generation across the country at a breakneck pace.

Thereafter, the longer-term challenge is not just peaking but starting to rapidly reduce coal use. Coal is tightly integrated across China’s energy landscape, such that steep cuts to coal consumption aren’t as simple as a diet, but rather more of a heart surgery upon China’s power sector, industry, and economy. This tight integration has in turn created heavy political inertia resisting change. Postponing adoption of stricter policies discouraging coal use remains tempting. Yet China must begin to challenge its coal dependence, starting by dismantling particularly inefficient policies that have encouraged new coal construction with little benefit to the electricity system.

Enforcing a stricter, earlier peak to coal-fired power generation in China would be politically significant precisely because coal energy is so embedded within Chinese industry. Many important levers across the whole Chinese economy are linked to coal. Two of the largest economic levers are steel and cement, vast industries tied to both China’s construction and infrastructure boom in recent decades and to coal-fired energy for electricity and process heat.

From aluminum plants and metal silicon smelters in the western region of Xinjiang to coal-based chemical plants in Shanxi and Inner Mongolia, numerous industrial facilities make use of onsite coal infrastructure to provide cheap electricity, heat, and raw materials. Coal is even used as feedstock for ammonia-based fertilizer production in China, supporting the country’s domestic agricultural sector.

While the share of coal in power generation has fallen fairly quickly from a recent high of 78 percent in 2011 to around 66 percent in 2022, the electricity sector has also remained systematically dependent on coal. In much of northern China, coal-fired boilers and coal co-generation plants also supply large urban district heating networks that keep apartments warm in winter. Record-high summer electricity demand peaks have prompted national planners to condone more permits for new coal plants, leading regional policymakers to advance dozens of new projects.

Coal’s importance for powering cities and factories – coupled with the perceived value of new coal projects themselves for driving economic activity in the construction, steel, and cement sectors – has in turn cultivated energy policies that inefficiently privilege coal plants. This behavior has historical roots in inflexible policies on electricity trading between provinces, which have led provinces to build excess coal capacity to ensure regional resource adequacy. Given that policymakers want to minimize importation of fossil fuels from abroad, domestic coal energy is also seen as strategically beneficial for ensuring energy security.

Even China’s turn toward a more ambitious climate policy has in some cases avoided touching coal use. Despite initially high expectations, the country’s carbon pricing scheme for coal plants was designed in a way that does not reward a shift from coal to clean energy, and arguably even rewards some operators for maximizing generation. And while developers have built massive wind and solar farms in sparsely populated regions of western China, the high-voltage direct current transmission networks carrying this electricity continue to be used to transmit more coal power than clean electricity, with even new coal plants built to feed the lines.

But while such industrial and political obstacles make the path toward shrinking coal consumption in China appear difficult, the way forward is also surprisingly straightforward. First, many new coal plants are the unneeded products of inefficient policies, and national regulators can and should cancel such irrational projects. Many newly-permitted coal projects from China’s most recent wave of coal plant approvals, for example, were proposed in quantities that did not rigorously consider actual regional power needs. Continued growth in clean energy installations, after record-breaking additions in 2021 and 2022, could help coal use peak and decline within the next few years.

Second, aggressive policy reforms that streamline how provinces produce, regulate, and trade electricity can drive the retirement of more coal power plants in the near term, particularly older, more polluting units. Rigid current rules for how provinces can trade power with one another can leave provinces short of electricity in crisis situations, which has led provincial administrators to accumulate excess backup coal capacity. A more flexible power exchange framework would render such plants superfluous.

Lastly, while many current difficult-to-decarbonize uses of coal in the Chinese economy – from district heat to steel production to chemicals – rely on high temperatures or even upon the carbonaceous raw material of coal itself, the development of technological alternatives in these areas is proceeding remarkably quickly. From electrification, heat pumps, steel recycling, green hydrogen, hydrogen-based steelmaking, and high-temperature advanced reactors to carbon capture and sequestration, researchers and industry pioneers are beginning to introduce new solutions more rapidly than expected. Decarbonizing these industries was always going to require time, yet it now appears that progress in these sectors could potentially even exceed expectations.

For now, however, the need for China to transition away from polluting coal energy remains considerable, and many basic areas for improvement remain unaddressed. Consideration of China’s complex power system, industrial, and political factors helps explain why the pace of change to date has been so slow. To accelerate China’s clean energy transition, policymakers, industry, and researchers will ultimately need to tackle these issues at the roots. Any successful surgery, after all, requires a hardheaded plan.