Market News

 July 28, 2014
China's Plan to Limit Coal Use Could Spur Consumption for Years

 Under pressure to reduce smog and greenhouse gas emissions, the Chinese government is considering a mandatory cap on coal use, the main source of carbon pollution from fossil fuels. But it would be an adjustable ceiling that would allow coal consumption to grow for years, and policy makers are at odds on how long the nation's emissions will rise.

Senior officials are debating these issues as they formulate a new five-year development plan, to be finalized by the end of next year. China emits more carbon dioxide than any other country, so what President Xi Jinping and his colleagues decide will have far-reaching consequences for efforts to contain climate change.

China's leaders have not detailed their views on coal or carbon emission limits. But there is robust support among senior policy advisers for a firm national cap on coal starting in 2016, Wang Yi, a professor at the Chinese Academy of Sciences in Beijing who studies environmental policy, said in a telephone interview.

"I think there's a broad consensus on this, and it's a question of how to implement it," said Professor Wang, who is a senior member of China's legislature, the National People's Congress. "If we can have a cap on coal, that would almost be equivalent to a cap on carbon, because coal is such a dominant source of pollution and emissions."

Professor Wang and others say a coal ceiling would be easier to enforce than a cap on carbon emissions from all fossil fuels, which some experts have proposed. China accounts for half of global coal consumption.

The coal cap would be stricter than current limits, which are not mandatory and are only loosely enforced. But it would be pegged to expected economic growth and energy demand, so coal use could keep rising for years.

Chinese policy advisers remain divided about how quickly the country should move to cut coal consumption. Some officials fear stricter limits would drag down the economy. They cite the prospect of mine closings, job losses and energy shortfalls if alternative sources of energy, such as nuclear, hydroelectric and solar power, fail to deliver in time.

"The main difficulty is the time it takes to develop the substitutes for coal, and the uncertainties of bringing them online," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University in eastern China. "The government is now more focused on cleaning up smog, but if the economy falters, then it's possible the government's focus could shift back to economic growth."

Strict limits are also likely to face opposition from the powerful coal industry and allied officials, said Ailun Yang, a senior associate at the World Resources Institute in Washington who works on emissions and energy policy in China. Growth in coal use has slowed markedly in the past couple of years, but the China National Coal Association said last year that it expected the country to consume 4.8 billion metric tons annually by 2020.

"The real debate is about how to engage the big state-owned fossil-fuel companies, and also the big provinces whose economies are very, very dependent on these industries," Ms. Yang said.

On the other side, some economists argue that bold efforts to reduce coal consumption would be an economic and environmental boon in the long term by encouraging new, clean modes of growth.

And, experts say, there is new pressure on the government from rising domestic anger over smog. Coal burned in power plants, boilers and furnaces is a main source of the grimy pollution that swamps Beijing and other cities, and many steps to cut smog would also cut carbon emissions.

"The whole air pollution situation has changed the debate dramatically," Ms. Yang said. "There's a lot more political space to argue for control measures."

A dozen provinces and major cities, including Beijing and Shanghai, have already set firm limits on coal use or goals to reduce consumption.

Yet the most worrisome new threat to China's carbon-cutting efforts could come from coal gasification plants, which officials have promoted as a way to reduce particulate air pollution, said Barbara A. Finamore, the Asia director at the Natural Resources Defense Council.

Those plants can feed gas to big cities, cutting coal demand in those cities, but producing the gas emits large quantities of carbon dioxide. A report issued by Greenpeace East Asia this week said local governments in China had proposed 48 such plants, in addition to two already running.

"Without a national cap, there is a real danger that coal production and air pollution will simply move to other parts of China," Ms. Finamore said.

China's National Energy Administration called this year for research proposals for "caps for total energy and coal consumption for 2020, and a practical path for implementing caps on energy and coal consumption."

A recent study that Professor Wang oversaw at the Chinese Academy of Sciences proposed that China aim for coal consumption to peak in 2025 around 4.5 billion metric tons. But other Chinese and foreign researchers say an earlier peak at a lower level is feasible and necessary.

Han Wenke, director general of the state Energy Research Institute in Beijing, has urged China to start cutting coal consumption around 2020. China's "actual consumption of coal is already very close to four billion tons, which is at the limits of endurance for the domestic environment," he wrote in a recent paper.

A parallel debate is whether China should set a date for a peak in its carbon emissions, and if so, what that date should be. Other governments have pressed China to set a date so they can better map out how global greenhouse gas levels could rise.

So far, the Chinese government has resisted doing so, partly out of fear that a deadline could become hostage to onerous international demands. But China's chief climate talks negotiator, Xie Zhenhua, said this month that the government could "propose a peak year for carbon emissions" in the first half of 2015, reported Xinhua, the official Chinese news agency.

Governments negotiating a new climate change treaty have agreed to propose national contributions to emissions reduction as part of efforts to reach an agreement in Paris next year. Previous efforts have foundered in part because China and other large developing countries have refused to accept calls from rich nations to take on binding emission targets.

China has been the world's biggest emitter of carbon dioxide from fossil fuels since around 2006, when it passed the United States, and most research indicates that its emissions are likely to keep rising for at least another decade, driven by industrialization, rising affluence and the growth of cities.

Just how long they will rise is a question that divides experts, even those close to the government.

"There is major controversy," Pan Jiahua, an expert on global warming and greenhouse gas policy at the Chinese Academy of Social Sciences in Beijing, said in a telephone interview. "I'm personally more optimistic and believe that 2025 is a viable time for a carbon emissions peak, but others think that's unrealistic and say we have to wait until 2030 or later."

At international talks in Copenhagen in 2009, governments agreed to try to hold greenhouse gas concentrations below levels likely to cause the average global temperature to rise 3.6 degrees Fahrenheit above the preindustrial average during this century.

Virtually no country is acting fast enough to be on track to reach that target. Even if advanced countries do far more to cut carbon emissions, China's must peak by the mid-2020s to keep hope alive for the Copenhagen goal, said Niklas Höhne, director of energy and climate policy at Ecofys, a consulting company. He and others said China could do that by around 2025, given the right industry, taxation and consumption policies.

"If a coal cap can help us reach a peak in coal in 2020, we can be confident that the CO2 peak will be about 2025," said Yang Fuqiang, a former energy researcher for the Chinese government and now a senior adviser for the Natural Resources Defense Council in Beijing, referring to carbon dioxide.

But several experts at Chinese government institutes said it would be too economically perilous to peak so soon, and two recent Chinese studies have said that any attempt to do so before 2030 would be impractical.

"If you wanted a peak right now, China could do it by stopping economic growth," said Professor Wang of the Chinese Academy of Sciences. "But the price would be that the ordinary people would go out onto the streets."