Market News

 September 10, 2014
China suggests cap on coal use

 China is looking to impose a national cap on coal consumption and a ban on the import of low-quality coal with a new air pollution law, the draft version of which has been released, aimed at strengthening the country's efforts to fight smog.

The State Council, China's cabinet, on Tuesday published the draft version of the law which will tighten the regulation of major air pollutants that has catapulted the nation into an environmental crisis in the past few years.

China will "lay out mid- and long-term targets to cap coal consumption, to reduce the share of coal in the energy mix," said the draft, published on a government website.

China is the world's biggest coal consumer and gets nearly 80 percent of its electricity from the heavily polluting fuel.

There has long been talk about curbing its coal use and the new law would make way for a mandatory cap on consumption to be set in the next five-year plan that will run from 2016.

"The State will ban the production, import, sales and combustion of coal that does not meet quality standards, and will encourage the burning of high-quality coal that has undergone washing and selecting," the draft said

Many power generating firms have turned to cheaper, low-quality imports of coal in order to cut costs, and the government has already been mulling a ban on foreign supplies with high ash and sulphur content.

The document did not state what the new standards for import will be but industry sources have said that the National Energy Administration has recommended the limit for ash and sulphur be set at a maximum of 15 per cent and 0.6 per cent, respectively.

If implemented, Australian and South African coal with a heating value of 5,500 kcal/kg will be worst hit, since their ash content hovers around 23-25 per cent and they contain sulphur of 0.8-1.0 per cent, traders have said.

Importers that bring in coal that do not meet approved levels will be slapped with a fine 1-3 times the value of cargo, according to the draft regulation.

New and existing coal mines that do not meet the specification on ash and sulphur content will need to build washeries to reduce the pollutants to the approved level.

Under the new law, power generators seeking to expand current facilities or build new ones would only be allowed to do so once they have received quotas allocated by the government.

Emission caps

The new law also seeks to regulate the levels of pollutants such as fine particulate matter, sulphur dioxide and nitrogen oxides emitted by factories nationwide.

This initiative comes in addition to the government's previously announced plan to beef up its market for trading air pollution permits.

Factories emitting more than they have been allowed would be fined two to five times the amount of money it would cost to clean up their excess emissions.

Plants that run without permission to pollute would be shut down and fined up to 1 million yuan ($163,000).

The draft law also seeks to ban the provision of fake emissions data as well as practices like the temporary suspension of production in order to avoid onsite inspections, something steel mills in Hebei have been accused of doing.

It also specifically empowers environmental officials to make full onsite inspections of enterprises and to demand whatever material and information they need from the firms.

If the evidence goes missing, the officials will be allowed to seal off the site.

By adding to the power of environmental officials, the law seeks to compliment the recent environmental protection law's efforts to boost implementation of anti-pollution policies, which has often been a problem in China.

The State Council said the draft law will be out for consultation until October 8. There was no time table for when it could enter into force.