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 December 18, 2014
China plans major slowdown of new coal-to-gas projects in bid to cut emissions

 China will exclude additional coal-to-natural-gas projects from its coal industry's next five-year development plan, according to local media reports.

China Energy News, a state-run newspaper, cited a policymaker Monday as saying that China will complete the construction of approved coal-to-natural-gas plants but will not approve new projects until 2020, aiming to keep its coal-based synthetic natural gas production capacity to 15 billion cubic meters at the end of the decade.

Coal-based synthetic natural gas -- a product of converting coal to natural gas through a gasification process -- has become a hit in the Chinese coal industry since the country's demand for cleaner fuels soared last year because of mounting pressure to clean up air.

According to a 2014 study from Greenpeace, China currently operates two coal-to-natural-gas demonstration projects, but there are 48 other plants under construction or in the planning stage. Once completed by 2020, those plants will produce 225 billion cubic meters of coal-fueled synthetic natural gas annually.

But additional buildup of coal-to-natural-gas projects could also create an environmental nightmare because producing the gas will emit huge amounts of carbon dioxide and worsen the water crisis in China's arid western regions.

A boom ending before it starts

Experts say that if Chinese policymakers suspend coal-to-natural-gas project approval, the planned projects will not be able to move ahead. In other words, China's coal-to-natural-gas boom will end before it has started.

If the policy is finalized, it will be a sea change in China's attitude toward coal-based synthetic natural gas development. Earlier this year, Wu Xiaoqing, vice minister of China's Ministry of Environmental Protection, said in a press conference that "central and western China are rich in coal and have a bigger environmental capacity; we encourage adopting coal-to-gas technology there, and use the produced gas to replace coal needed in the eastern part of the nation."

At another event, Wu Xinxiong, director of China's National Energy Administration, told reporters that the country plans to increase its coal-to-natural-gas production capacity to 50 billion cubic meters by 2020.

China Energy News did not disclose the name of the policymaker, a common practice when reporting about unpublished government documents. The document mentioned in the media report also can be revised before it is made public during the next annual meeting of the Congress in early 2015.

However, many experts have little doubt that the Chinese central government will halt coal-to-natural-gas expansion.

Ma Wen, a Greenpeace researcher on synthetic natural gas, told ClimateWire that Chinese policymakers had already postponed the release of a coal-to-natural-gas development guideline because of debates on whether or not the country should back up the sector.

"China has called for controlling its primary energy consumption in 4.8 billion tons of standard coal by 2020 and limiting coal consumption in 4.2 billion tons; those targets will not be realized if Chinese coal-to-chemicals industry continues to grow," Ma said.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, agreed. He said that "building coal-to-gas projects is opposite of China's goal to save energy and cut emissions. If the government does not call off the industry expansion now, it will certainly have to do so in the future."

A slowdown of other coal projects?

In the article published on Monday by China Energy News, the policymaker said that the Chinese government was also disappointed by the outcome of existing coal-to-natural-gas projects. Besides that, China is facing a rising worry that its natural gas supply may outgrow the domestic demand for the resource, the policymaker said.

As Ma of Greenpeace explained, China has already signed many natural gas import deals with overseas suppliers. However, the growth pace of natural gas sales in the country has slowed down this year, partly because of rising gas prices.

Ma said this trend is likely to grow as China continues reforming its pricing mechanism, aiming to let sale prices for natural gas fluctuate with market demand. For years, the country's gas prices have been fixed by the Chinese government to keep them low.

"Getting enough supplies of natural gas is no longer a concern now; what policymakers are concerned [about] is how to encourage Chinese citizens to use more natural gas," Ma said.

In addition to stopping building new coal-to-gas projects, the policymaker also said in the media report that China will cool down the development of other forms of coal-to-chemicals projects, with a plan to produce 6.6 million tons of coal to oil and 15 million tons of coal to olefins by 2020.

According to Chinese media, the previous planned production capacities for coal to oil and coal to olefins were 30 million tons and 24 million tons, respectively.

"Adjusting China's coal-to-chemicals development plan has significant impacts in terms of carbon emissions reduction," said Ma, the Greenpeace researcher. His estimates show that compared to the earlier targets, the new plan will avoid annual carbon emissions of more than 400 million tons, the equivalent to the total fossil emissions of Australia and New Zealand combined.