With new policies on air pollution and the economy, China’s coal consumption has been projected to cool down for a while, and the first evidence of the trend is starting to show up in statistics. Recent ambitious policy announcements have gone largely unnoticed, but have dramatic implications for the outlook of coal both in China and the world.
1. Growth of China’s coal demand is down
China’s coal consumption growth rate drops to decade low
According to the “China Energy Statistical Yearbook 2013”, published by the National Bureau of Statistics, China’s coal consumption growth slowed to 2.8% in 2012. This is a significant slowdown, considering the country has been heavily addicted to coal over the past decade, averaging a breakneck growth rate of 9%.
One third of China’s provinces reduced coal consumption in 2012
10 provinces and cities, including Beijing, Shanghai and Guangdong, burned less coal in 2012 compared to 2011. In total, these 10 regions reduced their coal use by 66.5 million tonnes (Mt). The three key economic regions – Beijing-Tianjin-Hebei (JJJ), Yangtze River Delta (YRD) and Guangdong – reduced their coal use in 2012 by 0.7% year-on-year. These three highly-developed areas burned over 1 billion tonnes of coal, accounting for 30% of China’s total coal consumption in 2012, or as much as the United States and Japan combined.
2. A policy to control total coal consumption will further weaken coal demand
China’s air pollution crisis is strongly tied to the vast amounts of coal burned in the country’s factories, power plants and cities. In September 2013, China’s State Council, or cabinet, released their "Airborne Pollution Prevention and Control Action Plan” to cut fine particle PM2.5 pollution and control total coal consumption.
With the plan, the Chinese government recognized that tackling the air pollution crisis will require significant reductions in coal consumption. The plan was accompanied by specific coal consumption targets in provincial action plans, with targets requiring an absolute coal consumption reduction of over 50% in Beijing, 13% in Hebei, 19% in Tianjin and 5% in Shandong by end of 2017, compared to 2012 levels.
Chongqing later announced a 21% reduction target, while Shaanxi is aiming to cut coal consumption by 13%. These targets are extremely significant as Shandong is the biggest coal consumer among Chinese provinces, burning as much coal as Germany and Japan combined; Hebei ranks fourth among Chinese provinces and Shaanxi is also in the top 10.
Another two key economic regions – the Yangtze River Delta (YRD) and the Pearl River Delta (PRD) – are targeting negative growth of coal consumption by the end of 2017. Additionally, two large coal consuming provinces to the northeast of Beijing - Liaoning and Jilin - will have to limit their coal consumption growth to less than 2% per year in the period from 2012 to 2017.
The Ministry of Environmental Protection (MEP) has now handed out assignments to all 31 provinces to tackle air pollution, together with additional provincial air pollution action plans. 26 provinces will aim to control total coal consumption, and 12 of those have specific targets.
In summary, given that China’s coal consumption grew at a significantly lower rate, further government coal consumption control policies will surely mean that the nation's coal demand will peak in the coming years.
3. China’s lower coal demand and how policy changes will affect the global coal trade and CO2 emissions
China is the world’s largest coal importer with 288 Mt of coal imported in 2012 – well over a third of all seaborne coal trade. This dramatically new outlook for China’s coal consumption will have a major impact on international coal trade and on coal exporting countries.
The 12 regions with specific coal consumption targets are important coal importing provinces in China. Together, these areas were responsible for 63% of the country’s total coal imports in 2012. They are the nation's most developed regions and account for 45% of China’s total coal consumption. Together with declining consumption, the coal consumption control policy means that total coal import demand will first peak and then decline. This will impact coal-exporting countries like the United States, Australia and Indonesia.
China’s coal consumption growth has been the dominant factor in global CO2 emission growth over the past decade, contributing over half of the increase from 2002 to 2012. The expected major slowdown in China’s coal consumption growth opens up a window of opportunity for peaking global CO2 emissions in time to avoid the worst impacts of climate change.
For detailed statistics and policy updates please refer to our infographic: "Coal Cap: Walk the Talk".