China to suspend new coal mine approvals amid pollution fight

A worker watches over activities near a coal mine in China's northern Shanxi province on Nov 20.

HONG KONG (BLOOMBERG) - China will stop approving new coal mines for the next three years and will continue to trim production capacity as the world's biggest energy consumer struggles to shift away from the fuel as it grapples with pollution.

China will suspend the approval of new mines starting in 2016 and will cut coal's share of its energy consumption to 62.6 per cent next year, from 64.4 per cent now, Xinhua News Agency reported on Tuesday (Dec 29), citing National Energy Administration (NEA) head Nur Bekri. This is the first time the government has suspended the approval of new coal mines, according to Mr Deng Shun, an analyst with ICIS China.

"This new policy, along with efforts to eliminate inefficient mines, may help to ease the severe domestic oversupply," Mr Deng said by phone from Guangzhou. "But, it will take several years to take effect."

The country will also close more than 1,000 coal mines next year, taking out 60 million metric tonnes of unneeded capacity, according to the Xinhua report.

China shuttered a similar number of mines this year, wiping out 70 million tonnes of production, according to a separate statement from the NEA dated Tuesday (Dec 29). The country is on track to produce 3.58 billion tonnes of coal this year, down 0.5 per cent from 2014, according to the NEA.

Coal demand in China has slid as its economy slows amid a shift towards consumption-led growth and while it intensifies efforts to rein in pollution. China plans to ask companies to replace electricity generated from their own coal-fired plants with renewable energy, the National Development and Reform Commission said last month.

The NEA estimates China next year will consume 3.96 billion tonnes of coal, 550 million tonnes of oil and 205 billion cubic metres of natural gas, according to the Xinhua report.

Join ST's Telegram channel and get the latest breaking news delivered to you.