Why China is struggling to wean itself from coal

Nearly 60 per cent of China's energy-hungry economy is fuelled by coal.
Nearly 60 per cent of China's energy-hungry economy is fuelled by coal.PHOTO: REUTERS

BEIJING (AFP) - US climate envoy John Kerry is in Beijing this week to urge the world's biggest polluter to reduce its reliance on coal.

But China is building more coal-fired power plants than the rest of the world combined, a plan that is threatening to derail its decarbonisation plans and global efforts to tackle climate change.

Here are five reasons why Beijing is struggling to kick its coal habit.

Nearly 60 per cent of China's energy-hungry economy is fuelled by coal.

Despite pledges to peak coal consumption before 2030, China brought 38.4 gigawatts of new coal-fired power into operation last year - more than three times what was brought on line globally.

"In the Chinese context coal is synonymous with energy security," Mr Li Shuo, a climate policy adviser at Greenpeace China, said.

"Plans announced so far don't give a clear answer on how China can ensure a steady energy supply without relying on the dirty fossil fuel." Economic planners are also nervous about slashing coal too quickly as it could cripple growth.

Over the past six months, several industrial hubs across the world's second largest economy have been hit by the worst blackouts seen in a decade as coal imports were disrupted due to the pandemic.

China's top decision-making body in late July said it was "playing a national game of chess" that balances the needs of the economy with Beijing's climate goals.

Greenpeace's Li warned this indicated a "push-back on the climate momentum generated by last year's carbon neutrality announcement", referring to a promise by President Xi Jinping to make China carbon neutral by 2060.

Over a third of China's six million coal miners lost their jobs between 2013 and 2020 as old mines shuttered, a recent survey by the Chinese Academy of Social Sciences found.

Fear of mass unemployment leading to social unrest has forced the top economic planner to slam the breaks on local government plans to cut emissions.

Earlier this month, the central government warned provinces to ditch "campaign-style carbon reductions measures" and do more to cushion the impact on businesses forced to cut pollution.

Most of China's wind, solar and hydro power is generated in the country's far western regions.

The lack of power lines that can transmit this energy to factories on the east coast has forced renewable power producers to stop production for months at times.

State Grid - the country's main utility provider - said it has invested over $45 billion dollars over the past five years to connect renewable power sources to the national grid and build energy storage facilities to ensure clean power isn't wasted.

But there is still a mismatch between supply and demand.

China launched its long-awaited emissions trading system in July, but the price of a metric tonne of carbon is still less than US$7 (S$9.40) - far below the US$70 per metric tonne in the European scheme in late August.

Analysts have warned this price is not high enough to force big polluters to clean up their act.

The market currently covers 2,162 big power producers that generate about a seventh of global carbon emissions from burning fossil-fuels.

But regulators have given out too many free permits to pollute pushing down the price of carbon, Ms Yan Qin, an analyst at Refinitiv, said in a research note.

Soviet-style energy quotas are forcing utility companies to buy more electricity generated using coal, even though renewables are now cheaper.

Efforts to change or abolish this quota system have stalled for nearly a decade due to pushback from coal-heavy provinces.

"The quota system has meant that the coal power generation business in China is almost risk-free," said Dr Yuan Jiahai, a professor at North China Electric Power University in Beijing.

"So local governments and industries are rushing to build new coal capacity before the deadline to peak emissions."