Limiting Coal Consumption in China
In 2014, China launched the New Energy Development Strategic Action Plan (NEDSAP 2014–2020) setting a target to limit coal consumption at 4.2 Gt/year by 2020, which is estimated to represent 62% of the energy mix. The Plan is a Low Emission Development Strategy designed through a country-driven process and rooted in China’s priorities, such as improving local air quality and addressing water scarcity issues.
The ambition to limit coal consumption in China comes out of a commitment at the highest political level, contributing to the achievement of China’s Copenhagen pledge of 40–45% reduction in carbon intensity compared to 2005 levels by 2020 and its Intended Nationally Determined Contribution (INDC) goal of peaking CO 2 emissions by 2030 at the latest.
In addition, capping and decreasing coal consumption is a high priority in China’s 13th Five Year Plan, which will be officially released in March 2016 at the annual National People’s Congress.
According to a recent study by Greenpeace (April 2014), cumulatively, the coal control measures could result in a reduction in coal consumption of approximately 350 million tonnes (MT) by 2017 and 655 MT by 2020, compared with business-as-usual growth. This translates into an estimated reduction in CO2 emissions of about 700 MT in 2017 and 1,300 MT in 2020.
The expected impacts are:
Energy Security: A diversified and low-carbon energy mix in China will lead to improved energy security. This will be achieved through the development of all sources of renewable energy, including nuclear power.
Environmental Impacts: Reducing the use of coal in the Chinese economy will have multiple co-benefits. According to the Greenpeace China Programme (2008), environmental and ecologic losses from coal use and exploitation add up to 7-9% of the annual GDP. Capping coal consumption will also lead to improved local air and water quality in the country in addition to reduced GHG emissions.
Improved Health Impacts: According to a recent study by NRDC and WWF, the air quality improvements from a national coal cap policy would save approximately 49,000 lives per year in 2020, 89,000 in 2030, 80,000 in 2040 and 51,000 in 2050, leading to economic benefits of $6.2 billion, $11.4 billion, $10.2 billion and $6.5 billion respectively. These benefits result from improved air quality, decreased incidence of lung disease in coal miners, etc.
Restructuring of the Economy: Government policies are directed towards a reorientation of the economy structure by decreasing the share of energy-intensive industry and enhancing the role of the services sector. Accordingly, a series of market-based fiscal measures and economic reforms are being initiated to spur this shift.
Reforming the Power Sector: Plans on reforming the power sector to make the prospective national ETS and the operating pilot ETS a more effective tool to cut emissions by reducing coal consumption is on the priority list of the government. This is likely to be done by making the power generation system far more sensitive to a carbon price and liberalising the heavily reg-ulated power sector. Setting up spot electricity trading platforms to let big consumers settle prices directly with generators rather than with grid companies, and requiring generators to prioritise low-emission energy could be other features of the reform pro-cess. The figure below depicts the impact of ETS on the power sector in the context of the coal cap measures in China:
National Development and Reform Commission (NDRC): NDRC is the primary authority to formulate and implement strategies and plans of national economic and social development, to carry out research and analysis on the domestic and international economic situation and to put forward targets and policies concerning the development of the national economy. Accordingly, NDRC is playing a leading role in defining and implementing the overall climate change policy, industry policy, supporting energy efficiency, energy conservation and renewable energy policies (including tariff policy) in light of the coal capping targets and timelines.
National Energy Administration (NEA): NEA is responsible for formulating and implementing energy development plans and industrial policies promoting institutional reforms in the energy sector (including coal, oil, natural gas, nuclear power, new and renewable energy, etc.), promoting energy conservation and comprehensive utilisation of resources in the energy sector, and guiding scientific and technological advancements through R&D.
Ministry of Environmental Protection: Responsible for developing and organising the implementation of national policies and plans for environmental protection.
Ministry of Industry and Information: Main functions include defining China’s industrial planning, policies and standards (energy efficiency and conservation) and to promote the development of major technological equipment and innovation concerning the communication and other sectors.
Ministry of Housing and Urban Development: Primarily responsible for the administration of construction projects in China and for establishing national standards of construction. The ministry also has a key role in the implementation of energy efficiency and conservation programmes.
State Council: The State Council in China has a comprehensive role in the coordination of the processes promoting use of non-fossil energy options leading to energy transition.
Over 20 leading government think-tanks, research institutes, and industry associations in China, such as the Energy Research Institute, the Chinese Academy of Environmental Planning, the National Climate Change Centre, Institute for Energy, Environment, and Economy at Tsinghua University etc. were involved in conducting the background study for the China Coal Consumption Cap Plan and Policy Research project which was aimed at creating a roadmap for adoption of a national coal cap in China’s 13th Five Year Plan.