May 18, 2021

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China has “no choice” but to rely on coal energy for now

China has "no choice" but to rely on coal energy for now

A coal-fired power plant in Jiayuguan, Gansu province, China on Thursday, April 1, 2021.

Qilai Shen | Bloomberg | Getty Images

BEIJING – China has ambitious goals to reduce its carbon emissions, but it won’t abandon coal-fired power anytime soon as it keeps its eyes on its economic targets.

President Xi Jinping said in September that the country’s carbon emissions will begin to decline by 2030 and said the country will achieve carbon neutrality by 2060, four decades from now.

Meanwhile, policymakers are making it clear that economic growth remains a top priority and that growth largely depends on coal energy. Beijing has a 6% GDP target this year, a level analysts say would allow authorities to address long-term problems such as the country’s high debt levels.

Many developing countries don’t even have electricity. In this situation, if you don’t use coal, what will you use?

Li Gao

Chinese Ministry of Ecology, on Chinese Coal Energy Financing Outside China

“China’s energy structure is dominated by coal. This is an objective reality,” said Su Wei, deputy secretary general of the National Development and Reform Commission. CNBC translated its comments into Mandarin, which it made late last week after Xi’s separate remarks at a US-led world leaders climate summit.

“Since renewable energy (sources like) wind and solar are intermittent and unstable, we have to rely on a stable energy source,” Su said. “We have no other choice. Over a period of time, we may need to use coal energy as a flexible adaptation point.”

He added that coal is readily available, while renewable energy needs to develop further in China.

Coal financing outside of China

Separately, on Tuesday, when asked by CNBC whether Beijing could follow South Korea in its promise to stop public funding of coal-fired power plants overseas, China’s ecology ministry indicated that China’s funding for the coal-fired power in developing countries will continue.

“China has supported some developing countries in building coal-fired power plants overseas,” Li Gao, director general of the ministry’s climate change department, which CNBC translated, told reporters in Mandarin. “China provides this support based on the local situation.”

“Many developing countries don’t even have electricity,” he said. “In this situation, if you don’t use coal, what will you use?”

According to Boston University’s Global Development Policy Center, the China Development Bank and Export-Import Bank of China jointly funded $ 474 million worth of coal projects outside of China in 2020 alone.

The same report indicated that China’s funding of energy projects beyond its borders has steadily declined since 2016, however.

Li said coal accounted for 56.8% of China’s domestic energy production in 2020, down from 72.4% 15 years ago. As of last year, China was the heaviest emitter of carbon dioxide in the world, according to the Union of Concerned Scientists, a non-profit organization founded at MIT. The United States was second and India was third.

During last week’s climate summit, Xi called for international cooperation to reduce carbon emissions, adding that different countries should play different roles in that reduction. He did not identify any country by name.

Xi said China “will strictly control coal-fired generation projects” and limit the increase in coal consumption over the next five years. He said the reductions will occur over the next five years.

The system “favors coal generation”

Chinese authorities have tightened carbon emissions restrictions this year in a targeted way, for example by calling for production cuts in the Tangshan City Steel Center.

However, China is still stepping up the construction of coal-fired power plants. Analysis from the US-based Global Energy Monitor indicates that China built more than three times the new coal-fired power capacity last year than the rest of the world combined.

China is the world’s largest coal consumer. Late last year, parts of the country cited coal shortages in limiting local energy use, as electricity demand soared. According to official data, electricity use in China increased by 3.1% last year.

The Chinese government aims to reduce the share of high-carbon fuel in national energy consumption to 20% by 2025, analysts from China Renaissance said in a report last month. But they noted that falling renewable energy costs are not enough to spur a major industry change.

“We believe the current system overwhelmingly favors coal-fired generation, in part because it is more stable and faces less variability in wind and solar energy,” the report said. “Uncertain market access has already slowed investment in renewable energy. Given the power of coal and construction interests, the necessary reforms are likely to require considerable political will.”