Experts doubt coal cap will be effective
China announced its target of capping its total energy demand at 4-4.2 billion tonnes of "standard coal equivalent" in late 2010, before ratifying its 12th five-year plan for 2011-15. (Standard coal equivalent is a measure of the energy in coal, and assumes a calorific value of 7000kcal per tonne, higher than most Australian or Chinese coal.)
UBS commodities analyst Tom Price said it was already too late for China to cap coal use at 4 billion tonnes because last year it consumed 4.05 billion tonnes, counting raw production of 3.8 billion tonnes plus net imports of 227 million tonnes. China's gross coal imports jumped 32 per cent last year, he said.
Mr Price said China's monthly raw coal production statistics did not factor in coal washing which could reduce yields and increase calorific values. "It will be hard to pin them down on this," he said.
But Mr Price said the National Development and Reform Commission's targets basically called for "flatlining" energy use, an unreasonable forecast because China depended on coal for 80 per cent of its power. "It's highly likely their coal consumption rate will continue to lift by at least a couple of per cent," he said, describing the 4 billion tonne target as a "nice academic exercise".
One energy industry executive based in Australia questioned China's "aspirational target".
The real question, he said, was whether China's leaders were "ever going to ration energy in order to achieve some emissions objective ... [and] throttle economic growth".
The executive said China was trying to find as much gas as it could, emulating the unconventional oil and gas boom in the US, and was building the world's largest fleet of nuclear power stations.
But China had conflicting policy objectives with evident tension between the economy, security of supply and the environment. The executive said air pollution was "a much higher priority than CO2, as you'd know if you'd been to Beijing lately". While much of the media coverage of the recent air pollution in China's north concentrated on emissions from burning coal, about a third of the pollution was from transport fuels and Beijing's electricity came mostly from gas-fired power stations.
"There's a long way to go before [China's] coal demand peaks," he said. "It's certainly not going to peak in this five-year plan".
Frequently Asked Questions about this Article…
China announced a target to cap total energy demand at about 4–4.2 billion tonnes of “standard coal equivalent” for the period leading to 2015. Standard coal equivalent is a way of measuring the energy in coal that assumes a calorific value of 7,000 kcal per tonne — a value higher than most Australian or Chinese coals — so it’s a technical unit used to compare energy volumes rather than a raw tonne-for-tonne measure.
UBS commodities analyst Tom Price and other industry observers said it may already be too late: last year China consumed roughly 4.05 billion tonnes when you count raw production (about 3.8 billion tonnes) plus net imports (about 227 million tonnes). Gross coal imports jumped about 32% last year, and because coal supplies around 80% of China’s power, analysts say it will be hard to flatline total coal use without throttling economic growth.
Tom Price noted China’s monthly raw coal production statistics don’t account for coal washing, which can reduce physical yields but raise the calorific value of the coal. That makes it harder to pin down true energy content from raw production numbers and complicates comparisons with a standard-coal target.
An Australian-based energy executive questioned whether Chinese leaders would ever ration energy or deliberately throttle economic growth to meet emissions objectives. The article said China faces trade-offs between economic growth, security of supply and environmental goals, and that rationing energy would be politically and economically difficult.
Yes. The article says China is searching for more gas — trying to emulate the unconventional oil and gas boom seen in the US — and is building what was described as the world’s largest fleet of nuclear power stations. Still, coal remained the dominant source, supplying roughly 80% of China’s electricity at the time.
According to the executive quoted in the article, air pollution — especially visible smog in cities like Beijing — is a higher immediate priority for Chinese policymakers than CO2 reductions. The article notes that while much media focus links air pollution to coal burning, about a third of pollution in north China came from transport fuels, and Beijing’s electricity was largely gas-fired.
The article reports China’s gross coal imports rose about 32% in the prior year, reflecting rising reliance on imported coal as domestic demand grows. For markets, that kind of import growth signals stronger global demand pressures, though the article also stresses uncertainty because China’s policy choices on energy mix and growth will influence future import trends.
No — the article quotes an industry executive saying there’s a long way to go before China’s coal demand peaks and that it is “certainly not going to peak in this five‑year plan.” Analysts expect coal consumption to continue rising by at least a couple of percent rather than falling to meet the 4 billion tonne target.
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