As the world moves to combat climate change, it’s increasingly doubtful that coal will continue to be a viable energy source, because of its high greenhouse gas emissions. But coal played a vital role in the Industrial Revolution and continues to fuel some of the world’s largest economies. This series looks at coal’s past, present and uncertain future.
Something remarkable happened in China in 2014. China’s coal consumption - the highest in the world - appeared to stabilise for the first time in 16 years. Many commentators proclaimed a new era for China’s energy mix and perhaps even the beginning of the demise of coal in China.
As China is the world’s largest greenhouse gas emitter, this was heralded as good news for the climate.
But the future is rather more uncertain. China is a major regional power with a major energy economy. Its primary energy consumption has grown by more than 500% over the past 30 years. China overtook the United States as the world’s largest primary energy consumer in 2010.
Not surprisingly, the world has been watching the role of coal in China’s energy development with considerable interest over the past few decades.
Twin threats: pollution and climate change
In 2010, China released its 12th Five-Year Plan (FYP), the country’s defining economic plan for 2011-15. It fundamentally changed China’s approach to energy and climate policies.
Instead of broad goals and statements, the plan shifted to specific policy instruments aimed at reducing emissions. It was driven in no small part by domestic environmental concerns centred on smog, air and water pollution.
The 12th FYP established binding targets to reduce energy intensity by 16%, reduce carbon dioxide (CO₂) emissions intensity (emissions per unit of GDP) by 17%, and increase the proportion of non-fossil fuels in the primary energy mix to 11.4% – all by 2015.
These targets were reinforced by the historic US-China Joint Announcement on Climate Change in 2014.
Through the announcement, and its pledge ahead of the Paris climate summit in December 2015, China promised to peak in CO₂ emissions around 2030 (and try to peak earlier), cut emissions intensity by 60-65% of the 2005 level, and source around 20% of its primary energy consumption from non-fossil fuels by 2030. Provided that economic growth is limited to 5.5% (China’s economy grew by 6.9% in 2015), China’s emissions in 2030 would return to close to 2005 levels.
After the Paris Agreement, China announced its 13th Five-Year Plan, covering 2016-20. With a focus on capping energy consumption to within 5 billion tonnes of coal equivalent (capping overall energy use, not only coal use) by 2020 and addressing air pollution, energy intensity will be reduced by 15%, CO₂ emissions intensity will fall by 18%, and the proportion of non-fossil fuels will increase to 15%.
What does this mean for coal?
BP’s 2016 Energy Outlook shows China’s fuel mix is changing. The share of coal in primary energy is projected to fall from 66% in 2014 to 47% by 2035. Demand for coal is likely to peak in 2027 and then fall by 0.3% each year over the next seven years.
To compensate for China’s reduced reliance on coal, the share of natural gas is expected to more than double, with the share of non-fossil fuels also increasing rapidly to bridge the gap.
One interesting question is what does this mean for coal-fired power infrastructure in China?
Two main drivers influence the building of new power plants.
The first is growth in future electricity demand. This is influenced by population growth and the intensification of energy use in developing economies, such as China.
The second is “business-as-usual retirement” of infrastructure. This is driven largely by regulatory compliance and competitiveness in the electricity market, as well as a preference to shift to low-carbon sources to assist in meeting emissions reduction targets.
Most power plants approaching retirement age are located mainly in the USA and Europe, as you can see in the chart below. China, on the other hand, has a remarkably young fleet with a median age of 10 years.
And this is where the dilemma emerges. Very few plants are approaching the age of natural retirement in China, even by 2030 when emissions are scheduled to peak.
Given the age of coal-fired infrastructure in China, it doesn’t appear as though business-as-usual retirements will drive a dramatic reduction in China’s coal use.
Increasing climate action
Of course the pledges announced prior to Paris are only part of the story. The Paris Agreement aims to hold warming to well below 2℃ and attempt to limit warming to 1.5℃.
Estimates suggest the Paris pledges would result in warming of 2.7-3.6℃. Accordingly, much greater emissions-reduction efforts are likely to be required to hold global average temperature increase to less than 2℃.
A recent study looked at the implications for global coal-fired power investments (operating, committed and planned) for a 2℃ average temperature rise scenario (in line with the International Energy Agency’s global mitigation scenario).
The investments in recent and new coal-fired power plant capacity are dominated by expansion in Asia, in particular China and India. A global reduction in coal-fired power infrastructure to shift from the business-as-usual scenario to the 2℃ mitigation scenario unsurprisingly would require China to make a significant contribution to this reduction.
Accordingly, China would need not only to reverse its growth trend in installed capacity by 2030, but also decommission some 400 gigawatts of coal-fired infrastructure, approximately equivalent to a third of its capacity, before the end of its useful life.
The implication is that non-OECD countries including China could be asked to carry more of the economic burden to transform the global energy system because these countries will need to prematurely retire cost-effective coal power assets. Questions about whether this is realistic and around compensation for the cost of such early retirements may influence the prospects of addressing the risk of climate change.
A second driver of China’s coal consumption trend is the push to reduce air pollution, in particular damaging pollution known as PM2.5. While BP’s Energy Outlook for 2016 suggests that this will drive the switch from coal to natural gas, in the absence of serious constraints on carbon emissions, energy security drivers may favour the use of coal-derived synthetic natural gas (syngas or SNG).
While this reduces air pollution, the production process is very carbon-intensive. China has made ambitious plans to develop this technology.
With the release of the 13th FYP earlier this year, the energy sector was expecting a limit on total coal consumption and cuts to coal production in order to peak emissions by 2030.
Yet while some production cuts have been announced, precisely how this will play out for coal-fired power infrastructure and actual coal consumption remains to be seen.
Caroline Stott, UQ Energy Initiative Research Officer, contributed to this article.