CHINA, the world’s largest coal consumer, has halted approvals of new coal mines for the next three years while it continues cutting output at existing operations. The move is aimed at shrinking both oversupply and limiting a worsening pollution crisis.
State-run news agency Xinhua has reported that the national energy regulator will close more than 1000 coal mines this year, eliminating 60 million tonnes of capacity that is no longer needed.
China’s air pollution generally increases during winter, when power consumption, much of it fuelled by coal, increases in line with more demand for heating. The situation is particularly bad in the nation’s east, including the cities of Beijing, Shanghai and Hong Kong. Late last year authorities issued Beijing’s first-ever red alert for pollution when poisonous air quality prompted the government to close schools, force motorists off the road and shut down factories for more than 72 hours.
The air-quality index at the time topped 300 and the US Environmental Protection Agency said an index reading above 300 was extremely rare in the US and generally occurred only during events such as forest fires.
As well as these measures affecting the coal industry directly, the government has also readjusted its targeted energy mix for 2016. Non-fossil fuels will make up 13.2% of the country’s energy, an increase from 12% this year; natural gas usage will increase from 6% to 6.2%; and coal usage will be reduced to 62.6% from around 64.4% in 2015. For the next five years, the government also aims to add more than 20 million kilowatts of installed wind power and more than 15 million kilowatts of installed photovoltaic power.
“Due to environment concerns, the government has been quite aggressive in introducing renewable energy into the market but it might take a long time before we see a real shift because prices will remain as the main factor determining people’s habits,” said ICIS director of research Li Li, who is based at the market information company’s Guangzhou offices.
China’s attempts to phase out coal use are likely to drag coal prices further down as diminishing demand will exacerbate the current glut of coal. While coal-fired power in China has gradually abated in recent years in tandem with the country’s slowing manufacturing sector, coal is still largely responsible for power generation, and China comprises nearly half of the world’s coal consumption, which means any attempts to reduce its use have major impacts on the global industry.