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A Five-Part Strategy to Cap and Cut China's Coal Consumption

Alvin Lin

Posted May 28, 2013

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It is hard to miss the staggering statistics when it comes to coal in China, which now consumes nearly as much coal as the rest of the world combined. Unrestricted growth in coal consumption in the last decade has led to the worst air pollution in recent memory, with citizens in northern and central China breathing in higher levels of hazardous air pollution this past winter than if they were living in an airport smoking lounge. Coal mining and combustion also cause serious water and soil pollution, including the release of toxic metals like mercury and arsenic. Unless things change, there are plans to build even more coal-fired power plants in the future -- some 558 GW worth, which would be a 73% increase over China’s 2011 thermal power plant capacity.

EIA coal graph.png


The impacts of coal mining and consumption on China’s environment, public health and the economy are already astronomical: from January’s “airpocalypse” to the existence of “cancer villages” and 3.5% in GDP losses (in 2010 alone), this dirty and unsustainable energy source has catapulted to the center of attention among Chinese citizens and leaders alike. Given coal’s heavy costs, China’s leaders are paying close attention to coal and have sought now seek to reduce coal consumption and pollution by introducing a suite of policy measures, including:   

  • Considering a tax on resources, including coal, in order to account for the environmental costs of coal and shift investment towards clean energy.
  • Finalizing new emissions control limits for six heavily-polluting industries. China’s power sector accounts for about 50 percent of its coal consumption and emissions, and heavy industries such as iron and steel, cement and coal chemicals also constitute a large share, causing major climate and air pollution.
  • Planning regional coal consumption cap pilots in key regions such as Beijing-Tianjin-Hebei, the Pearl River Delta, the Yangtze River Delta and the Shandong city cluster as part of China’s “Twelfth Five Year Plan for Air Pollution Prevention and Control in Key Areas (in Chinese).” The pilots are aimed at bringing much-needed regional cooperation and coordination to reduce key air pollutants by 2015, including cutting PM 2.5 by 5-6 percent. But as with the total energy consumption cap, the details and penalties for non-compliance are still unclear.

While these are all critically important policy measures, the underlying challenge remains that China consumes too much coal overall, and much more needs to be done to reduce coal consumption to a level compatible with China’s and the world’s long-term sustainable development. Global carbon dioxide levels have now passed 400 ppm and will continue to grow rapidly if countries do not wean off fossil fuels and scale up cleaner energy sources. And as the world’s biggest emitter of carbon dioxide—spewing out 10 billion out of the global total of 38.2 billion tons in 2011—China is a key player in the future of sustainable development.   

Although scaling up alternatives to coal may seem a formidable task, we believe China can develop the policies and technologies needed to cap and then cut its coal consumption in the next decade. We are working with government researchers, academics, NGOs and others to develop an effective and enforceable coal cap policy that will address the severe pollution and health impacts from coal while providing cleaner energy sources for China’s economy. Such a program could begin at the city and regional levels, where coal consumption cap policies are already being developed, and ultimately scale up to a national binding target that is incorporated into China’s future Five Year Plans.

Here are five key components of NRDC’s coal cap strategy:

1. Work with the largest coal consuming sectors and regions to help them develop integrated plans for capping coal use through more efficient technologies, fuel switching and closing outdated production capacity. In order to address coal consumption, it will be important to work with the largest coal-consuming sectors (power, iron and steel, cement, and chemicals) to find ways to scale up more efficient technologies such as combined heat and power that can reduce coal consumption. These sectors should be required to install and operate pollution control and emissions monitoring equipment when consuming coal, and should be incentivized to switch from coal to natural gas and renewables in order to reduce their emissions. Plants with smaller and less efficient boilers and other equipment should be phased out or required to use natural gas.

Similarly, those cities and regions that face the worst air pollution from coal should be the focus of efforts to pilot coal consumption caps and to develop plans and policies for capping and reducing coal consumption in the next five years by scaling up clean energy sources and developing lower carbon economies that do not rely as much on heavy industry for development.  

Focusing on these key sectors and regions and showing that they can begin to limit their coal consumption will help to develop the policies and experience needed to reach a national coal cap policy.

2. Strengthen enforcement of coal consumption and emissions targets and standards through improved data and enforcement tools. Strengthening data on coal production and consumption and emissions from coal consuming facilities is key to providing a foundation for implementing a coal consumption cap and related policies such as a resource tax or carbon trading, and for enforcing emissions standards. Online emissions monitoring systems should be installed on all power plants and industrial facilities over a minimum size, with public reporting of data and penalties for false or inadequate reporting.  

It is also important to strengthen the use of pollution permits and environmental impact assessments to manage the impacts of high coal-consuming projects. These tools should provide a way for the government and the public to supervise emitters’ compliance with coal consumption targets and pollution standards, pushing them to find ways during project planning to reduce emissions and health impacts to the lowest extent possible, including by reducing consumption of coal and increasing use of cleaner energy sources. 

3. Continue to scale up energy efficiency and renewable energy: China has made significant progress in energy efficiency but still requires about twice as much energy as the world’s average to produce one unit of GDP.  We have been working to scale up demand side management programs to improve efficiency in industry, and have also been promoted policies and standards to improve building energy efficiency in China. Meanwhile, China is already the world’s largest investor in renewable energy, leads the world in wind power capacity and solar hot water heating, and plans to increase its use of non-fossil energy (nuclear and renewables) to 15 percent of primary energy consumption by 2020 (including 200 GW of wind power and 50 GW of solar power).  However, China still faces technical, economic and regulatory challenges that are preventing it from fully utilizing its efficiency and renewable resources, which will require cooperation and support from international partners to help develop best practices for market transformation. 

4. Develop responsible standards and best practices for shale gas and nuclear power development: China reportedly has nearly 50 percent more “technically recoverable” reserves of shale gas than the U.S., and has ambitious plans to develop its unconventional gas resources. While natural gas is much less polluting during combustion than coal, unregulated hydraulic fracturing (or “fracking”) consumes a significant amount of water and has the potential to cause water pollution, high methane emissions, and other environmental damage. We’re working with policymakers in China to learn from best practices for environmental protection in the U.S., so that China can develop this resource as safely as possible. Similarly, we are providing policy recommendations to help strengthen China’s nuclear safety regulatory system post-Fukushima.

5. Help to implement carbon trading and carbon tax pilot programs: In addition to mandatory coal consumption cap targets for local governments and enterprises, it will be important to begin to develop market and fiscal mechanisms such as carbon trading and/or a carbon tax, in order to price carbon to send a signal to the market to shift investment from fossil fuels to low-carbon energy sources. Developing these market and fiscal measures to price carbon will depend on accurate data on coal consumption and regulation of emitters. It will also be important that government revenues from pricing carbon through either carbon trading or a carbon tax be used to provide incentives for energy efficiency and renewable energy in order to spur the investments needed to scale up low-carbon energy.


Establishing a binding coal consumption cap policy adds a critically important lever to existing climate and energy policies in China. Capping coal will not be an easy task, and will require both applying pressure and providing incentives for both industry and government officials to act. Doing so will not only clean up China’s air but also conserve water and land resources, reduce water pollution, and alleviate transportation pressures, all of which will help secure a healthier future for China’s citizens, environment and economic growth.  

This blog post was co-written with my colleagues Christine Xu and Barbara Finamore.

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Michael P TottenMay 28 2013 05:11 PM

Thank you Alvin, very nice blog. I agree on the need for greater international cooperation and support from partners if China is to cap and steadily reduce its coal use to zero, replacing it overwhelmingly, I would argue, with efficiency, wind and solar - not shale, natural gas, or nuclear. As the Harvard-Tsinghua Universities joint 2009 wind assessment concluded: China’s favorable onshore wind resources could provide 25 trillion kWh of electricity annually, more than five times its national consumption in 2012. Assuming a 10-year feed-in tariff (FIT) payment per kWh comparable to what is currently being offered, wind could accommodate all the demand for electricity projected for 2030, about twice current consumption. [Potential for Wind-Generated Electricity in China
Michael B. McElroy, Xi Lu, et al. Science 325, 1378 (2009); DOI: 10.1126/science.1175706] Of course China's off-shore wind resources are estimated to be even larger than land-based wind resources.

As Edward Mazria, founder, Architecture 2030 recently noted: "By 2030, a staggering 900 billion sq. feet [84 billion sq. meters] of new and rebuilt buildings will be constructed in cities worldwide – an area equal to more than 3 times the total building stock of the United States. We have a choice. We can plan, design and build sustainably, or accelerate environmental degradation and increase human suffering." An immense percentage of that total will occur in China and surrounding Asia region. Asia's building sector needs a veritable revolution, using the readily available 4D software tools for designing zero net energy buildings, as well as aggregated buildings in streetscapes and neighborhoods in new city design. Using the best-in-play 4D software tools enable integrated designs obtaining factor 5 to 10 energy efficiency gains, plus material savings through inclusion of building integrated solar PV (BIPV) options [see, Economics of Building Integrated PV In China, John Byrne, Gerard Alleng and Aiming Zhou, 2001, ]. The 4D CAD tools enable detailed visual virtual walk-throughs from design to construction to spot any flaws, bottlenecks or missed opportunities. The 4D software then enables going straight to scheduling construction, and can be designed so that post-occupancy commissioning and monitoring can be continuous through inclusion of wireless smart sensor networks. Most importantly, algorithms can calculate financial engineering options, i.e., having the utility use its access to long-term, fixed capital (10%) to finance upfront any necessary cost increases, which typically are the least-cost-and-risk energy service option. China is already moving aggressively on efficiency, solar and wind, as you point out, but so many transaction costs, market barriers, outdated utility regulatory practices, and lack of enforcement on code standards, are resulting in massive lost opportunities, that get filled in the breach by more coal.

HerleyMay 28 2013 06:09 PM

Good article Alvin. However I am not sure that Michael Totten's suggestions are couched in reality. Reduce (thermal?) coal consumption to zero? Does your policy consider a replacement for metallurgical coal or do you envision a steel-less society?

I haven't read the 2009 Harvard Tsinghua study but does it seriously recommend and fully explore the cost and transmissions issues over generating all of China' electricity from onshore wind?

Not least how do you reticulate power 2000 km from say Xinjiang (even using UHV-DC at any kind of reasonable cost and just how many would this nation of wind turbines have to accommodate and expanded every year?

I suggest that it's this kind of unrealistic (and easily rejectible) thinking that leaves well meaning countries such as say Australia with increasing rather decreasing amounts of coal generated electricity.

Alvin's more realistic approach is more likely to realise the transition from high carbon energy generation to a long term and affordable (for all elements of society - not just index linked public servants and academics) energy prices.

Otherwise China will end up like Australia (ref World Bank China 2030 Report) where the deep green "nothing but renewables" policies have resulted in the very thing they
oppose - more coal.

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