China has said it will halt construction work on 30 coal-fired power plants, in what Greenpeace, the environmental group, has described as a “globally unprecedented move”.
So far this year Beijing has already shelved or postponed plans for 114 gigawatts of thermal coal power stations, according to Energy Transition Advisors, a London-based consultancy, compared to a total installed capacity of around 900GW, as the Communist party has sought to shift the world’s largest polluter towards cleaner forms of energy and tackle air pollution.
However, this would be the first time China has moved to scrap plants already under construction.
“Up to now, the Chinese government had avoided interfering in projects that had already been contracted and financed, and where construction had started,” says Lauri Myllyvirta, an energy analyst for Greenpeace in Beijing.
“The cancellations will be painful, and entail major commercial losses and disputes. But spending money to complete these unneeded coal plants would have been even more wasteful: it would likely have cost well over $20bn. Now China avoids throwing good money after bad.”
The statement from the National Energy Administration says that construction of 30 coal plants with a combined capacity of 17GW will be halted. The plants are all in the 13 Chinese provinces that were told in April not to develop new coal-fired plants.
A further 30 plants, 10 of which are under construction, in the west of the country will also be hit by plans to abandon the construction of long-distance transmission lines designed to send their power to coastal regions.
However, given the tendency for local governments to ignore attempts by Beijing to crack down on overcapacity in the steel and aluminium industries, at this stage it is not clear whether the edict from the NEA will be acted upon.
Even if it is, carbon emissions from China’s coal-fired power sector will rise to levels incompatible with attempts to limit global temperature rises to 2C by 2020, according to research by Energy Transition Advisors.
The findings add to fears that China’s large-scale financing of coal plants elsewhere in the emerging world imperils the 2C target, despite president Xi Jinping’s ratification of the Paris climate accord — the culmination of more than 20 years of effort by the UN to tackle global greenhouse gas emissions — last month.
Research released earlier this year found that two Chinese policy banks had provided $118bn of overseas energy finance between 2007 and 2014, as much as the World Bank and the Asian, Inter-American and African development banks combined. However, while coal constituted a negligible share of the projects financed by the multilateral lenders, it accounted for 66 per cent of energy-related lending by China.
The Energy Transition Advisors’ analysis suggests that China’s domestic coal consumption is also incompatible with efforts to curb climate change, despite Beijing’s efforts to tackle the problem.
Coal production fell by a “staggering” 9.7 per cent year-on-year in the first six months of 2016, according to the Institute for Energy Economics and Financial Analysis, a large absolute decline in a country that accounted for 47.7 per cent of global coal production in 2015, according to BP, even if domestic production was partially replaced by an 8.2 per cent rise in coal imports.
However Mark Fulton, founding partner of Energy Transition Advisors and a former Citigroup and Salomon Brothers economist, says that although 114GW of planned construction has been shelved this year, a further 389 plants with a total capacity of 205GW are under construction, “leaving a coal juggernaut … that in emission terms is sufficient to significantly effect the global carbon budget”.
China is “moving in the right direction, but not fast enough,” Mr Fulton adds.
Projections from Bloomberg New Energy Finance, illustrated in the first chart, suggest that capacity in China’s coal sector is likely to continue to rise until 2020, and only start to fall by a meaningful amount in the 2030s, when older plants are retired.
Based on a theoretical thermal coal budget calculated by the International Energy Agency, a think-tank backed by industrialised countries, designed to reflect the proportion of China’s greenhouse gas emissions that can realistically come from the thermal coal sector, Mr Fulton sees trouble ahead.
“Less than half of the capacity presently under construction would be sufficient to break the IEA annual thermal coal budget by 2020 and the total budget [designed to last until 2050] by 2036,” he says.
Some commentators, such as Nicholas Stern, a British economist and academic, and his colleagues at Tsinghua University in Beijing, argue that China’s coal consumption has peaked.
In contrast, Mr Fulton’s calculations are based on an assumed load factor, or capacity utilisation rate, of 50 per cent for both new and existing coal-fired plants, so additional capacity leads to additional supply and demand.
If he is wrong about this and coal consumption has peaked, Mr Fulton says those currently building new coal-fired power stations run the risk of being stuck with “stranded assets” that no longer have a productive use.
Mr Fulton is also concerned about the coal sector in India, which he calculates will also have used up its pre-2050 budget for coal-fired emissions by the mid-2030s, even without the addition of any new plants beyond those already under construction.
Some might quibble with the focus on India, given its carbon dioxide emissions per head were just 1.8 tonnes in 2014, according to European Commission data, compared to 5.0 tonnes in China, 6.7 in the EU and 16.5 in the US.
However, India and China’s electricity and heat sectors produced emissions of almost 5.3 gigatonnes in 2013, according to the IEA, a significant chunk of the 13.7Gt produced by these sectors globally and more than a tenth of the 50Gt of emissions from all sources.
As a result, Mr Fulton argues India’s coal industry is so large it cannot be ignored. “No other sector has such a concentrated impact as this [and] coal dominates the power sector in India,” he says.
He cites data from CoalSwarm, an information clearinghouse, suggesting that India has 65GW of coal capacity under construction and an additional 178GW proposed, potentially more than doubling the country’s current capacity of 197GW.
India is likely to continue to expand its coal capacity in every year until at least 2040, according to Bloomberg New Energy Finance, as the second chart shows.
Merely the plants currently under construction in China and India would account for 3 per cent of the global carbon budget, Mr Fulton says, while the two countries’ combined pre-construction pipeline stands at 584GW, “which is totally unacceptable in a 2C context without massive deployment of carbon capture and storage”, a technology still in its infancy.
Across China, India and Southeast Asia as a whole, coal-fired emissions will exceed the IEA’s annual budget by about 2020, and by 2040 will produce emissions of two and a half times this level, according to projections from BNEF, as the final chart shows.
Mr Fulton argues China and India should extend or introduce moratoriums on coal-fired power plants and, where feasible, halt current construction. Electricity market reforms that prioritise renewables are “low-hanging fruit”, he argues.
In addition, he believes deployment of either carbon capture and storage schemes, or carbon capture and utilisation, will be essential, despite “painfully slow progress” in this direction.
Without CCS or CCU, China and eventually India “will require equally urgent and radical action if the world is to meet the 2C target”, he argues, including caps on coal consumption, mothballing of existing coal plants and scrapping of fossil fuel subsidies.