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| Fig. 1: Coal consumption of China between 2006 and 2016. [5] There has been a small decline from the peak in 2013 to 2016. (Source: L. Burik) |
As the developed world continues to phase out its reliance on coal-fired power plants, the world's largest consumer of coal is following suit. After decades of relying on coal energy to fuel enormous growth for its massive population, the People's Republic of China is making a concerted effort to curtail domestic reliance on coal for energy production. It is through a combination of free market forces and government-led reform that China is reducing its dependence on coal. However, whether or not this prioritization of energy from renewable sources yields significant reduction to coal's share of energy production remains to be seen.
Firstly, market pressure has discouraged inefficient use of coal. Over the past ten years, the producer price index for purchasing fuel has been growing at an annual rate of 6.93 percent. [1] This dramatic annual increase has led producers to use coal more sparingly in efforts to keep costs under control. Whereas coal was used indiscriminately in the mid-20th century in an effort to sustain an enormous population and fuel massive economic growth, price inflation in the coal market has led producers to use coal more sparingly.
In addition to the influence of market forces discouraging inefficient use of coal, China's government has taken an activist role in diversifying their energy profile and increasing their renewable energy capacity. Through the use of state owned enterprises, or, SOEs, the Chinese government has effectively subsidized enormous investment in renewable energy production. In fact, recent estimates claim that these SEOs control 83% of thermal, 84% of hydroelectric, and 100% of China's nuclear power generation. [2] Clearly, the government has prioritized investing in renewable energy production and reducing coal's stranglehold on Chinese energy production.
The combination of market forces and government support for renewable energy production have led China to adopt an ambitious carbon reduction plan over the next 20 years. To reach this goal, China has committed to limit contribution of coal to total energy consumption to a maximum 65% for 2017, and cap the countrys annual coal use to 4.2 billion tons by 2020. [3] Clearly, diversifying its energy portfolio is a priority for China's decision makers.
Unfortunately, efforts to reduce coal reliance are slow-going. Growth in coal consumption has stayed relatively even with GDP growth through the early 2010s. [4] Even as China continues to invest in renewable energy and incrementally increases renewable capacity for energy, coal is remaining the dominant source of consumed energy. Fig. 1 shows that while China can celebrate a slow down in the growth of coal consumption, a significant decrease in coal consumption has yet to be achieved. Whether or not Chinese investment in renewables will realize significant renewable energy share takeover from coal simply remains to be seen. Chinese ambitions are high, but they face a long road ahead for loosening coal's stranglehold on energy production.
© Lewis Burik. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] W. Xie, P. Sheng and X. Guo, "Coal, Oil, or Clean Energy: Which Contributes Most to the Low Energy Efficiency in China?," Util. Policy 35, 67 (2015).
[2] B. Rioux et al., "How Do Price Caps in China's Electricity Sector Impact the Economics of Coal, Power, and Wind? Potential Gains from Reforms," Energy Journal 38, No. SI1, 63 (2015).
[3] X. Zhang, N. Winchester, and X. Zhang, "The Future of Coal in China," Massachusetts Institute of Technology, April 2017.
[4] B. Chan, "China's Energy Outlook," Physics 240, Stanford University, Fall 2011.
[5] "BP Statistical Review of World Energy 2017," British Petroleum, June 2017.