Outlook and Challenges for Chinese Coal
China has been, is, and will continue to be a coal-powered economy. The rapid growth of coal demand since 2001 has created deepening strains and bottlenecks that raise questions about supply security. Although China's coal is 'plentiful,' published academic and policy analyses indicate that peak production will likely occur between 2016 and 2029. Given the current economic growth trajectory, domestic production constraints will lead to a coal gap that is not likely to be filled with imports. Urbanization, heavy industry growth, and increasing per-capita consumption are the primary drivers of rising coal usage. In 2006, the power sector, iron and steel, and cement accounted for 71% of coal consumption. Power generation is becoming more efficient, but even extensive roll-out of the highest efficiency units could save only 14% of projected 2025 coal demand. If China follows Japan, steel production would peak by 2015; cement is likely to follow a similar trajectory. A fourth wedge of future coal consumption is likely to come from the burgeoning coal-liquefaction and chemicals industries. New demand from coal-to-liquids and coal-to-chemicals may add 450 million tonnes of coal demand by 2025. Efficient growth among these drivers indicates that China's annual coal demand will reach 4.2 to 4.7 billion tonnes by 2025. Central government support for nuclear and renewable energy has not been able to reduce China's growing dependence on coal for primary energy. Few substitution options exist: offsetting one year of recent coal demand growth would require over 107 billion cubic meters of natural gas, 48 GW of nuclear, or 86 GW of hydropower capacity. While these alternatives will continue to grow, the scale of development using existing technologies will be insufficient to substitute significant coal demand before 2025. The central role of heavy industry in GDP growth and the difficulty of substituting other fuels suggest that coal consumption is inextricably entwined with China's economy in its current mode of growth. Ongoing dependence on coal reduces China's ability to mitigate carbon dioxide emissions growth. If coal demand remains on its current growth path, carbon dioxide emissions from coal combustion alone would exceed total US energy-related carbon emissions by 2010. Broadening awareness of the environmental costs of coal mining, transport, and combustion is raising the pressure on Chinese policy makers to find alternative energy sources. Within China's coal-dominated energy system, domestic transportation has emerged as the largest bottleneck for coal industry growth and is likely to remain a constraint to further expansion. China is short of high-quality reserves, but is producing its best coal first. Declining quality will further strain production and transport. Transporting coal to users has overloaded the train system and dramatically increased truck use, raising transport oil demand. Growing international imports have helped to offset domestic transport bottlenecks. In the long term, import demand is likely to exceed 200 mt by 2025, significantly impacting regional markets. The looming coal gap threatens to derail China's growth path, possibly undermining political, economic, and social stability. High coal prices and domestic shortages will have regional and global effects. Regarding China's role as a global manufacturing center, a domestic coal gap will increase prices and constrain growth. Within the Asia-Pacific region, China's coal gap is likely to bring about increased competition with other coal-importing countries including Japan, South Korea, Taiwan, and India. As with petroleum, China may respond with a government-supported 'going-out' strategy of resource acquisition and vertical integration. Given its population and growing resource constraints, China may favor energy security, competitiveness, and local environmental protection over global climate change mitigation. The possibility of a large coal gap suggests that Chinese and international policy makers should maximize institutional and financial support to moderate demand and improve energy efficiency.
- Research Organization:
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- Environmental Energy Technologies Division
- DOE Contract Number:
- DE-AC02-05CH11231
- OSTI ID:
- 1050632
- Report Number(s):
- LBNL-4772E; TRN: US201218%%1051
- Country of Publication:
- United States
- Language:
- English
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02 PETROLEUM
03 NATURAL GAS
32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION
36 MATERIALS SCIENCE
29 ENERGY PLANNING
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CARBON
CARBON DIOXIDE
CEMENTS
CHINA
CLIMATIC CHANGE
COAL
COAL INDUSTRY
COAL LIQUEFACTION
COAL MINING
COMBUSTION
ECONOMIC DEVELOPMENT
EFFICIENCY
ENERGY EFFICIENCY
ENERGY SECURITY
ENERGY SOURCES
ENERGY SYSTEMS
ENVIRONMENTAL PROTECTION
MANUFACTURING
MITIGATION
NATURAL GAS
PETROLEUM
POWER GENERATION
PRICES
SECURITY
SHORTAGES
STABILITY
STEELS
STRAINS
TRANSPORT
VERTICAL INTEGRATION