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China’s coal revival

China’s coal revival

A series of domestic and international crises have deepened China’s addiction to coal. What will it take to wean it off?

Blackouts, lockdowns and the invasion of Ukraine. All these events have compounded China’s reliance on the world’s dirtiest fuel. Last year it built over half of all new coal power plants worldwide – almost enough capacity to offset all the plants that were closed down outside the country. 

It’s bad news for the world’s carbon budget. Never mind new plants; if all existing coal and gas infrastructure were allowed to continue emitting into old age, it would blow through the entire 510 gigatonnes left for limiting warming to 1.5 degrees. And while the total number of coal plants coming online each year is falling fast, the amount of electricity generated by coal globally has reached a record high. 

China’s intense increase in the supply and production of coal comes a year after Xi Jinping’s announcement of the “dual goals” of peaking carbon emissions before 2030 and achieving neutrality before 2060. The leadership is betting that it can hit both through a rapid expansion of renewables and storage in the next decade. Right now though, coal is king – and China’s commitment at Cop26 to “phase down” (rather than “phase out”) coal looks like a pipe-dream. Beijing knows the stakes. So why is it taking the risk of opening plants that will soon need to close?

  • Economics. China is currently attempting to build its way out of a slowdown in economic growth caused by a) covid lockdowns in more than 60 cities and b) rising oil and gas prices following the Russian invasion of Ukraine. Due to its abundance and compatibility with China’s grid, coal is the go-to fuel for producing the vast amounts of electricity required for new construction projects. There’s also an impulse from local governments to build coal plants that create jobs and boost economic activity. Coal accounted for 56 per cent of the country’s total energy consumption in 2021. 
  • Politics. Last summer several Chinese provinces were hit by a series of power cuts. This didn’t sit well with an authoritarian government that prides itself on infrastructure. Xi Jinping gave a speech saying that the country “must hold the energy food bowl in its own hands” – a nod to the coal industry to approve new plants. 
  • History. Europe’s attempts to wield energy sanctions against Russia may evoke painful memories for Beijing: for many years after the Communist Party took control in 1949, the US and USSR imposed restrictions on energy exports, prompting a national drive for self-sufficiency. “These experiences of being isolated have been ingrained in the authority’s memories,” Yu Aiqun of Global Energy Monitor tells Carbon Brief.

Despite China’s embrace of new coal projects, experts say there are several levers that could be employed to avoid a full-blown coal revival in China and beyond:

Renewables. “The plans for building renewable capacity are very impressive over this five-year period,” says Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air. “It’s just that the confidence they’re going to meet peak loads without new coal isn’t there.” It’s estimated that China will add about 1,200 gigawatts of wind and solar power over this decade – close to the total power capacity of the US in 2020. But the nut it really needs to crack is energy storage. Only then can the CCP sleep easy knowing the lights won’t go out when lockdowns are lifted and demand surges.

Financing. China’s Cop26 commitment to end overseas financing for coal is highly consequential. E3G has calculated it could remove as much as 40GW of coal across 20 countries – equivalent to the entire operating fleet of Germany. As the charts below show, Chinese banks are by far and away the biggest lenders for coal, but a concerted attempt to end coal financing also relies on institutional investors; many profess a desire to green the global economy through declarations like the Net Zero Asset Managers Initiative, while also investing hundreds of billions into coal projects.

  • And the rest… “We need to see the OECD out of coal by 2030 and the non-OECD out by 2040. While the EU has been retiring coal rapidly, in other places, notably the US, it’s not happening fast enough,” says Leo Roberts, Research Manager at E3G. One way to accelerate retirements in the Global South is through multilateral transition deals such as the one agreed between South Africa and G7 nations at Cop26. There’s an eagerness from sponsor governments to replicate that model: Indonesia, India, and Vietnam are all on the hit list.

On the face of it, the situation looks dire: the world is expected to burn more coal this year than at any point in human history. But surging global oil and gas prices are likely to make Chinese consumers cut back on spending, and depress global demand for the goods China manufactures. That said, successive crises have reminded the world’s biggest importer of oil and gas that it is vulnerable, tipping the balance in China away from the push for net zero and towards short-term energy security. Only a revolution in renewable energy can bring it back.

Tortoise Climate Summit

The world must cut emissions fast. At the second annual Climate Summit on 12 May, we will investigate whether a fair transition can help the world get to net zero faster. Do join us.

A global transition

In episode four of our myth-busting podcast series with the Centre for Net Zero and Octopus Energy, Lucy and Giles explore how every country – from China to Kenya – is going through its own transformation.


eco-nomics

Windfall fall-out?
Rishi Sunak and Kwasi Kwarteng appear to have had a fall-out over windfall taxes on oil and gas companies. The Times reports that the chancellor threatened BP and Shell with a windfall tax on their profits if they don’t invest more in renewable projects in the North Sea and across the UK. BP this morning reported profits of $6.2 billion. Shell is expected to report $8.5 billion in profit from the first quarter off 2022, compared to $3.2 billion in the same period last year. Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, seemed surprised, telling the BBC such a tax, which has been championed by Labour but not by the Tories so far, would disincentivise investment.


policy

Burning up
India is burning more coal after a record-breaking heatwave saw a spike in demand for energy. The Indian subcontinent is experiencing the highest spring temperatures for 122 years, with temperatures in the northwest and central India reaching 35.9 and 37.8 degrees Celsius and cities in Southern Pakistan hitting 47 degrees Celsius at the end of April. The heatwave, a symptom of climate change, has fuelled demand for power as people switch on fans and air-conditioning systems to keep cool. That demand is being fulfilled by burning more of the black stuff – state-run India Coal boosted production by 27 per cent last month and Indian railways cancelled 753 passenger trains to free up track to increase supply to power plants. It’s a toxic, life-threatening cycle.


nature

Code red for rainforests
One of the big promises made at Cop26 was to not only halt but reverse deforestation by the end of the decade. 143 world leaders including Brazilian president Jair Bolsonaro signed up. New figures released last week show that there’s a long way to go: 11.1m hectares of tree cover was lost in tropical rainforests in 2021, and primary rainforest particularly important for carbon storage and biodiversity was destroyed at a rate of ten football pitches every minute. 40 per cent of the destruction was in the Brazilian Amazon. The next six months will be critical in determining the forest’s fate: in October, Brazilians vote on whether to return Bolsonaro to office or oust him from power. Deforestation in the Brazilian Amazon has hit record highs under his leadership, and scientists warn it could surge even further in this election year.


engagement and activism

Sun, sea and sewage

The swimming season is here, but anyone dipping their toe in the sea this summer may want to think twice. Raw, untreated sewage was discharged into England and Wales’ designated bathing waters for 217,804 hours last year. Spills by United Utilities alone added up to 75,000 hours, with Morecambe South beach in Lancashire the worst affected. Companies including Southern Water and South West Water have already been hit with fines for such spills, but environmental campaigners say Ofwat, the regulator, also isn’t doing enough to check-up whether Victorian-era water treatment plants are still working and to force companies to upgrade when they’re found to be lacking.

Thanks for reading.

Barney Macintyre
@barneymac


Additional reporting by Ellen Halliday. Graphics by Katie Riley. Edited by Jeevan Vasagar.


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