China finds coal a hard habit to break as power plants, steel mills stall pledges to scale back

China’s power producers and steel mills continue to invest in coal-based production capacity at alarming rates, showing no signs of scaling back despite the country’s pledge to reach carbon neutrality by 2060, a study showed.

China started building 33 gigawatts (GW) of coal-fired power producing capacity in 2021, almost triple the world’s combined capacity, according to the Centre for Research on Energy and Clean Air (CREA) in Helsinki and the Global Energy Monitor (GEM) in San Francisco.

Steel mills approved 74 million tonnes of coal-based capacity last year after a hiatus in 2020, adding in 12 months what the rest of the world put together on average in five years, the report said.

The rapid build-up is in stark contrast to China’s 2060 carbon neutrality pledge, which requires at least 80 per cent of existing coal-based power and steel plants to close by 2050, unless they are equipped with carbon-capture equipment or use zero-emission fuel such as hydrogen. The new capacity on the drawing boards and being built make any transition to the 2060 target harder and more abrupt, leading to economic waste, said CREA’s lead analyst Lauri Myllyvirta.

The coal-based steel mills initiated in 2021 will entail US$70 billion to US$110 billion in stranded assets when carbon emission reduction targets are realised, and the coal power plants imply a further stranded investment of US$20 billion.