Climate change: China accelerates investments in coal-fired power and steel plants, risking emission goals, report warns
- China approved between US$26 billion and US$33 billion in coal-based capacity in the first half of 2022 despite falling demand, two climate non-profits say
- A lack of flexible grid management perpetuates reliance on coal power and creates a perceived need to build more of it, the groups say
China’s investments in coal-based power, iron and steel capacity accelerated in the first half of the year, putting the country’s commitments to decarbonise its economy at risk, experts say.
Approvals for new coal-fired power plants and coal-based iron and steel facilities increased even as demand is falling and while renewable power and low-carbon technologies for iron and steel production are making fast progress, according to a report from two climate groups.
The Chinese government approved 15 gigawatts (GW) of coal-fired power plants, 30 million tonnes per annum (Mtpa) of new coal-based iron-making capacity and 15 Mtpa of new coal-based steel plants in the first half of 2022, according to a report released on Wednesday by climate non-profit organisations the Centre for Research on Energy and Clean Air (CREA) and Global Energy Monitor (GEM).
The estimated US$26 billion to US$33 billion in new investments in coal-based capacity took place despite falling demand for coal-fired power and steel production since last summer, the researchers found.
China’s coal-fired power generation declined by 4 per cent year on year in the first half of 2022, according to China Electricity Council. Meanwhile, the output of China’s crude steel production fell by 6.5 per cent in the same period.
“Although the ramp-up of coal might be a short-term policy adjustment, it poses a risk to China’s long-term climate commitments, and the full implications of the coal-power building spree remain unclear,” said Shen Xinyi, a researcher at CREA.
According to the National Energy Administration, coal-fired power plants produced 60 per cent of China’s electricity in 2021, making them the largest carbon-emitting sector in the country, followed by the iron and steel sector.
Electricity shortages in China last autumn could have led to the accelerated investments in new coal-based power generation capacity this year. “The lack of flexible grid management perpetuates reliance on coal power and creates a perceived need to build more of it,” the report noted.
China, the world’s largest steel producer, has stepped up efforts to replace existing coal-based capacity with low-carbon alternatives to reduce the emission of pollutants and greenhouse gasses in the ferrous sector. However, unreported capacity expansions, higher production efficiency and a revival of low-quality steel production resulted in a discrepancy between the state planner’s capacity targets and actual capacity, the report found.
“China’s private steel companies are betting on both sides, pushing forward innovative, industrial decarbonisation technologies while also building a large share of high-emission, coal-based iron and steel capacity,” said Caitlin Swalec, project manager at GEM.
“Meanwhile the central government has walked back China’s industrial decarbonisation goals, setting the country up for a challenging path to net zero.”
The large amounts of newly built coal-based capacity could even complicate China’s net-zero transition economically and politically. CREA and GEM estimate that the new investments in coal-based power and steel capacity in the first six months of this year will result in stranded capacity – US$8.5 billion in coal and between US$15 billion and US$22 billion in steel – if they cannot be fully utilised, which seems likely under the current trend of falling demand and is more certain if China’s low-carbon transition is successful.
There is an urgent need to align investments in new production capacity in the steel sector with the goal of peaking and reducing carbon emissions before 2025, the report suggested. The government should also enforce the policy of only permitting new coal power for grid stability, taking into account the effect of more flexible grid operation, and extend the policy to gas-fired power plants, the report said.
“With its goal of hitting carbon neutrality by 2060, China is running out of time to transition away from fossil fuels,” said CREA’s Shen.