China’s commitment to decarbonisation has not changed, despite increase in coal power use

China’s renewed focus on coal power won’t derail plans to achieve carbon neutrality by 2050
It has made clear the transition to clean energy will not come at the expense of the immediate needs of the country, as it grapples with Covid-19 outbreaks and slowed economic growth

Norman Waite

Published: 3:30am, 11 Apr 2022

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At a recent hearing on “China’s Energy Plans and Practices” held by the US-China Economic and Security Review Commission before the US Congress, a member asked those testifying: “When do you think the Chinese leadership will not be concerned about energy security?” It was a trick question, but the panellists knew the correct response: never.

China’s recent focus on coal supply and coal power generation has generated fear that it has chosen energy security over decarbonisation. However, like many countries right now, China has both immediate priorities and long-term goals.

While it’s true that China has prioritised coal at present, it’s a mistake to conclude that it has postponed its decarbonisation plans. On the contrary, China has taken significant steps to increase its clean energy supply.

China’s power outages last September resulted from a combination of strong demand, weak coal production, high coal prices, and coal pricing restrictions. The common thread running through all these was a breakdown in policy coordination: coal mining regulators ignored output bottlenecks; provinces didn’t heed calls to manage energy consumption; there were no plans to offset hydro production shortfalls; and pricing market rigidity backed generators into a corner.

Those immediate issues were addressed, but since then, the central government’s tone displays a greater awareness of the risks of a chaotic energy transition.

Since these problems began to emerge last summer, Beijing has admonished cadres at all levels to take measured actions consistent with the goals of decarbonisation. It sent a message that there would be no reward for actions that appeal to long-term goals at the expense of immediate priorities.

Photovoltaic panels at a solar farm in Jiaxing, Zhejiang province, on March 11. China has introduced many plans, policies, and directives promoting renewable power. Photo: Bloomberg

Data from the China Electricity Council shows that the country sourced well over 60 per cent of its power from thermal coal in 2021. This will not change overnight, even as the country adds more than 100 gigawatts (GW) of wind and solar every year.

China’s immediate priority to preserve uninterrupted power was made more urgent this year. Growth in 2022 will be challenged by a property sector slowdown, Covid-19 policy impediments to consumer spending, and a military conflict that could put China on the wrong side of global sanctions.

Beijing has further need to elevate the importance of stability as the party congress prepares to break with tradition and appoint Xi Jinping to a third term, something no leader has been granted since the 1980s.

This is not to suggest that China would be justified in abandoning, altering, or delaying its decarbonisation efforts under any circumstances. China produces almost a third of the world’s carbon dioxide, and about half of that comes from coal power. Changes to China’s decarbonisation commitment would have profound effects on global efforts.

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All indications are that this is not the case. China’s support for its thermal coal power supply chain is an immediate priority, distinct from its long-term decarbonisation goals. The country’s focus on coal, in fact, comes against the backdrop of Beijing’s ongoing efforts to maximise renewable energy consumption.

Last September, at the height of the power crunch, Beijing modified its dual energy control policy to exclude renewable power and focus solely on carbon control.

In October, Beijing doubled the commercial and industrial market price band for coal power to 20 per cent above or below the benchmark, while leaving renewable energy pricing unchanged. In two months, China made clean energy cheaper and removed constraints on its consumption.

Renewables ‘to meet 70 per cent of China’s additional power needs by 2024’

While the impact of those two actions can’t be overstated, China introduced too many other plans, policies, and directives promoting renewable power to list them all. A few worth mentioning include the People’s Bank of China’s introduction of a refinancing facility for banks that lend to decarbonisation projects, including all varieties of clean energy and storage, last November. Also, January’s plan to create a single nationwide electricity market by 2030 will improve price efficiency, renewables penetration and demand response.

Finally, February’s policy plan for the country’s clean energy transition maps out the path for renewables to both supply the country’s marginal energy demand and replace fossil energy generation over the next eight years.

None of this guarantees China will be successful in its efforts to decarbonise, or that it won’t alter its decarbonisation efforts in the future. However, the fear that China has already rethought those pledges is unfounded.

Coal remains the country’s main source of baseload power today, but China continues to chart its path to sustainable energy independence through higher renewable energy penetration.

Norman Waite is an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA)