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China Briefing: Impact of coal push; ‘No new overseas coal power projects’; Analysis on energy plans

China Briefing
Welcome to Carbon Brief’s China weekly digest. 
We handpick and explain the most important climate and energy stories from China over the past seven days.

Snapshot
New analysis by Carbon Brief has examined China’s recent coal push and the implications for its climate goals. Beijing has repeatedly ordered the nation to boost its coal production and coal supply since widespread power shortages occurred in late 2021. The article interviewed a wide range of experts in and outside of China.
On Monday, China said that it would “stop building overseas coal-fired power projects completely” in new guidelines. Notably, the document gives instructions for those projects that are under construction or have been built. Experts told Carbon Brief that this is the first time China has explained president Xi Jinping’s pledge from last September.
Finally, Jin Boyang – senior analyst for energy transition at “information provider” Refinitiv – has analysed two recent energy policy documents from China for Carbon Brief. The Chinese government published its 14th five-year plan (FYP) for energy last Tuesday and set its energy targets for 2022 this Tuesday.
Key developments
Analysis examines China’s coal push and its implications
WHAT: Carbon Brief has assessed China’s recent efforts to boost coal production in analysis published earlier this week. The article – written by Carbon Brief’s China editor, Xiaoying You – took a deep dive into China’s current coal policy by interviewing a wide range of experts in and outside of China. Specifically, the piece examined why coal is important to China, what caused Beijing’s recent coal push and how the move might affect its climate actions. It also presented a host of views on whether or not the coal push would drive up China’s carbon peak level, which will have a knock-on effect on China and the world’s net-zero efforts. Furthermore, by citing experts, media reports and policy documents, the article explained what “clean and efficient use of coal” means – a concept China has repeatedly emphasised in the past few months. 
WHO: All of the experts interviewed by Carbon Brief referred to last year’s power shortages as a direct driving factor behind China’s coal push. Byford Tsang of E3G, an environmental climate change thinktank, highlighted a “shift in the rhetoric” towards coal by China’s leadership after the “power crunch” in 2021. But he noted that this did not represent a “policy shift” because the Chinese government had already underlined the importance of energy security and mentioned the “clean and efficient” use of coal while passing its 14FYP in March 2021. In addition to the power shortages, Matt Gray, co-chief executive of TransitionZero, added that the “ongoing energy crisis and shortages internationally” is “probably a factor” behind Beijing’s “refocus” on energy security. He noted the situation is “obviously going to be exacerbated by the recent news of what is happening in Ukraine”.
WHY: The experts also shared their views on why China is still building new coal-fired power plants. Five new coal power projects with a combined capacity of 7.3 gigawatts (GW) were approved in the first six weeks of 2022, the analysis said, citing a recent report. Yu Aiqun, China researcher at Global Energy Monitor, noted that the surge of approvals signified that “the direction of wind [in China’s policy-making] has changed” – from controlling pollution and emissions to ensuring economic growth and energy security. Yu also highlighted a “strong impulse” to build coal power plants in China. Meanwhile, some experts perceive new coal-fired power capacity as “necessary” to ensure a stable grid for meeting growing demand in the near term, according to Dr Ryna Cui at the University of Maryland School of Public Policy in the US. She said: “One argument for that is to use coal plants for providing flexible peaking services to help support an increasing share of renewables in the grid.” The analysis also presented various opinions from other experts. 
HOW: One key question the analysis examined is how the coal push would potentially affect the level of CO2 at which China will peak – something experts had different views on. For example, Dr Xie Chunping – policy fellow at the Grantham Research Institute on Climate Change and the Environment in London – said that the push “will certainly affect” the level of China’s CO2 emissions in “the following few years”. But she said it “may not necessarily” affect the timing and level of China’s emissions peak, “as long as China starts to significantly reduce the utilisation rates of coal-fired plants and use them as backup capacity, once renewables build up”. Meanwhile, Dr He Gang – assistant professor in the Department of Technology and Society at Stony Brook University in the US – said that China’s energy-related CO2 emissions reached 11.9bn tonnes last year, according to the International Energy Agency (IEA). Dr He said that the figure “already exceeded” a previously discussed goal of 11bn tonnes in 2030 and a more aggressive goal of 10.5bn tonnes in 2025.
WHEN: The analysis was published on the same day as China set the targets for the country’s energy-related works for 2022 in new “guiding opinions”. The directives – published by the state energy regulator – are largely aligned with the 14FYP for energy, which emphasises energy security. The latest document carries some quantitative targets for the year. For example, it specifies that in 2022, the nation’s total energy production should reach “about” 4.41bn tonnes of standard coal equivalent (tce), its crude oil production should “return” to “about” 200m tonnes and its gas production should amount to “about” 214bn cubic metres. (According to Yicai, a Shanghai-based news website, China’s crude oil production dropped below 200m tonnes in 2016 and kept declining until 2019. The outlet reported that China’s crude oil production was 199m tonnes in 2021. Refinitiv’s analyst, Jin Boyang, analyses the latest energy plan for Carbon Brief lower down.)
China explains pledge of no new overseas coal plants
WHAT: Six months after China’s president Xi Jinping announced that the country “will not build new coal-fired power projects abroad”, the Chinese government has provided some explanations for the one-line pledge, which sparked various interpretations at the time. According to a new policy document published on Monday, China will “stop building new overseas coal power projects completely” and “push forward” those coal power projects that are under construction “steadily and cautiously”. It also stipulates that the country will “promote” the “green and low-carbon” development of those coal power projects that have been built, with instructions on how to achieve the goal.
WHO: The directives were released on Monday by four national-level government agencies in a set of “opinions” on the development of the “Belt and Road” Initiative (BRI), China’s global infrastructure development strategy. (China Briefing has explained the importance of “opinions” in China’s governing system.) The four agencies are the National Development and Reform Centre (the state economic planner), the Ministry of Foreign Affairs, the Ministry of Ecology and Environment and the Ministry of Commerce. According to state media, all of these agencies are directly involved in leading the BRI, which was launched by Xi in 2013.
NEW PROJECTS: At the United Nations General Assembly (UNGA) last September, Xi said that China “will not build new coal-fired power projects abroad” in a virtual address. Compared to that announcement, the directives go further by saying that China will stop building new overseas coal power projects “completely”. Dr Christoph Nedopil – associate professor of economics at the Fanhai International School of Finance (FISF) of Fudan University in Shanghai – told Carbon Brief that as far as he knows, this is the first policy document that has publicly explained Xi’s pledge. Dimitri de Boer – chief representative of the China office of ClientEarth, an environmental charity organisation – told Carbon Brief: “Although [Xi’s] pledge was already a top confirmation of the decision to do so, it is good to see this reaffirmation, and especially to see that there is no backsliding, in the face of the turbulent geopolitical situation today.”
UNDER CONSTRUCTION: Although the directives contain language on what China intends to do with those overseas coal power projects that are under construction, the wording can be “interpreted in several ways”, according to Dr Nedopil. He said: “Being aware that some negotiations on coal-fired power plants that have not reached financial close are still on the way, like the Gwadar coal-fired power plant in Pakistan, it could mean that no new coal-fired power plants should be planned, while the ones in planning can still go ahead.” He noted that the instructions could also mean that “even the ones under construction can be re-evaluated”. De Boer said that the “ambiguity” of the language “may reflect an ongoing debate about exactly how to deal with existing projects – and exactly where to draw the line on ‘new projects’”. He added that the word “cautious” may “also suggest pulling out of projects, for example, if they encounter difficulties”.
ALREADY BUILT: In comparison, the orders for those projects that have already been built are more detailed. Specifically, the directives “encourage” those “relevant” companies to “enhance the clean and efficient use of coal”, reduce the emissions of sulphur dioxide (SO2), nitrogen oxides (NOx) and dust from the burning of coal and adopt “advanced” technologies, such as carbon capture, utilisation and storage (CCUS). De Boer said that this section “appears to refer to the retrofitting of existing coal plants” in the hope of making them “cleaner and/or more efficient”. He explained: “While that could be an improvement in some cases, there would be a risk of an increase in the lifetime emissions of such a project, especially if the retrofit involves an expansion in capacity.” De Boer added: “From a climate perspective, capacity expansions are very similar to new coal plants, so they should certainly not be allowed.”
TWITTER REACTION: The explanations have sparked discussions among China climate watchers on Twitter. In an explanatory thread, journalist Liu Hongqiao (formerly of Carbon Brief) said that, before the latest directives, China had included Xi’s pledge in its updated nationally determined contribution (NDC) and the 14FYP for energy. Explaining her understanding of China’s language on those overseas coal power projects that are under construction, Zhang Xing – China energy policy analyst at the Centre for Research on Energy and Clean Air (CREA) – tweeted: “‘Cautiousness’ is a very interesting word. I think it hides the possibility for China to stop the funding [for projects that are under construction] if they see a reason to do so.” Lauri Myllyvirta, CREA’s lead analyst, described the new guidance as “formalising the ban on new overseas coal power projects”.
Analysis
What messages do China’s recent energy plans send?
(This analysis is written by Jin Boyang – senior analyst for energy transition at Refinitiv, a global provider of “financial markets data and infrastructure” – for Carbon Brief.)
China has unveiled two major policy documents regarding its energy sector over the past two weeks. First, the National Development and Reform Commission, the state economic planner, and the National Energy Administration, the state energy regulator, jointly published the 14th five-year plan (FYP) for energy on 22 March. The plan sets the direction for the country’s energy sector from 2021 to 2025. A week later, the state energy regulator released a guideline on energy development for 2022, giving specific targets for this year.
The Chinese government has become more risk-averse after witnessing a series of counter-productive outcomes of the so-called “campaign-style” energy consumption reduction, such as the nationwide power shortages in 2021. Therefore, both documents have put the issue of energy security in a primary position.  
For example, the guideline on energy development for 2022 has described securing supply and strengthening reserves as one of its “primary principles” with the aim to better “address the risks and challenges affecting energy security”. 
According to the guideline, the process of reducing carbon emissions will be carried out in a “steady and stable way”, signifying the cautiousness borne in the mind of China’s top leadership. The guideline has also set this year’s target of the share of non-fossil fuel in China’s overall energy consumption to “around” 17.3%, a 1.4 percentage points increase from 2020’s data. This demonstrates that China’s green transformation is taking place in a well-paced manner. 
During the recent “two sessions”, China’s premier Li Keqiang called on the country to push forward low-carbon transformation “in accordance with overall planning and the principle of ‘establishing the new before abolishing the old’”. (See Carbon Brief’s explanation of the term.) In the context of power generation, “the new” could refer to renewables and “the old” could refer to thermal power, especially coal power, which China is not ready to get rid of rapidly, as the slogan indicates.
The instructions from Premier Li imply that in the next five years, some coal capacity buildout would be deemed necessary to fulfil rising peak demand and facilitate renewables integration. In the meantime, increasing renewables capacity will allow the running hours of coal-fired power plants to decrease. The latter matches China’s view of coal power plants in the future, which can be summarised as “adding capacity but reducing power generation”.
Aside from energy security, achieving low-carbon transformation and improving energy efficiency are among the five “main goals” listed by the 14FYP for energy. The plan also sets specific targets on the portion of non-fossil power generation in total power generation (39%) and the ratio of “flexible adjustable” power-generating sources in all power-generating sources (24%).
These goals and targets echo China’s president Xi Jinping’s speech in the 36th “collective study session” of the Politburo of the CPC Central Committee, which consists of China’s most senior leaders. Moreover, they further explain the leadership’s March 2021 instructions of building a “new power system with new energy as mainstay”. (China largely uses the term “new energy” to refer to renewable energy. According to a book published by Tsinghua University, “new energy” covers solar, hydro, wind power, biomass energy and hydrogen fuel, among other energy forms.)
According to the central government, the planned new power system will consist of three “pillars”. They are “large wind and solar power bases as the basis, clean and efficient coal as the support, and safe and reliable ultra-high voltage (UHV) transmission lines as the carrier”. This signals that from 2021 to 2025, China will build more “new energy” bases and UHV transmission lines and conduct more retrofits for coal plants to increase their operational flexibility. (Read Carbon Brief’s analysis on China’s coal policy for more on the system.)
As for “new energy”, the first “batch” of 50 wind and solar energy farms is set to be operational by the end of 2022. According to Refinitiv’s in-house model, these farms are expected to generate around 160 terawatt hours (TWh) of clean energy per year, helping to reduce 100m tonnes of carbon dioxide (CO2) emissions per year compared to a “business-as-usual” scenario where these energy farms are not planned and built.
If the second and third batches of “new energy” bases – which are under planning – are of similar scales, the total installed capacity of the three batches will reach 300 gigawatts (GW) by the end of 2025. Compared to the “business-as-usual” scenario – and assuming that renewable power generation replaces coal power generation completely – the latter two batches would help cut the power sector’s CO2 emissions by 300m tonnes per year, according to Refinitiv’s projections.
Although many of the objectives in the 14FYP for energy seem ambitious, I think the one about “implementing demonstration projects of scientific and technological innovation” (实施科技创新示范工程) is of the greatest importance.
China’s 30/60 targets cannot be achieved without technological breakthroughs, especially those technologies that are currently not economically feasible and can only make a difference when applied on large scales. The 14FYP for energy has outlined several key technologies that China is about to spend great efforts developing, such as energy storage, hydrogen, next-gen nuclear system, natural gas hydrate and carbon capture, utilisation and storage (CCUS). If successfully developed, these technologies would be extremely useful in the process of carbon peak and carbon neutrality.
(Read last week’s China Briefing for more information on China’s 14FYP for energy.)
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