By David Stanway –
BEIJING, Jan 8 (Reuters) – China approved the construction of more than 100 million tonnes of new coal production capacity in 2013 – six times more than a year earlier and equal to 10 percent of U.S. annual usage – flying in the face of plans to tackle choking air pollution.
The scale of the increase, which only includes major mines, reflects Beijing’s aim to put 860 million tonnes of new coal production capacity into operation over the five years to 2015, more than the entire annual output of India.
While efforts to curb pollution mean coal’s share of the country’s energy mix is set to dip, the total amount of the cheap and plentiful fuel burned will still rise.
According to data compiled by Reuters, the National Development and Reform Commission (NDRC), China’s top planning authority, approved the construction of 15 new large-scale coal mines with 101.3 million tonnes of annual capacity in 2013.
“Given that China’s total energy consumption is still growing along with the economy, then coal production will continue to grow,” said Helen Lau, senior commodities analyst with UOB Kay Hian in Hong Kong.
“While China is trying to foster consumption from other sources like hydro and nuclear, we expect actual coal production to grow 2-3 percent a year in the next five years.”
Chinese coal production of 3.66 billion tonnes at the end of 2012 already accounts for nearly half the global total, according to official data. The figure dwarves production rates of just over 1 billion tonnes each in Europe and the United States.
Much of China’s new capacity is in regions like Inner Mongolia and Shaanxi, reflecting a strategy to close small mines in marginal locations like Beijing and consolidate output in a series of huge “coal industry bases” that will deliver thermal power to markets via the grid.
While expanding output at such bases, China has shut more than 300 million tonnes of old capacity in the last decade, but critics say new mines are rapidly outpacing closures and the policy merely shifts China’s environmental problems elsewhere.
“Despite the climate change pressure, water resource scarcity and other environmental problems, the coal industry is still expanding fast in northwest China,” said Deng Ping, a campaigner with environmental group Greenpeace in Beijing.
“The scale of these coal bases has been rarely seen in other places in the world, with open-cast coal mines, coal power plants, and coal chemical plants all combined together.”
The new projects involved a total investment of 54.1 billion yuan ($8.9 billion). In 2012, the administration approved just four coal projects with 16.6 million tonnes of annual capacity and a total investment of 7.8 billion yuan.
The list of approvals does not cover all mines launched in 2013, with many smaller projects under the purview of local authorities and not the central government. According to rules issued in December, coal mines producing more than 1.2 million tonnes per year need Beijing’s go-ahead, while local governments can approve the rest.
It takes the NDRC months to announce new mine approvals, so other projects may have been passed in the fourth quarter. One 46 million-tonne mine was approved in December but the NDRC has yet to publish details.
An NDRC spokesman was not available to comment.
With major cities hit by smog last year, the government has promised to ease its dependence on coal, a major source of air, soil and water pollution as well as climate-warming emissions.
It has issued guidelines to restrict mining in residential areas, improve quality and reduce overcapacity.
But coal is cheaper than all the alternatives and China is the world’s biggest producer as well consumer. It is also far more reliable than intermittant energy sources like hydropower or wind.
The 2011-2015 plan said around 860 million tonnes of new coal production capacity will be brought into operation, as well as 300 more gigawatts of coal-fired power, twice the total generation capacity of Germany.
While Beijing said in September that it would cut the share of coal in its primary energy mix to “less than 65 percent” by 2017, down from 66.8 percent in 2012, consumption will still rise in absolute terms, with total energy demand set to grow 4.3 percent a year over the 2011-2015 period.
“The replacement of coal hasn’t been as fast as expected, and other sources of energy are not only expensive but also face a lot of technical and environmental problems,” said UOB’s Lau.
The government’s 2011-2015 energy plan put coal production capacity at 4.1 billion tonnes by 2015, but Lau said it may be much higher.
“We estimate China’s total coal production capacity will be 4.7 billion tonnes by 2015 – I think the government figure is a big underestimation.”