Due to the distribution of coal resources in China, the majority of thermal coal production lies in the Northern provinces – Inner Mongolia, Shanxi and Shaanxi are the top three producers. In 2016, these three provinces combined to contribute over 60% of domestic supply.
Energy security is vital in China’s energy strategy. Poor oil resources and rocketing oil demand means China imports 60% of their oil. As natural gas supply and demand faces a similar situation, China’s leadership is keen to improve the country’s energy self-sufficiency, which has led to it encouraging the development of the coal-to-chemicals industry. Coal-to-liquids, coal-to-gas, coal-to-olefins are now the key components of the coal to energy and chemicals sectors. PCI Wood Mackenzie assessed that the coal-to-chemicals sector consumed 249 Mt of coal in 2016.
The emissions vs. energy security conundrum
As a leader of the Paris climate agreement, China announced its carbon emissions will peak before 2030, and its carbon emissions per GDP will be cut by 60% to 65% between 2005 and 2030. With coal being an obvious contributor to carbon emissions, China is looking to restructure its energy mix to low-carbon, clean or renewable energy. As such, the Energy 13th Five-Year Plan aims to reduce coal’s share in total energy demand from 64% in 2015 to a max of 58% in 2020, while increasing the share of renewables and natural gas in the energy mix.
How will China balance their carbon-cutting with energy security objectives? Despite strengthened policies on coal regulation, China has not stopped approving coal-conversion projects. Part of the problem can be solved with increased measures on ‘sanmei’ – a lower quality variety of raw coal burnt using technology incapable of reducing its polluting effects. Sanmei is mostly used by those with small industrial boilers or for heating their homes. While this group only accounts for 20% of total coal demand, their use of sanmei contributes almost 80% of pollution caused by coal in China.