China’s Coal: Demand, Constraints, and Externalities
Lawrence Berkeley National Laboratory Report (LBNL-2334E)
China has been, is, and will continue to be a coal-powered economy. In 2007 Chinese coal production contained more energy than total Middle Eastern oil production. The rapid growth of coal demand after 2001 created supply strains and bottlenecks that raise questions about sustainability.
Urbanization, heavy industrial growth, and increasing per-capita income are the primary interrelated drivers of rising coal usage.
In 2007, the power sector, iron and steel, and cement production accounted for 66% of coal consumption. Power generation is becoming more efficient, but even extensive roll-out of the highest efficiency units would save only 14% of projected 2025 coal demand for the power sector. A new wedge of future coal consumption is likely to come from the burgeoning coal-liquefaction and chemicals industries. If coal to chemicals capacity reaches 70 million tonnes and coal-to-liquids capacity reaches 60 million tonnes, coal feedstock requirements would add an additional 450 million tonnes by 2025. Even with more efficient growth among these drivers, China’s annual coal demand is expected to reach 3.9 to 4.3 billion tonnes by 2025.
Central government support for nuclear and renewable energy has not reversed China’s growing dependence on coal for primary energy. Substitution is a matter of scale: offsetting one year of recent coal demand growth of 200 million tonnes would require 107 billion cubic meters of natural gas (compared to 2007 growth of 13 BCM), 48 GW of nuclear (compared to 2007 growth of 2 GW), or 86 GW of hydropower capacity (compared to 2007 growth of 16 GW).
Ongoing dependence on coal reduces China’s ability to mitigate carbon dioxide emissions growth. If coal demand remains on a high growth path, carbon dioxide emissions from coal combustion alone would exceed total US energy-related carbon emissions by 2010.
Within China’s coal-dominated energy system, domestic transportation has emerged as the largest bottleneck for coal industry growth and is likely to remain a constraint to further expansion. China has a low proportion of high-quality reserves, but is producing its best coal first. Declining quality will further strain production and transport capacity. Furthermore, transporting coal to users has overloaded the train system and dramatically increased truck use, raising transportation oil demand.
Growing international imports have helped to offset domestic transport bottlenecks. In the long term, import demand is likely to exceed 200 million tonnes by 2025, significantly impacting regional markets.