CHINA'S COAL REDUCING

FT - DECEMBER 3 2019 - China's government plans to reduce coal power production in the north-west of the country by at least a quarter, in a bid to tackle overcapacity in an industry seen as a threat to reducing global carbon emissions.

Five of China's centrally controlled power suppliers will aim to cut coal power capacity by a quarter to a third across the provinces of Qinghai, Gansu and Shaanxi, and the regions of Xinjiang and Ningxia, according to state media.

The three-year pilot project by the State-owned Assets Supervision and Administration Commission of the State Council, or Sasac, is expected to be the first in a multi-stage initiative to make coal production more efficient across the country.

The plan will designate one state-run company out of China Huaneng Group Co, China Datang Corp, China Huadian Corp, State Power Investment Corp and China Energy Group to take charge of production in each area. 

China is set to install new coal power equivalent to the entirety of the EU's entire coal capacity, with 148GW of plants either being built or about to start being constructed. That trend has dashed hopes Beijing will step up efforts to combat climate change imminently.

The relaxing of curbs on coal power, combined with shrinking investment in solar and wind energy, have caused further alarm over carbon dioxide emissions in China. Its energy sector emissions hit a record high in 2018, accounting for more than half of the global increase in energy-related CO2 emissions, according to the International Energy Agency. Emissions are expected to rise about 3 per cent this year.

Some analysts, however, said the new plan gave some cause for optimism.

"It's making it clear that in the clash between coal and renewables the view from the central authorities is that coal has to give," said Lauri Myllyvirta, an analyst at the Centre for Research on Energy and Clean Air, a think-tank.

The Chinese government has for years pushed state-owned electricity providers to merge in a bid to raise their competitiveness and become more efficient.

Beijing probably chose northwestern China for the trial because losses and overcapacity for coal power producers were particularly pronounced in the region, according to Yuan Jiahai of North China Electric Power University.

But policymakers face a trade-off between keeping capacity down and allowing companies that have invested in new builds to recoup their investments, Mr Yuan said.

"[Sasac] want to allow the national electricity companies to grow bigger, have more assets and business, so there could still be a contradiction between the direction of their plans and those of electricity market reforms."

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