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A Five-Part Strategy to Cap
and Cut China's Coal
Consumption
ORIGINAL SOURCE: http://switchboard.nrdc.org/blogs/alin/a_five-part_strategy_to_cap_an.html

It is hard to miss the staggering statistics when it comes to coal in China, which now
consumes nearly as much coal as the rest of the world combined. Unrestricted growth in
coal consumption in the last decade has led to the worst air pollution in recent memory,
with citizens in northern and central China breathing in higher levels of hazardous air
pollution this past winter than if they were living in an airport smoking lounge. Coal
mining and combustion also cause serious water and soil pollution, including the release
of toxic metals like mercury and arsenic. Unless things change, there are plans to build
even more coal-fired power plants in the future -- some 558 GW worth, which would be a
73% increase over China’s 2011 thermal power plant capacity.
The impacts of coal mining and consumption on China’s environment, public health and
the economy are already astronomical: from January’s “airpocalypse” to the existence of
“cancer villages” and 3.5% in GDP losses (in 2010 alone), this dirty and unsustainable
energy source has catapulted to the center of attention among Chinese citizens and
leaders alike. Given coal’s heavy costs, China’s leaders are paying close attention to coal
and have sought now seek to reduce coal consumption and pollution by introducing a
suite of policy measures, including:

• Establishing pilot carbon emissions trading programs in five cities (Shanghai,
Beijing, Shenzhen, Tianjin, and Chongqing) and two provinces (Guangdong and
Hubei). Shenzhen’s carbon trading program starts June 17 and will cover 638
companies responsible for 38% of the city’s emissions. China is also continuing
to develop its low carbon pilot cities and provinces program.
• Capping total energy consumption at 4 billion tons of coal equivalent by 2015,
although this is a non-binding target and no penalties are in place yet for non-
compliance.
• Considering a tax on resources, including coal, in order to account for the
environmental costs of coal and shift investment towards clean energy.
• Finalizing new emissions control limits for six heavily-polluting industries.
China’s power sector accounts for about 50 percent of its coal consumption and
emissions, and heavy industries such as iron and steel, cement and coal
chemicals also constitute a large share, causing major climate and air pollution.

• Planning regional coal consumption cap pilots in key regions such as Beijing-
Tianjin-Hebei, the Pearl River Delta, the Yangtze River Delta and the Shandong city
cluster as part of China’s “Twelfth Five Year Plan for Air Pollution Prevention and
Control in Key Areas (in Chinese).” The pilots are aimed at bringing much-needed
regional cooperation and coordination to reduce key air pollutants by 2015,
including cutting PM 2.5 by 5-6 percent. But as with the total energy consumption
cap, the details and penalties for non-compliance are still unclear.
While these are all critically important policy measures, the underlying challenge
remains that China consumes too much coal overall, and much more needs to be
done to reduce coal consumption to a level compatible with China’s and the world’s
long-term sustainable development. Global carbon dioxide levels have now passed
400 ppm and will continue to grow rapidly if countries do not wean off fossil fuels
and scale up cleaner energy sources. And as the world’s biggest emitter of carbon
dioxide—spewing out 10 billion out of the global total of 38.2 billion tons in 2011—
China is a key player in the future of sustainable development.
Although scaling up alternatives to coal may seem a formidable task, we believe China
can develop the policies and technologies needed to cap and then cut its coal

consumption in the next decade. We are working with government researchers,
academics, NGOs and others to develop an effective and enforceable coal cap policy
that will address the severe pollution and health impacts from coal while providing
cleaner energy sources for China’s economy. Such a program could begin at the city
and regional levels, where coal consumption cap policies are already being developed,
and ultimately scale up to a national binding target that is incorporated into China’s
future Five Year Plans.
Here are five key components of NRDC’s coal cap strategy:
1. Work with the largest coal consuming sectors and regions to help them develop
integrated plans for capping coal use through more efficient technologies, fuel
switching and closing outdated production capacity. In order to address coal
consumption, it will be important to work with the largest coal-consuming sectors
(power, iron and steel, cement, and chemicals) to find ways to scale up more efficient
technologies such as combined heat and power that can reduce coal consumption.
These sectors should be required to install and operate pollution control and emissions
monitoring equipment when consuming coal, and should be incentivized to switch from
coal to natural gas and renewables in order to reduce their emissions.

Plants with smaller and less efficient boilers and other equipment should be phased
out or required to use natural gas. Similarly, those cities and regions that face the
worst air pollution from coal should be the focus of efforts to pilot coal consumption
caps and to develop plans and policies for capping and reducing coal consumption in
the next five years by scaling up clean energy sources and developing lower carbon
economies that do not rely as much on heavy industry for development.
Focusing on these key sectors and regions and showing that they can begin to limit
their coal consumption will help to develop the policies and experience needed to
reach a national coal cap policy.
2. Strengthen enforcement of coal consumption and emissions targets and standards
through improved data and enforcement tools. Strengthening data on coal production
and consumption and emissions from coal consuming facilities is key to providing a
foundation for implementing a coal consumption cap and related policies such as a
resource tax or carbon trading, and for enforcing emissions standards. Online
emissions monitoring systems should be installed on all power plants and industrial
facilities over a minimum size, with public reporting of data and penalties for false or
inadequate reporting.

It is also important to strengthen the use of pollution permits and environmental impact
assessments to manage the impacts of high coal-consuming projects. These tools
should provide a way for the government and the public to supervise emitters’
compliance with coal consumption targets and pollution standards, pushing them to
find ways during project planning to reduce emissions and health impacts to the lowest
extent possible, including by reducing consumption of coal and increasing use of
cleaner energy sources.
3. Continue to scale up energy efficiency and renewable energy: China has made
significant progress in energy efficiency but still requires about twice as much energy
as the world’s average to produce one unit of GDP. We have been working to scale up
demand side management programs to improve efficiency in industry, and have also
been promoted policies and standards to improve building energy efficiency in China.
Meanwhile, China is already the world’s largest investor in renewable energy, leads the
world in wind power capacity and solar hot water heating, and plans to increase its use
of non-fossil energy (nuclear and renewables) to 15 percent of primary energy
consumption by 2020 (including 200 GW of wind power and 50 GW of solar power).
However, China still faces technical, economic and regulatory challenges that are

preventing it from fully utilizing its efficiency and renewable resources, which will
require cooperation and support from international partners to help develop best
practices for market transformation.
4. Develop responsible standards and best practices for shale gas and nuclear power
development: China reportedly has nearly 50 percent more “technically recoverable”
reserves of shale gas than the U.S., and has ambitious plans to develop its
unconventional gas resources. While natural gas is much less polluting during
combustion than coal, unregulated hydraulic fracturing (or “fracking”) consumes a
significant amount of water and has the potential to cause water pollution, high
methane emissions, and other environmental damage. We’re working with
policymakers in China to learn from best practices for environmental protection in the
U.S., so that China can develop this resource as safely as possible. Similarly, we are
providing policy recommendations to help strengthen China’s nuclear safety regulatory
system post-Fukushima.
5. Help to implement carbon trading and carbon tax pilot programs: In addition to
mandatory coal consumption cap targets for local governments and enterprises, it will
be important to begin to develop market and fiscal mechanisms such as carbon trading
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and/or a carbon tax, in order to price carbon to send a signal to the market to shift
investment from fossil fuels to low-carbon energy sources. Developing these market
and fiscal measures to price carbon will depend on accurate data on coal consumption
and regulation of emitters. It will also be important that government revenues from
pricing carbon through either carbon trading or a carbon tax be used to provide
incentives for energy efficiency and renewable energy in order to spur the investments
needed to scale up low-carbon energy.
Establishing a binding coal consumption cap policy adds a critically important lever to
existing climate and energy policies in China. Capping coal will not be an easy task,
and will require both applying pressure and providing incentives for both industry and
government officials to act. Doing so will not only clean up China’s air but also
conserve water and land resources, reduce water pollution, and alleviate transportation
pressures, all of which will help secure a healthier future for China’s citizens,
environment and economic growth.
**END OF SLIDE**
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