Coal in the Energy Supply of China
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2027en.fm Page 1 Wednesday, June 21, 2000 10:30 AM © OECD, 2000. © Software: 1987-1996, Acrobat is a trademark of ADOBE. All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction, lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and any elements thereof like any other copyrighted material. All requests should be made to: Head of Publications Division Public Affairs and Communication Directorate 2, rue André-Pascal, 75775 Paris Cedex 16, France. COAL INDUSTRY ADVISORY BOARD INTERNATIONAL ENERGY AGENCY 1974 .1999 Coal in the Energy Supply of China Report of the CIAB Asia Committee FOREWORD China, the world’s second largest energy consuming country and the foremost producer and consumer of coal, is an increasingly important player in international energy markets. This importance has been clearly recognised by the IEA, which signed a Memorandum of Policy Understanding in the Field of Energy with the State Planning Commission (now the State Planning and Development Commission) in 1996, and which has since been developing co-operative relations with China in such diverse areas as energy statistics, policy analyses and advice on regulatory reforms and market development, energy supply security, energy efficien- cy improvements, cleaner energy technologies and environmental protection. Coal accounts for over 75% of China’s total commercial primary energy consumption and has been of crucial importance to China’s rapid economic expansion. Coal will inevitably remain the overwhelming indigenous energy resource for the foreseeable future and an understanding of the major trends and developments in this energy sector is essential for analysing the challenges that face China’s economy and environment today. This report, prepared by the Coal Industry Advisory Board (CIAB), an advisory body to the International Energy Agency, provides an informative overview of the coal industry within the context of China’s energy economy. Descriptive rather than prescriptive, it examines the main economic, geographic and environmen- tal issues facing the industry. The importance of China to the climate change challenge is undeniable and the issue of technology transfer to ensure higher coal-burning efficiencies both in the power and industrial sectors is an issue of common interest to China and OECD countries. This report has been reviewed informally by a number of Chinese organisations and their comments are reflected in the text. The report is published on my responsibility as the Executive Director of the International Energy Agency and does not necessarily reflect the views or positions of the IEA, its Member countries, individual members of the CIAB or any official Chinese body. Robert Priddle Executive Director 1 FOREWORD by the CIAB Chairman Leigh Clifford China’s future, in political, economic and human terms, is of enormous importance to the world, not least the OECD countries. The anticipated development of the Chinese economy over the coming decades will present challenges as well as opportunities for investment and partnership to OECD member countries. China’s present massive demand for coal, and its heavy reliance on the fuel, sets it apart from other economies. While China’s future options for energy sources may broaden, coal will continue to fuel China’s future economic growth for the foreseeable future. How coal is used in China, in terms of efficiency and emissions control, will be important both to the Chinese society and to other nations. In 1994 the CIAB asked its then China Committee to survey the situation of coal in China. The first report, produced in 1995, was intended as an internal brief for CIAB members. With the development of IEA relations with China, including an energy seminar in December 1996 and follow-up discussions, the IEA Secretariat encouraged the CIAB to expand and update the report and to make it more widely available. This work was carried out in late 1998 and early 1999, through the efforts of the CIAB’s Asia Committee and the IEA Secretariat. The existence of the report owes much to the efforts of two people – Mike Allen, formerly of Rio Tinto, who undertook the original draft, and Jeff Piper of the IEA Secretariat, who undertook much of the detailed drafting of the latest revisions and additions. I trust that this report will serve as a useful guide to those wishing to better understand the present Chinese coal industry and opportunities for development. The CIAB looks forward to assisting the IEA in developing relations with the Chinese energy industries and in encouraging the use of coal in an energy-ef- ficient and environmentally compatible way. 3 Map of China indicating the provinces and major cities TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................................... 9 General.......................................................................................................................................... 9 Power generation .......................................................................................................................... 10 The environment........................................................................................................................... 10 Technology transfer ...................................................................................................................... 11 Future prospects............................................................................................................................ 12 1. THE ECONOMIC CONTEXT ................................................................................................. 13 1.1 Profile of the economy......................................................................................................... 13 1.2 Economic prospects ............................................................................................................. 15 2. CHINA’S ENERGY ECONOMY ............................................................................................. 19 2.1 Energy reserves .................................................................................................................... 19 2.2 Energy supply....................................................................................................................... 19 2.3 Energy consumption ............................................................................................................ 21 2.4 Energy issues........................................................................................................................ 24 3. THE COAL INDUSTRY ............................................................................................................ 27 3.1 Structure of the coal sector................................................................................................... 27 3.2 Coal supply .......................................................................................................................... 31 3.3 Coal consumption ................................................................................................................ 39 3.4 Coal-related infrastructure ...................................................................................................42 3.5 Coal market issues ............................................................................................................... 46 4. COAL AND THE ENVIRONMENT ........................................................................................ 53 4.1 Background .......................................................................................................................... 53 4.2 Regulatory structure............................................................................................................. 54 4.3 Impact of coal mining .......................................................................................................... 55 4.4 Impact of coal combustion................................................................................................... 56 4.5 Energy policy options .......................................................................................................... 60 5. TECHNOLOGY TRANSFER ................................................................................................... 67 5.1 Foreign investment policies and practices........................................................................... 67 5.2. Electricity sector and Independent Power Producers (IPPs) .............................................. 69 5.3 Clean coal technologies .......................................................................................................75 6. FUTURE PROSPECTS.............................................................................................................. 79 6.1 Current reforms in the coal industry.................................................................................... 79 6.2 Challenges............................................................................................................................ 80 6.3 Opportunities for co-operation............................................................................................. 81 7 ANNEXES GOVERNMENT ORGANISATION CHART............................................................................. 84 I. GOVERNMENT