Energy Policy 87 (2015) 517–523 Contents lists available at ScienceDirect Energy Policy journal homepage: www.elsevier.com/locate/enpol Clean coal use in China: Challenges and policy implications Xu Tang a,n, Simon Snowden b, Benjamin C. McLellan c, Mikael Höök d a School of Business Administration, China University of Petroleum, Beijing 102249, China b Management School, University of Liverpool, Liverpool L69 7ZH, England c Graduate School of Energy Science, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto 606-8501, Japan d Global Energy Systems, Department of Earth Sciences, Uppsala University, Villavägen 16, SE-752 36 Uppsala, Sweden HIGHLIGHTS Clean coal is not widely used in China due to many management issues. Legal liability of pollution related with coal utilization is too low in China. China is lack of laws and mandatory regulations for clean coal utilization. It is difficult to accelerate clean coal utilization by incentive subsidies alone. article info abstract Article history: Energy consumption in China is currently dominated by coal, a major source of air pollution and carbon Received 23 June 2015 emissions. The utilization of clean coal technologies is a likely strategic choice for China at present, Received in revised form however, although there have been many successes in clean coal technologies worldwide, they are not 27 September 2015 widely used in China. This paper examines the challenges that China faces in the implementation of such Accepted 29 September 2015 clean coal technologies, where the analysis shows that those drivers that have a negative bearing on the utilization of clean coal in China are mainly non-technical factors such as the low legal liability of at- Keywords: mospheric pollution related to coal use, and the lack of laws and mandatory regulations for clean coal use Clean coal in China. Policies for the development of clean coal technologies are in their early stages in China, and the Coal consumption lack of laws and detailed implementation requirements for clean coal require resolution in order to Environmental challenge accelerate China's clean coal developments. Currently, environmental pollution has gained widespread Energy administration attention from the wider Chinese populace and taking advantage of this opportunity provides a space in which to regain the initiative to raise people’s awareness of clean coal products, and improve enterprises’ enthusiasm for clean coal. & 2015 Elsevier Ltd. All rights reserved. 1. Introduction coal consumption in China with coal consumption rising as the economy and industry expand (Fig. 2). Ma et al. (2010) undertook a Economic growth benefits from abundant and cheap sources of comprehensive literature review on this topic. Many of the re- energy, and in China-the world’s largest developing country as viewed studies demonstrate a causal relationship between na- well as a global factory-the present clear choice for such a source tional aggregate energy consumption and national aggregate of abundant and cheap energy is coal. Coal currently dominates economic growth in China, and the causal relations can be clas- fi the supply and consumption of energy in China (Fig. 1), accounting si ed into three groups: (1) Energy consumption Granger causes for 75.6% of total energy production and 66.0% of total energy economic growth; (2) Economic growth Granger causes energy consumption; (3) Economic growth and energy consumption consumption in 2013 (National Bureau of Statistics of China, 2014), Granger cause each other. With a more detailed focus, He et al. and coal is particularly critical for the power sector, generating (2008) found that the causal relationship between energy con- about 80% of China’s total electricity output (Shealy and Dorian, sumption and economic growth is significant only in secondary 2010). industries. Different findings emerge because econometric analysis There is a close relationship between economic growth and results on causal relations have been greatly affected in China by variations in methods used, time periods studied and, importantly, n Corresponding author. Fax: þ86 10 89731752. data sources (Ma et al., 2010). In recent studies, the Granger E-mail address: [email protected] (X. Tang). causality test for China reveals that there is a bi-directional http://dx.doi.org/10.1016/j.enpol.2015.09.041 0301-4215/& 2015 Elsevier Ltd. All rights reserved. 518 X. Tang et al. / Energy Policy 87 (2015) 517–523 coal consumption with an average estimation of 2.32Gt for 2010, 28% lower than the actual coal consumption rates. The industrial sector (manufacturing), especially heavy industries such as iron and steel and cement industries, are responsible for the majority of China’s coal consumption and its growth during 2001 to 2011 as pointed out by Chong et al. (2015). Rapid GDP growth based on energy intensive production and consumption has brought about a rapid growth of coal consumption. For example, China im- plemented positive fiscal policy to promote the reform of the real estate market at the beginning of the 21st century. The investment in the development of real estate began to increase quickly, with an average annual growth rate of more than 25% in 2001–2012, which drove the consumption of steel, building material and other energy-intensive products at the same time. According to earlier research, China's coal demand will con- tinue to grow and it may prove difficult for China to reach a peak ’ in its coal consumption before 2020 (Wang and Li, 2008). How- Fig. 1. China s energy production and consumption structure in 2013. Data source: ’ NBSC(2014). ever, China s coal consumption growth began slowing down from 2013 largely due to the slow-down of economic growth and the stagnation of energy intensive industries. In 2014, China's coal consumption fell by 2.9% (National Bureau of Statistics of China, 2015). China has made significant efforts to control coal con- sumption. The latest important effort was made in November 2014, when China and the U.S. issued a Joint Announcement on Climate Change (Xinhua net, 2014). According to the announce- ment, China intends to achieve a peak in its CO2 emissions around 2030 and to make its best efforts to peak early, and intends to increase the share of non-fossil fuels in primary energy con- sumption to around 20% by 2030. It is hard to say whether China's coal consumption has already peaked in 2013. In a recent study, Hao et al. (2015) pointed out that China's coal consumption is expected to continue growing at a decreasing rate until 2020 un- der the benchmark scenario. However, the rate of increase of coal consumption will decrease significantly in the future. With full implementation of its ambitious targets, China may adopt stricter controls to peak coal consumption earlier. In recent years, the development and utilization of renewable energy for power generation have been paid more attention in Fig. 2. China coal consumption, GDP and industrial added value. Data source: NBSC China due to the severe environmental problems associated with (2014). coal (Zhu et al., 2015). Taking China's wind power development for example, China led the world for the first time with the largest causality between economic growth and coal consumption in both cumulative installed capacity of 44.3 GW of wind power in 2010 the short-term and long-term (Govindaraju and Tang, 2013). Fur- (GWEC, 2012), which reached 96.37 GW in 2014, around 27% of the ther supporting this conclusion, Sheng et al. (2014) employed an total global installed capacity of wind power (Xinhua net, 2015). instrumental regression technique to verify the positive relation- Other renewable energy sources for power generation, such as the ship between economic growth and energy demand in China. In biomass power industry, have also achieved rapid growth (Liu recent years, serious haze has become a hot topic for not only the et al., 2014). In 2014, power generation from renewable energy government but also the public in China (Li and Zhang, 2014). reached 4.3 trillion kWh and accounted for 22% of total power Most air pollution in China is a result of coal combustion, with coal generation in China (China National Energy Administration, 2015). being the source of 90% of the SO2 emissions, 70% of the dust Even so, the complex Chinese market environment presents sig- emissions and 67% of the NOx emissions (Chen and Xu, 2010). The nificant challenges to power generation from renewable energy results of analysis show coal consumption causing pollution, (Zhao et al., 2013; Liu et al., 2014). Therefore, the fuel mix for whilst renewable energy consumption reduces pollution (Bloch power generation is still currently dominated by coal, and re- et al., 2015), and coal-dominated energy structures are the main moving coal from the energy mix is unlikely to be the first choice reason for atmospheric pollution (Boden et al., 2013). to reduce greenhouse gas emissions and improve air quality (Bloch In fact, on the consumption side, China is trying to constrain et al., 2012).Against this background, an important option will be coal consumption and reduce its percentage in the energy mix due to seek ways to utilize current coal resources in an en- to considerations of environmental factors. However, this does not vironmentally acceptable manner. Therefore, clean coal technolo- always work in practice, as has become apparent over the last gies would appear to be a clear strategic choice for energy in decade. According to China’sofficial 11th Five-year Plan (2006– China. However, clean coal is not widely used in China at present. 2010), coal demand was expected to be 2.56Gt in 2010, sig- The purpose of this study is to analyze the situation and the nificantly lower than the actual rate of coal consumption of 3.22Gt challenges for implementation of clean coal in China.