China’s coal consumption has peaked  

Posted by Big Gav in ,

Brookings has a report from the China Daily prophesising that Chinese coal use has peaked - China’s coal consumption has peaked.

Looking ahead, we do not anticipate significant new growth of coal consumption this year or in the next few years. First of all, the Chinese government is not setting a higher target of growth for 2018. The traditional drivers of coal growth – construction and manufacturing – will continue to give way to the service sector in economic growth. Real estate development is experiencing the coldest winter ever due to restrictive regulations by the central and local governments. Anticipation of a property tax would make speculators switch from “buy” to “sell” mode.

We stick to our conclusion made in 2016: Coal-fired growth is over, despite the fact that coal remains the primary fuel for the Chinese economy.

Additionally, investment in infrastructure construction by local governments is now haunted by the local debts and is unlikely to grow quickly. In fact, some provincial governments have gone public to acknowledge and correct their overestimations of GDP and revenue. We stick to our conclusion made in 2016: Coal-fired growth is over, despite the fact that coal remains the primary fuel for the Chinese economy.

In addition, the regional coal-cap policy will continue to squeeze coal out of the energy mix, especially in the haze-intensive regions in the north. It is expected that even less coal will be used next winter, when more gas pipes are in place for heating.

The real game changer is clean energy. The price of solar photovoltaic is at an all-time low, enough to compete against coal for power generation. Additionally, wind power is well positioned to play an even bigger role.

Nevertheless, China is still the single largest coal user in the world, and coal represents more than 60 percent of its energy mix. But in the long run, coal consumption will continue declining – with current policies and the structural transformation of the economy from being a heavy industry-led, export-driven model to one sustained by services and domestic consumption – despite the annual and seasonal fluctuations.

We have no doubt that China’s coal consumption has peaked and coal-fired economic growth has come to an end.

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