Cleaner Coal in China (International Energy Agency)

Book Description:

China’s rapid economic growth has aroused intense interest around the world. Policy makers, industrialists, investors, environmentalists, researchers and others want to better understand the issues that this populous nation faces as it further develops an already thriving economy largely fuelled by coal. This study sheds light on the Chinese coal supply and transformation sectors.

China’s coal, mined locally and available at a relatively low cost, has brought enormous benefits to energy consumers in China and to those outside the country who enjoy the products of its coal-based economy. Yet from another perspective, China’s coal use has a high cost. Despite progress, health and safety in the thousands of small coal mines lag far behind the standards achieved in China’s modern, large mines. Environmental degradation is a real and pressing problem at all stages of coal production, supply and use. Adding to these burdens, emissions of carbon dioxide are of concern to the Chinese government as it embarks on its own climate protection strategy.

Technology solutions are already transforming the way coal is used in China and elsewhere. This study explores the context in which the development and deployment of these technologies can be accelerated. Providing a large amount of new data, it describes in detail the situation in China as well as the experiences of other countries in making coal cleaner. Above all, the report calls for much greater levels of collaboration – existing bi-lateral and multi-lateral co-operation with China on coal is found lacking. China’s growing openness presents many commercial opportunities. Establishing a global market for cleaner coal technologies is key to unlocking the potential of technology – one of ten major recommendations made in this study.

This report presents an overview of coal in China, examines coal-related policies and
issues, and recommends ways the country – both on its own and in co-operation with
others – might improve the sustainability of coal use.
Coal meets just over one quarter of the world’s demand for primary energy. In 2007,
2.5 billion tonnes of coal were mined across China, almost one half of global hard
coal production. Coal is the nation’s most important fuel, accounting for 63% of
total primary energy supply (including all biomass fuels), much greater than the global
average.1 However, coal production and use bring heavy social and environmental
burdens. Within China, there is agreement that urgent challenges are posed by the everlarger
volumes of coal that the economy requires to meet national development goals.
Internationally, the implications for the regional and global environment, for world
coal trade and for China’s comparative economic position have attracted growing
attention. China’s challenges are shared in many other countries, since coal use is
anticipated to grow worldwide for many years. All of us, directly or indirectly, have a
strong stake in a “cleaner coal” future.
To help address the challenges, the IEA makes ten key recommendation, together with
suggestions on how these might be implemented in China. Each recommendation is
important – all the issues must be tackled and none ignored. The challenges created by
coal use in China are no longer just a national issue – they transcend boundaries. Finding
solutions in our increasingly globalised world demands much greater international
engagement. The most powerful form of co-operation is international trade and this
forms a central theme to the recommendations. All governments need to make sure
that trade, linked to clean energy, grows quickly.
This report provides policy makers with the information needed to appreciate the scale
of the challenges faced and the role of international co-operation and collaboration
in solving them. Providing insight for those outside of China is only one objective
of the report; another is to share the experiences of developing coal-related policy in
IEA member countries with policy makers in China. These experiences have been
distilled into a single chapter, which, of course, cannot do justice to the efforts made
over many years to improve the way coal is mined and used. Wherever possible, links
to more detailed sources of information are suggested. By simultaneously publishing
this report in English and Chinese, the concepts and ideas will at least be accessible
to the widest possible audience in China and beyond.

TABLE OF CONTENTS

FOREWORD BY THE EXECUTIVE DIRECTOR OF THE IEA . . . . . . . . . 3
FOREWORD BY THE CHIEF ENGINEER OF THE NATIONAL ENERGY
ADMINISTRATION OF THE NDRC . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PHOTOGRAPH CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
China’s surging coal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Managing the exploitation of China’s coal resources . . . . . . . . . . . . . . . . . . . . . . . . 19
Industry restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Coal mining safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Competitive markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Steps towards sustainable coal use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Promoting cleaner coal technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Developing new cleaner coal technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Deploying well-proven technologies and practices . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Importance of effective regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Creating an international price for pollution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
China’s role in a cleaner future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
International engagement on cleaner coal . . . . . . . . . . . . . . . . . . . . . . . 25
II. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Drivers for cleaner coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Scope and structure of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
III. COAL IN CHINA TODAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Coal resources and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Coal supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Coal mine safety, environmental protection and miner welfare . . . . 45
Coal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Coal demand and stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Evolution of coal markets, pricing and government oversight . . . . . 53
From a centrally planned economic system to a functioning coal market . . . . . . . . . . . 53
Coal pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Establishing markets and reforming prices: the case of Shanxi. . . . . . . . . . . . . . . . . 59
Major current coal-related legislation and regulations . . . . . . . . . . . . 60
Legislation and regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Coal-mining licences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Coking sector licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Coal-fired power generation licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Coal industry administration: custom and practice . . . . . . . . . . . . . . . 65
Coal mining safety and closure of small coal mines . . . . . . . . . . . . . . 67
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
IV. COAL AND ITS ALTERNATIVES IN CHINA’S ENERGY FUTURE . . . . 71
Coal supply and demand projections . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Prediction of coal demand and supply by NDRC . . . . . . . . . . . . . . . . . . . . . . . . . 71
Coal demand projections by other Chinese organisations . . . . . . . . . . . . . . . . . . . . . 72
Coal demand and supply scenarios from IEA World Energy Outlook 2007 . . . 74
Coal demand projection from US EIA International Energy Outlook 2007 . . . 76
Alternatives to coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Nuclear power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Large-scale hydropower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Renewable energies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Hydrogen as an energy carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Energy efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
V. A CLEANER FUTURE FOR COAL IN CHINA: THE ROLES OF
TECHNOLOGIES AND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Technology review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Coal mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Coalbed methane and coal mine methane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Coal preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Coal-fired power generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Coal-to-liquids (CTL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Carbon dioxide capture and storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Policy review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Policies and regulations for coal mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Policies on coal preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Policies and regulations for CBM/CMM development and utilisation . . . . . . . . . . . 113
Policies on power generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Coal chemicals and CTL policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Other relevant policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
R&D requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Coal preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Power generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Coal gasification and CTL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
CO2 capture and storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Technology transfer and international co-operation . . . . . . . . . . . . . . 123
Experience with technology transfer to date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
A commercial framework for future international co-operation and technology transfer . 124
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
VI. A CLEANER FUTURE FOR COAL IN CHINA: THE ROLES OF MARKETS
AND INSTITUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Market outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Influence of government policy on short- and medium-term outlook . . . . . . . . . . . . . . 131
Coal demand outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Coal supply and price outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Outlook for imports and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Legal and regulatory outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Evolution of government policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Evolution of coal sector administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Future revisions to coal-related legislation and regulations . . . . . . . . . . . . . . . . . . . . 146
Towards cleaner energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
VII. COAL INDUSTRY EXPERIENCE IN OTHER COUNTRIES . . . . . . . . . . 153
Trends in large coal-using countries: past and present . . . . . . . . . . . . 154
Long-established industrialised countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Newer industrialised countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
A developing industrial economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Transition economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Conclusions and relevance for China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Tackling technical and social issues during coal industry restructuring . . 164
Coal industry restructuring in European IEA member countries . . . . . . . . . . . . . . . 165
Coal industry restructuring in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Summary of experience in IEA member countries and relevance to China . . . . . . . . 184
Development of coal-related law in IEA member countries . . . . . . . 187
The development of rights acquisition and tenure law . . . . . . . . . . . . . . . . . . . . . . . 188
The development of health and safety law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Pollution control and other environmental legislation . . . . . . . . . . . . . . . . . . . . . . . . 195
Elements from legislation in IEA member countries relevant to China . . . . . . . . . . . 203
Conclusions from coal-policy experience in IEA member countries
and the global transition to cleaner coal . . . . . . . . . . . . . . . . . . . . . . . . 204
Applying coal-policy experience in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
The global transition to cleaner coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
VIII. DOMESTIC AND INTERNATIONAL STUDIES RELEVANT
TO CLEANER COAL IN CHINA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
Overview of domestic studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
Coal industry development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
Prospects for coalbed methane and coal mine methane . . . . . . . . . . . . . . . . . . . . . . . 215
Development and commercialisation of clean coal technologies . . . . . . . . . . . . . . . . . . 215
Prospects for coal-to-liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Prospects for local coal utilisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218
Overview of international studies and projects . . . . . . . . . . . . . . . . . . . 219
Motivation of organisations engaged in studies and projects . . . . . . 220
Coal industry restructuring studies and projects . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Market-related technology assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Strategic and commercial studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
Topical reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Other studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Key recommendations from studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Asian Development Bank studies and projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
World Bank studies and projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Market-related technology assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Strategic and commercial studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Topical reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Critique of recommendations made in studies and projects . . . . . . . 237
Coal industry restructuring studies and projects . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
Market-related technology assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Strategic and commercial studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
IX. CHINA’S INTERNATIONAL COLLABORATION ON CLEANER COAL . . 247
Current bilateral and multilateral collaboration . . . . . . . . . . . . . . . . . . 247
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
Bilateral collaboration agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
Multilateral collaboration agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Improving international collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Towards more effective transfer of clean coal technologies . . . . . . . . . . . . . . . . . . . . . 261
Critique of bilateral collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Critique of multilateral collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
Proposals for future collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
X. CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . 273
Coal resources, markets and transport . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Coal resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
Coal markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Coal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
Clean coal technologies and environmental security . . . . . . . . . . . . . . 280
Coal mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
Coal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
Coal-fired power generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
Well-proven technologies and practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285
Coal-industry restructuring, social welfare and mine worker safety . 286
Coal industry restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
Social welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287
Mine worker safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
International collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
A cleaner coal strategy for China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296
ACRONYMS, ABBREVIATIONS AND UNITS . . . . . . . . . . . . . . . . . . 297
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
ANNEXES