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Can China follow-through on coal cuts?

China unveiled comprehensive new measures to tackle air pollution on Thursday, with plans to slash coal consumption and close polluting mills, factories and smelters, but experts said implementing the bold targets would be a major challenge.

China has been under heavy pressure to address the causes of air pollution after thick, hazardous smog engulfed much of the industrial north, including the capital, Beijing, in January.

It has also been anxious to head off potential sources of unrest as an increasingly affluent urban population turns against a growth-at-all-costs economic model that has spoiled much of China's air, water and soil.

China published the plan on its official website (www.gov.cn), also promising to boost nuclear power and natural gas use. Environmentalists welcomed the plan but were skeptical about its effective implementation.

"The coal consumption reduction targets for key industrial areas are a good sign they are taking air pollution and public health more seriously, but to make those targets happen, the action plan is a bit disappointing and there are loopholes," said Huang Wei, a campaigner with Greenpeace in Beijing.

Beijing has struggled to get wayward provinces and industries to adhere to its anti-pollution measures and there were few concrete measures in the new plan to help strengthen its ability to monitor and punish those who violate the rules.

"We don't see any fundamental structural changes, and this could be a potential risk in China's efforts to meet targets to reduce PM 2.5," said Huang, referring to China's plan to cut a key indicator of air pollution by 25 percent in Beijing and surrounding provinces by 2017.

Coal, which supplies more than three-quarters of China's total electricity needs, has been identified as one of the main areas it needs to tackle. China would cut total consumption of the fossil fuel to below 65 percent of primary energy use by 2017 under the new plan, down from 66.8 percent last year.

Green groups were expecting the action plan to include detailed regional coal consumption cuts, but those cuts appear to have been left to the provinces to settle themselves.

Northern Hebei province, China's biggest steel-producing region, has announced it would slash coal use by 40 million metric tons over the 2012-2015 period.

Other targets in the plan were also generally in line with a previous plans. It said it would aim to raise the share of non-fossil fuel energy to 13 percent by 2017, up from 11.4 percent in 2012. Its previous target stood at 15 percent by 2020.

To help meet that target, it would raise installed nuclear capacity to 50 gigawatts (GW) by 2017, up from 12.5 GW now and slightly accelerating a previous 2020 target of 58 GW.

It would add 150 billion cubic meters of natural gas trunk pipeline transmission capacity by the end of 2015 to cover industrial areas like the Beijing-Tianjin-Hebei region and the Yangtze and Pearl river deltas in the east and southeast.

CLOSING CAPACITY, OPENING LOOPHOLES

China has long sought to use tougher anti-pollution controls to tackle overcapacity in sprawling and ill-regulated industries like iron and steel, aluminium and cement. The iron and steel sector is the second biggest consumer of coal after power.

Thursday's plan said China would speed up the closure of old industrial capacity and "basically complete" work to relocate plants to coastal areas, as well as tackle pollution and overcapacity in the sectors by 2017.

It also said a 2015 target to close outdated capacity in industrial sectors would be accelerated to 2014, and it would also halt construction of all unapproved projects in industries facing overcapacity. Experts said the impact would be limited.

"For aluminium, a lot of the production was never approved by state government but was haphazardly approved by local governments, so what has already come online cannot be reversed," said Yongan Futures base metals analyst Zhu Shiwei. Zhu said the measures might at least curb new capacity growth.

China would also stop approving new thermal power plants and cut coal consumption in industrial areas, although Greenpeace's Huang said the target didn't appear to be mandatory.

Hebei would cut coal consumption by 40 million metric tons from 2012 to 2017, and Beijing had also promised to reduce its total consumption by 13 million metric tons to less than 10 million metric tons over the same period. Others, including the heavy industrial hub of Shandong and the manufacturing base of Jiangsu, both on the eastern coast, were likely to follow.

However, eastern coastal regions would be allowed to source more thermal electricity from other provinces through the power grid, raising the possibility that China's coal consumption would be moved inland rather than actually reduced.

"For (big coal-producing) places like Shanxi and Inner Mongolia, this might be a potential loophole for them to actually increase their coal consumption," Huang said.

Experts also said China's bid to tackle coal consumption could be stymied by its weak monitoring capability.

"Measuring is still a big problem. Even if you look at the provincial energy data and the national data, there is a massive discrepancy of around 200-300 million metric tons and it could be more than that," said Yang Fuqiang, senior Beijing-based adviser with the Natural Resources Defense Council.

Source: Reuters