China has cut coal production for the third year in a row, according to government figures, despite a host of reasons to doubt that it did.
Based on official data, China’s mines produced 3.36 billion metric tonnes of coal last year, down sharply by 9.4 per cent from 2015. The decrease marked the biggest annual drop so far since production peaked in 2013.
The steep decline reported by the National Bureau of Statistics (NBS) would be good news for environmental advocates seeking reductions in smog and greenhouse gas emissions, if it turns out to be true.
China produces and burns about half the world’s coal, accounting for 64 per cent of the country’s energy supply last year, based on official data.
Largely coal-fired power, winter heating and the recent resurgence of steel production have been blamed for China’s unrelenting bouts of urban smog.
While the reported drop in coal production suggests that conditions are getting better, China’s frequent smog alerts make the opposite case that coal-caused pollution has been getting worse.
Over 57 per cent of China’s 338 cities monitored by the Ministry of Environmental Protection (MEP) suffered varying degrees of air pollution late last month. Nearly 20 per cent reported “serious” or “heavily polluted” air, state media said.
The cumulative 13.2-per cent cut in officially-reported coal output since 2014 suggests citizens could see some relief, but doubts about the figures may outweigh NBS claims.
With the government calling for cuts in production, the incentive is to report them, whatever the reality.
Tim Wright, professor emeritus of Chinese studies, University of Sheffield
Reason for concern
One reason for concern is a widely reported disruption of the coal market in the second half of 2016, caused by the government’s poorly executed plan to shed surplus production capacity at China’s mines.
Last February, the cabinet-level State Council responded to a three-year slump in coal prices and profits by ordering mines to reduce overcapacity by 500 million tonnes a year and to consolidate another 500 million tonnes under more efficient operators by 2020.
After months without progress in meeting targets set for 2016, the government’s top planning agency pressured the mines to make rapid cuts, resulting in sudden shortages at power plants and a price spike of over 50 per cent.
At the end of 2016, the price of coal used for power production stood at 639 yuan (U.S. $93) per tonne, up 72.7 percent from the start of the year, the official English-language China Daily said.
Production surged in the third and fourth quarters as idled mines reopened to reap the profits and meet the demand.
The National Development and Reform Commission (NDRC) authorised an increase in operations and urged 900 mines to boost output by a collective 1 million tonnes a day.
Coal output rose each month from September through December as the mines responded, although the output never reached year-earlier levels, according to NBS data.
But the NBS calculations are impossible to verify, in part because the agency apparently neglects to update adjustments to its year-earlier figures.
On its website, for example, the NBS claims that coal production fell by 5.1 per cent and 3.0 per cent in November and December respectively from the comparable 2015 periods.
But calculations based on the posted data yield smaller declines of 2.7 and 1.8 per cent.
And although production officially lagged, China’s coal imports soared 25.2 per cent last year to 255.5 million tons, the General Administration of Customs said.
Unauthorised coal production
The inconsistencies are compounded by questions about whether unauthorised coal production is counted at all, even after it is detected by the authorities.
On January 17, for example, 10 miners were killed by a cave-in at the Danshuigou mine near Shuozhou city in northern China’s Shanxi province, due to “illegal” and “over-quota” production as well as “poor maintenance,” the State Administration of Work Safety (SAWS) said.
China National Coal Group (ChinaCoal), the owner, had a provincial quota of 75,000 tonnes per month, but it produced 400,000 tonnes in November and 260,000 tonnes in December, SAWS said, according to a Reuters report.
The agency cited “fake safety measurement data,” but it did not make clear whether the extra output was included in NBS reports. ChinaCoal has launched a company-wide investigation of illegal production at over 50 of its mines, a spokesman said.
Tim Wright, professor emeritus of Chinese studies at Britain’s University of Sheffield and an expert on China’s coal industry, said that skepticism over the official data is justified.
“With the government calling for cuts in production, the incentive is to report them, whatever the reality,” Wright said in an email message.
While it is hard to tell whether over-quota production is included in the NBS reports, Wright said that “even if it is, most of it is not found out.”
Wright noted that China has previously made major revisions to coal data to correct underreporting, but the acknowledgments may come years after the fact.
In 2015, the NBS revised coal figures for 2000 to 2013, making upward adjustments of 7 per cent for production and 14 per cent for consumption, according to calculations by the US Energy Information Administration.
Wright said that production numbers for 1999 to 2000 were similarly raised retroactively by over 20 per cent.
The higher totals for those years may distort comparisons with more recent unrevised figures.
In 2011, a study for Stanford University and the Carnegie Endowment for International Peace also found that production reports from China’s provinces over the previous decade often topped national totals by as much as 500 million tons a year, suggesting a large illegal coal trade.
Push for cleaner energy sources
Despite the doubts, at least one key statistic seems to support the NBS estimate that coal production declined last year.
The National Energy Administration (NEA) reported that the volume of coal used in power generation fell 3 per cent last year, while electricity consumption rose 5 per cent.
Electricity use rebounded after a scant increase of 0.5 per cent in 2015. The results for coal use appear to reflect the push for cleaner sources from renewables and natural gas, as well as reactions to the price increase.
In a response to the smog crisis, the NEA also announced last month that it had ordered the cancellation of 104 coal-fired power projects in 13 provinces, some of which were already in progress.
But China’s five-year energy plan released by the NDRC in December suggests that even if coal production did fall last year, the decrease may be temporary as the government seeks to support economic growth.
The plan would allow coal production to rise from 3.75 billion tons in 2015 to 3.9 billion tonnes in 2020, while consumption would grow from 3.96 billion to 4.1 billion tonnes.
The NDRC’s latest revised targets for reducing production overcapacity in the five-year plan call for cuts of 800 million tonnes by 2020 compared with 2015. By then, coal’s share of primary energy would be lowered to 58 per cent.
Over the longer term, the share of coal is expected to fall below 45 per cent by 2035 with increased contributions from gas and non-fossil sources, according to the recently released BP Energy Outlook for 2017.
Wright said it is unclear how much of last year’s increase in smog alerts can be correlated with changes in coal volumes due to other variables.
“Obviously, much of (the smog) is coal related,” he said.
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