In its sixth year, the China Coal Cap Project’s strategic focus has turned towards the local level, working to support coal cap implementation in heavily coal-reliant provinces and cities, including Shandong, Shanxi, and Henan provinces, and the cities of Xi’an, Wuhan, Zibo and Linfen. The Project will also continue to support coal reduction in key industries and dispersed coal governance.

2018 marks the beginning of the implementation of the goals of the 19th Party Congress. As the 40th anniversary of China’s reform and opening up policies, it will be a year of continuing to promote supply-side structural reforms. 2018 is also the first year of implementing the “Three Year Action Plan to Win the Battle for the Protection of Blue Skies,” making it a pivotal year for the 13th Five-Year Plan’s success.

In 2018 the global economic structure and order were significantly changed. Global economic growth has boosted energy consumption, and fossil fuel consumption in particular has seen significant growth from recent years. Global energy efficiency improvement rates are declining, and CO2 emissions are increasing, directly impacting the implementation of the Paris Accords. Additionally, China’s economy is steady and growing. As China’s economy has improved, coal consumption in 2017-2018 has rebounded. In 2017, China’s coal consumption rose 0.4%, despite declines in the cement sector, the construction sector, and in dispersed coal usage. However, strong growth in the power, the iron and steel, and the coal chemical industries helped to drive an overall increase in coal consumption.

In 2017 and 2018, the China Coal Cap Project has faced severe challenges. Now, in the middle of the 13th Five-Year Plan, it is important to sum up experiences and lessons learned in order to realize the 13th Five-Year Plan’s goals. The China Coal Cap Project must be adaptable for new situations and should continue to focus on the central task of winning the Blue Sky Defense War. This includes working with five central sectors on coal cap work, conducting local pilot programs, focusing on key coal-consuming industries, working to improve dispersed coal governance, and cleaning and modernizing coal production, with particular attention paid to saving energy and reducing consumption.

China has now established a national coal consumption cap target. For the first time ever, China has set mandatory targets both for the share of coal in China’s total energy consumption and for the efficiency of coal-fired power plants, as included in the “Thirteenth Five Year Plan for Energy Development” released January 17, 2017. These new targets reflect the important contributions of the China Coal Cap Project.

In phase one of the Project (2014), the share of coal in China’s total energy consumption mix was forecasted to fall to below 17% by 2050, with China’s coal-fired power plants leading the world in efficiency. In phase two (2015), the Project recommended that coal consumption be capped at 55% of China’s total energy consumption by the end of the 13th Five-Year Plan period, with coal-fired power plants meeting an average efficiency standard of 300 grams of coal equivalent per kilowatt hour of electricity produced. Phase three (2016) of the project has focused on the implementation of coal cap policies, as China’s coal consumption fell to 62% of total energy use, with coal-fired power plants achieving an average efficiency of 315 grams of coal equivalent per kilowatt hour.

2017 will be a key year for China’s energy transition: to finish its 13th Five-Year Plan coal cap targets ahead of schedule; to complete the implementation of the Air Pollution Action Plan; and to ensure that 2014 remains the peak year for China’s CO2 emissions. In 2016, China consumed about 3.784 billion tons of coal, representing a 4.7% drop from 2015. During the next four years (2017-2020), coal consumption will only need to drop by about 2% per year to meet the 55 percent coal cap target. Still, in 2016, air pollution remained severe in the greater Beijing-Tianjin-Hebei region, including in the “2+26” key air pollution cities, with an average PM2.5 concentration of 103 micrograms per cubic meter. To reach the 2020 goal to bring national PM2.5 levels to below 45 micrograms per cubic meter, coal consumption will need to be significantly reduced. In 2014, China’s energy sector was responsible for 9.5 billion tons of CO2 emissions; these emissions fell by about 0.5% in 2015 and about 1% in 2016. If this trend continues through 2017, China can preserve 2014 as its peak year for CO2 emissions.

The “China Coal Cap Project” (Coal Consumption Cap Plan and Policy Research Project) was launched in October 2013 as a three-year project aiming to provide relevant government authorities with recommendations on coal cap policies and implementation plans.

In the first phase of the Project (2014), research on long-term coal consumption strategies (2015-2050) was carried out, red lines for resources, environment, health and climate change related to coal development and utilization were established, and the changing trend of coal consumption was analyzed. The project found that a coal consumption cap could reduce the share of coal consumption in the country’s total energy consumption to 17% by 2050 (compared to 64% in 2015) and increase the proportion of non-fossil energy in 2050 to 52% (compared to 12% in 2015). These changes will promote an energy structure transition, protect the environment and help achieve the climate change goal of keeping temperature rise below 2°C. The second phase of the Project (2015) provided recommendations for the 13th Five-Year Plan period (2016-2020) coal consumption cap strategy. The proposal allocated the national coal cap objectives and additional supporting targets to regional, provincial and municipal level governments and to major coal-intensive industries. It also recommended developing a series of supporting measures based on market mechanisms to achieve a national coal consumption of less than 3.5 billion tons (2.5 billion tons of standard coal equivalent), accounting for 55% or less of total energy consumption by 2020.

The third phase of the Coal Cap Project (2016) will see the development of a coal cap action plan, which will monitor the implementation of policies and guarantee measures to achieve the coal cap objectives for the 13th Five-Year Plan period and lay a foundation for a long-term energy transition and development strategy. With the efforts made in 2014 and 2015, coal consumption fell to 3.95 billion tons in 2015 from a peak of 4.244 billion tons in 2013. The average annual PM2.5 concentration in 74 key cities throughout the country was reduced by over 14%, a remarkable achievement resulting from coal cap efforts. Also in the third phase, pilot projects will be launched in three provinces: Shandong, Inner Mongolia, and Shaanxi; and in three cities: Wuhan, Shijiazhuang and Xi’an. These pilot projects will promote the development and implementation of coal cap plans for these key provinces and cities, thoroughly review the advanced experience and best practices of coal-intensive industries such as electricity, cement, steel, construction and coal-to-chemicals, and promote concrete coal cap measures. For the coal mining industry, cutting excess capacity should be the priority, with the goal of limiting coal production to 3.4 billion tons or less by 2020.

The research team for the third phase (2016) consists of three working groups, focused on regional, sectoral, and integrated policy research. Under a unified research framework and top-level design, the three working groups will coordinate with each other and adopt measures suited to local conditions to combine energy use trading with carbon trading, water use trading and pollutant emissions trading. Based on the research in the first and second phases, an expert advisory panel will be formed to guide, participate in, and support problem-solving for challenges encountered by localities, industries, and enterprises as they implement coal cap actions. The working groups will review the effectiveness of coal cap actions in provinces, cities, and key industries, as well as the best practices and experience of leading enterprises, in order to build case studies and better support other provinces, cities and enterprises in the implementation of their own coal cap plans. Special attention should be paid to controlling the development of the coal-to-chemicals industry, efficient and clean use and control of dispersed coal, resolving excess capacity, spreading best practices, implementing various supporting measures and accelerating the reduction of coal consumption.

The third phase advocates for China’s leadership in global green governance. The One Belt, One Road Initiative for global economic development has a far-reaching impact and presents great potential for cooperation. China should actively develop its green leadership to protect the environment and cope with climate change, follow the path of “jointly building and sharing through consultation,” and take the lead in achieving the 2030 UN Agenda for Sustainable Development and actively implementing the Paris Agreement on Climate Change.

After over a year of research, the China Coal Cap Project (Coal Consumption Cap Plan and Policy Research Project) has completed the “China Coal Cap Long-Term (2015-2050) Development Scenario and Outlook Report.” The report identifies 2016-2020 as the time period in which China’s coal consumption will peak, providing a critical opportunity for advancing the country’s energy transition strategy. Phase Two of the project will build on the foundation laid by the first year of the project, deepening, quantifying, and making more detailed coal cap targets, policies, and measures, and ultimately producing a blueprint for a coal cap strategy and action plan.

The second phase of the project revolves around the unique characteristics of the 13th Five Year Plan and China’s “Four Comprehensives” strategy. During the 13th Five Year period (2016-2020), China’s development will enter a crucial transition period as its economy enters a “new normal,” providing a valuable opportunity to reform its energy structure. Capping coal consumption will be at the heart of this reform.

The objective of the Coal Cap Project’s second phase is to promote a peak in China’s coal consumption within this 13th Five Year period. The project will design blueprints for a Coal Consumption Cap Strategy Plan (2016-2020) and Action Plan (focusing on 2016-2017) in order to provide relevant policy-making bodies with effective policy advice and concrete measures to advance China’s energy transition, environmental protection, climate change, and sustainable development objectives.

The 13th Five Year Plan coal cap policy aims to accomplish the following:

l Establish both national and local-level air quality, water resource, public health, and climate change redlines, and propose a strategy for coal consumption reduction, replacement, and clean utilization based on environmental restrictions.

l Establish interrelated national, sectoral and sub-national coal cap target systems. During the 13th Five Year Plan, national coal consumption should be reduced to below 60% of primary energy consumption.

l Control increases in coal consumption in the power, coal-to-chemicals, and buildings sectors, while also reducing the existing coal consumption of energy-intensive industries such as steel, cement, and building materials.

l Implement dual coal production and consumption cap targets and measures in provinces that both produce and consume large amounts of coal. The 8+3 area (Beijing, Tianjin, and Shanghai, plus Hebei, Jiangsu, Zhejiang, Shanxi, Henan, Shandong, Anhui, Hubei provinces), the Chengdu-Chongqing-Guizhou area, and other areas with severe pollution issues constitute the primary regional focus of the coal cap. Major cities will also be a key area of focus, as will China’s northwestern region, which will see increased development under the China’s new “One Belt One Road” development strategy.

China is the world's largest producer and consumer of coal, accounting for nearly half of the world’s total annual coal consumption. While coal is the main energy source for China's economic development, it has also caused serious damage to the environment and public health. In recent years, large areas of China have experienced frequent and severe air pollution in the form of thick smog, which poses a grave threat to public health. In response to climate change and air pollution, the Natural Resources Defense Council (NRDC) launched a China Coal Consumption Cap Project in October 2013. The project brings together 17 leading Chinese stakeholders, including government think tanks, research institutes, and industry associations, to develop a comprehensive roadmap and policy package for establishing and implementing a binding national coal consumption cap that aims to help China peak its coal consumption by 2020. Accelerating the replacement of coal with energy efficiency and cleaner energy sources will fundamentally help China achieve its long-term economic, environmental, and climate goals.

In recent years, the Chinese government has implemented energy and carbon intensity targets, renewable energy development targets, and an energy consumption cap goal, which have all helped increase the Chinese economy’s energy and carbon efficiency. However, despite these energy and environmental policies, coal consumption continues to rise. To address this rising coal consumption, the State Council in its September 2013

"Air Pollution Prevention Action Plan" called for "a medium and long-term national coal consumption cap target and target responsibility management system," and set regional coal consumption caps for key air pollution regions such as Beijing-Tianjin-Hebei, the Yangtze River Delta and the Pearl River Delta, requiring them to cap and reduce their coal consumption by 2017. The Air Pollution Action Plan recognizes that in order for China to address its severe air pollution, it must transform its energy structure. This requires a nationwide effort in which every sector and every region, province, and city needs to formulate a coal consumption cap target and implementation plan that will rationally control coal consumption, help develop cleaner energy sources, and improve air quality, and other environmental and public health measures.

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