Energy Crisis Prompts China to Increase Investments into Coal

China has braved an energy crisis brought on by drought and scorching heat waves these last few months, with some parts of the country suffering power outages on a daily basis.

It is said that increased coal import costs and reckless control of the domestic production of coal may have also affected energy supply in China. The crisis has seen the country focus on strengthening its energy security by increasing investments into coal-fired power stations in an attempt to meet demand.

For decades, the country has tried to decrease its dependency on coal. During the announcement of its five-year plan for the 2016–2020 period, the government even axed a number of coal-power projects. However, during the first quarter of this year, the country approved more than 8 GW of new coal plants, later announcing that it would also invest 10 billion yuan ($14.4 billion) into the generation of power from coal.

In addition to this, China plans to expand the capacity of select coal mines in a bid to ensure domestic supply given the volatility observed in the global market price of coal following Ukraine’s invasion by Russia.

Currently, China is responsible for one-third of all global emissions of carbon dioxide. Last year, the country’s carbon dioxide emissions were higher than 11.9 billion tons, which makes this its highest recorded emissions. The International Energy Agency attributed this significant increase to the electrification of energy services and rapid growth of the country’s GDP, which caused the demand for electricity in China to rise by 10%.

The China Electricity Council recently recommended that the nation reach 1,300 GW of coal-fired power in 2030 in order to strengthen energy security and meet increasing demand. This goes against the country’s long-term net-zero emissions goal as well as its 13th five-year plan, which stipulated that coal-fired plants needed to be capped at generating 1,100 GW of power.

It is expected that the country will stop using coal completely by 2050, if it is to meet its climate targets. However, more resources being invested into the coal industry only makes it harder for the country to rid itself of fossil fuels and switch to cleaner energies.

If heavier restrictions on the use of fossil fuels in China aren’t imposed, it will become extremely difficult for the world to meet the climate targets set under the Paris Agreement. This makes China’s latest move to revert back to the use of coal a setback for the fight against climate change, but the current realities dictate that plenty of coal supplied by entities such as Peabody Energy Corporation (NYSE: BTU) is needed to bridge the energy deficits around the world as greener alternatives are gradually deployed at scale.

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