A new research report has estimated China’s increasing efforts to shift away from coal to cleaner fuels could puts annual investments of about $21 billion at risk of being stranded.
China has relied heavily on coal to fuel its economic growth over the past three decades, and it now burns half the coal that the world consumes each year.
Reuters Newsagency reports a nationwide pollution crisis, increasing water scarcity and growing concerns over climate change mean Beijing wants to shift to cleaner energy sources.
Falling consumption would also have an impact on coal producers worldwide, because China is the world’s biggest coal importer, according to a report by think-tank the Carbon Tracker Initiative and the Association for Sustainable and Responsible Investment in Asia.
“This risk is of notable interest to Australian and Indonesia exporters,” it said.
Analysts expect China’s coal consumption to peak sometime between 2020 and 2030.
The report said a quick shift, aided by a slower growing economy, would leave assets worth billions at risk of being unprofitable.
“Lower-than-expected Chinese thermal coal demand threatens to leave those investors not actively assessing their Chinese coal holdings bearing the brunt of stranded assets and wasted capital,” the report said.
Chinese coal companies spent around $21 billion in 2013 on exploring and developing coal resources, despite a government push to use more natural gas, nuclear power and renewable energy to generate power.
Based on estimates from the International Energy Agency for coal demand in 2020 under “business as usual” and “new policies” scenarios, the report said that up to 437 gigawatts (GW) of installed coal capacity could be at risk in 2020.
That would equal 40 per cent of expected installed capacity by that year.
The report said companies such as Shanxi Coal International Energy Group and Datang International Power Generation Company were at risk from high debt levels amid falling coal prices.
At the same time poor quality of coal produced by China Coal Energy Company could put that company at risk if there were strategic shutdowns.
China plans to cap its coal consumption from 2015 at 3.9 billion tonnes and has banned the construction of new coal-fired power plants in the region surrounding Beijing as well as in the Yangtze and Pearl River deltas.
Those regions have been told to make absolute cuts in consumption.
Professor He Jiankun, a top climate adviser to the government, said at a conference earlier this week he expected consumption to peak at around 4-4.5 billion tonnes between 2020 and 2025.
