Energy system reforms for the reduction of coal dependency

This chapter aims to investigate enabling factors and barriers toward a sustainable energy system in China with special focus on the supply and demand of coal. In 2014, China’s coal consumption showed negative growth (-0.6%) for the first time since 1987. This fall in coal consumption continued the following two years: -2.0% in 2015 and -4.7% in 2016. As a result, coal’s share in total primary energy consumption fell from 72.5% in 2007 to 62.3% in 2016 - plummeting more than 10 points in just eight years. The objective of this paper is to analyze the background of the reduced coal dependency in China’s energy mix after 2008. This paper considers two major factors influencing China’s changing energy structure: the tightening of environmental regulations and the progress of reforms in coal pricing. Then, the outlook for a future shift away from coal is discussed, focusing on factors such as China’s commitment to COP21 and the economic performance of coal versus other energies. In conclusion, this chapter points out that tightening environmental regulations as well as the lowering economic efficiency of coal compared to other energies (induced by coal pricing reforms) are both the most important reasons behind coal’s reduced share. To meet commitments to COP21, substantial restriction of coal use will not be necessary because of the increasing share of the service sector, resulting in lower overall CO₂ emissions. Therefore, to grasp whether or not the shift away from coal will accelerate, we should rather pay attention to the price of coal, which is likely to be influenced by current policies cutting the coal industry’s production capacity.