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China Softens Coal Focus in Bid to Clean Up Its Skies

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The Wall Street Journal

Premier Li Keqiang announces plan to eliminate more than 50 gigawatts of coal-power capacity

A newly built Chinese state-owned coal-fired power plant in Liuzhi county, Guizhou province, on Feb. 7.

A newly built Chinese state-owned coal-fired power plant in Liuzhi county, Guizhou province, on Feb. 7. PHOTO: KEVIN FRAYER/GETTY IMAGES

China’s government pledged to dramatically slow a coal-power building binge that is threatening its environment, saying Sunday it would shut down dozens of coal-power plants and stop some new construction.

In his annual report delivered Sunday, Premier Li Keqiang said China would eliminate more than 50 gigawatts of coal-power capacity—equivalent to more than the entire capacity of South Africa—through the new measures.

Additionally, he said China would eliminate more than 150 million metric tons of coal capacity this year, after cutting 290 million metric tons last year.

Taken together, the figures help illustrate efforts under way in China to wean itself off a heavy reliance on coal for power and industry—a key source of pollution afflicting many cities—and shift the economy to cleaner sources of energy.

At the same time, leaders know they must take care to ensure that job losses don’t threaten social stability. Last year, the government said 1.8 million jobs could be lost by restructuring of the coal and steel sectors.

“As overcapacity is cut, we must provide assistance to laid-off workers,” Mr. Li said.

The cuts come against the backdrop of big changes across China’s energy industry, including greater liberalization of prices for many commodities that were long under the hand of the state. The ultimate goal is to spur greater competition and cut inefficiency that impedes growth.

Despite the promise Sunday, China’s overall coal-power capacity will continue to rise through 2020, exacerbating the glut. In a five-year economic road map released last year, the government said it aimed to keep coal-power capacity under 1,100 gigawatts by 2020, or around 20% higher than 2015. The measures announced Sunday are intended to make sure the rise isn’t even steeper.

The power sector is one of the starkest examples in China of supply outstripping demand. Even as electricity demand growth slowed along with China’s economy, state-backed power companies continued building new coal-fired plants. That has caused utilization rates to fall nationwide.

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