clamping down on the coal-to-chemical industry

context: Coal-to-chemical projects were heavily promoted over the last decade to reduce reliance on foreign fuel imports by creating fuels from coal. This push was underpinned by the logic that coal is cheap and abundant in the PRC. However, recent efforts to boost coal output have produced middling results; authorities are thus now prioritising coal for power and heating. The coal-to-chemical industry will be consolidated, cleaned up and prevented from growing—a win for the environment given its high carbon intensity and nasty pollution.

The PRC will clamp down on coal-to-chemical projects and limit growth in coal consumption, per ‘Notice on promoting the healthy development of the modern coal chemicals industry’, released by NDRC and six other agencies on 27 Jul 2023.

The new notice repeals the 20 million tonne growth targets set for each coal-to-chemical demonstration zone; these zones were set up during the 13th 5-year plan to expand the coal-to-chemical industry.

The notice aims to promote a transition to high-end industry in coal-to-chemicals through both diversification and decarbonisation. 

The notice adopts a strict tone regarding new coal-to-chemical projects: they must only be built if absolutely necessary, and only if doing so does not compromise coal supply to power plants. New projects should also only be built in areas with ample coal and water resources. They cannot be built in areas prone to air pollution. 

This notice is aimed at strengthening the role of coal as an energy source (i.e. for coal-fired power), rather than a feedstock. Coal-to-chemical plants use coal as a feedstock to produce other chemicals, such as ammonia or synthetic fuels. 

The notice also calls for existing coal-to-chemical plants to implement low-carbon upgrades.