China’s coal conundrum - Wilson Center · China’s coal conundrum ... environmental mandates)...

Confidential. © 2017 IHS MarkitTM. All Rights Reserved. Confidential. © 2017 IHS MarkitTM. All Rights Reserved.

China’s coal conundrum What could enable an earlier coal and CO2 peak?

Xizhou Zhou, Senior Director

Head of Power, Gas, Coal & Renewables Group – Asia Pacific

March 13, 2017 | China Environment Program | The Wilson Center

Confidential. © 2017 IHS MarkitTM. All Rights Reserved.

Key Implications

• Given current policies and investment trends, IHS expects that Chinese carbon emissions will peak before 2030, even with increasing investment in coal-fired power and coal-conversion sectors.

• The economic transition away from heavy manufacturing the past few years means that the carbon peak could come earlier and at a lower level than previously thought.

• In addition to economic growth, government policies (e.g., further environmental mandates) and market factors (e.g., cost competitiveness of alternative fuels and technologies) will also be critical for the future of coal – and thus any coal conversion projects.

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IHS long-term scenario outlooks Coal demand trajectory came down significantly between 2015 and 2016 outlooks

3

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2000 2005 2010 2015 2020 2025 2030 2035 2040

China: Coal consumption outlook

Source: IHS © 2017 IHS Markit

mt o

f sta

ndar

d co

al

Reference scenario 2016



Why the substantial drop in 2016 outlooks?

4

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

2000 2010 2020 2030 2040

Energy intensity of the Chinese economy

Source: IHS © 2017 IHS Markit

mto

e pe

r bill

ion

2015

US$

of Outlook

-2

0

2

4

6

8

10

12

14

16

18

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Services

Non-manufacturingindustry

Manufacturing

Agriculture

China's real GDP growth (%) and its components

Source: IHS © 2016 IHS


Renewables and gas played a role too, but coal-fired power continues to grow

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0

2,000

4,000

6,000

8,000

10,000

12,000

2000 2005 2010 2015 2020 2025 2030 2035 2040

Other

Solar

Wind

Gas

Nuclear

Hydro

Coal

China power generation outlooks (Reference scenario 2016)

Source: IHS

Pow

er g

ener

atio

n (T

Wh)

© 2017 IHS Markit

Outlook


Power/heating and feedstock are the main sectors for future coal consumption growth in China

6

-100

0

100

200

300

400

500

600

2005-10 2010-15 2015-20 2020-25 2025-30 2030-35

Power Heating Industry

Feedstock Residential Other

Incremental thermal coal consumption in China

Source: IHS Markit © 2017 IHS Markit

mill

ion

tons

of S

CE

Negative value: Demand reduction


Coal as a feedstock: the most versatile fuel

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Source: IHS Markit 01112-8

via methanol Synthetic natural gas (SNG)


Where does coal-to-methane fit in China’s gas supply? Multiple gas supply sources competing for China’s gas market

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China’s natural gas supply system


IHS Markit 2015-25 Asia long-term liquefied natural gas price outlook

How do energy companies examine their supply strategies? Will coal-based SNG be economically competitive

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0

2

4

6

8

10

12

14

16

100 150 200 250 300 350 400 450 500

SNG production cost vs coal price

Source: IHS Markit © 2017 IHS Markit

US

dolla

rs p

er M

MB

tu

Coal price in RMB per ton Note: Assume 75% utilization rate. Coal prices are based on lignite 3800 kcal.


Current policies will enable China’s reach its COP21 commitments, but deeper cuts are possible

10

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2000 2005 2010 2015 2020 2025 2030 2035 2040

China: Energy-related carbon emissions outlook

Source: IHS © 2016 IHS

mt e

nerg

y-re

late

d C

O2

emis

sion

s

“Autonomy” scenario 2016




Summary of key implications

• 2030 peak carbon is very much achievable for China, even with higher coal usage in the power and coal conversion sectors.

• Economic restructuring is key to lowering coal consumption, and

any changes in the restructuring will alter future carbon trajectory.

• Environmental policies and market factors will determine the future of coal conversion. More regional coal ban? Future fossil fuel prices?

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IHS Markit: Industries we serve

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10

largest automobile companies in the world

>80% of the Fortune Global

500

All G20 governments

>70% of the Fortune

US 1000

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custodians


Energy-Wide Perspectives

Our Energy & Natural Resources Group

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& Africa

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Regional organization / global expertise

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Oil Markets, Downstream, and

Chemicals

Power, Gas, Coal & Renewables


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We’re hiring!

Multiple position in the Power, Gas, Coal and Renewables group in Asia

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To locate the job descriptions and apply, please visit: https://www.ihs.com/about/careers.html Please reference the Req ID numbers after each position.

https://www.ihs.com/about/careers.html

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