Bas Heerma van VossandRyan Rafaty

Opinion | China could make two small changes that don’t cost the Earth to phase out coal

A study has found that the central government’s policy framework is already suitable for facilitating a rapid curbing of coal market development, but the incentive structure for local governments and state-owned enterprises needs to be improved

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A worker cuts steel with a torch near the coal-powered Datang International Zhangjiakou Power Station in China’s northern Hebei province on November 12. Photo: AFP

Bas Heerma van VossandRyan Rafaty

Published: 10:15pm, 13 Mar 2022Updated: 5:03pm, 14 Mar 2022

Few of the many challenges of tackling climate change are more important in the short term yet as seemingly impenetrable as China’s slow-moving phasing out of coal. In 2020, China commissioned more than five times the coal-fired electricity capacity of the rest of the world combined.

China’s investment decisions will shape the global market for coal in the coming decades, putting substantial power over global climate change mitigation in the hands of a few actors. Burdened by chronic overcapacity, China has seen a multitude of bankruptcies in the coal sector in recent years.

But China’s coal sector remains steadfast in pursuing new investments and provincial authorities are still greenlighting construction projects to increase coal-fired power capacity.

This has led many international observers to wonder: why do societies continue to invest in coal plants that stand to be written off within a decade? It also begs the question: is there a reasonable, politically sensitive intervention capable of substantially altering the course and quickly, in a manner that benefits both China and the world?

These are questions we pose and seek to answer in a new study published in the journal Energy Policy. It was found, and this might come as a surprise to some, that the central government’s energy policy framework needs little adjustment – it is already suitable for facilitating a rapid curbing of coal market development.

Instead, the incentive structure for local governments and state-owned enterprises needs to be improved substantially to comply with central government policies. The problem is not so much the central policy regime itself but the perverse incentives of key actors operating within it.