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Economy

New policy pushes for clean energy over coal

Four days after the end of the APEC summit, Beijing's sky became dusky again and traffic jams returned.

BEIJING -- Early November saw the sky above Beijing remain clear and blue for almost a week, an exceptional stroke of good luck for citizens living in the Chinese capital notorious for heavy pollution.

     However, the beautiful autumn sky was a product of a forceful campaign to reduce smog during the Asia-Pacific Economic Cooperation forum.

     After the meeting, the APEC Blue, as the clear skies of that week have been unofficially branded, quickly returned to the more familiar gray as harmful particulate matter 2.5, or fine particles with a diameter of 2.5 micrometers or less, returned to everyday conditions.

     The rare glimpse of sunshine and blue sky during the APEC summit underscored the grim fact that air pollution is now one of the biggest policy challenges facing China.

     More than two-thirds of PM2.5 in China are believed to be produced from coal usage. There are countless coal-related sources of pollution, including thermal power plants, boilers for industrial and household use and trucks. In other words, China would not have attained its phenomenal economic growth were it not for coal.

     China's coal reserves account for 12.8% of the global total, the third largest following the deposits in the U.S. and Russia. For China, coal has long been a stable and low-cost fuel that the country has taken advantage of to keep its economy growing rapidly for years.

     As a result, however, China has become disproportionately dependent on coal: It is now responsible for half of global coal consumption despite the country constituting 20% of the world's population.

     The result is chronic and serious air population in many of its large cities.

The "new normal"

The current economic buzzword in China is "new normal." The term is a call for a hard look at China's economic reality. The era of dazzling growth powered by infrastructure spending and property bubbles is over. A new era of slower, healthier growth has arrived.

     The new normal in the energy sector is a shift away from coal to cleaner energy.

     Recently, Chinese policymakers and industry executives in the energy sector often talk about peak coal consumption. They believe China's coal use will soon stop growing and start declining.

     Li Zhidong, a professor at Nagaoka University of Technology, predicts China will reach such a peak by 2020.

     The trend will be powered by the expanded use of other power sources such as natural gas, nuclear power and renewable energy along with increased energy efficiency.

Setting targets

China's National Energy Administration has set a target of reducing the proportion of coal as a primary energy source to 62% by 2020 while raising non-fossil energy usage to 15% from the 9.8% in 2013.

     To achieve the target, the government plans to expand China's nuclear power generation capacity to 58 gigawatts in 2020 from the current 19.02GW. The government also intends to ramp up its wind power generation capacity to 200GW and solar power generation capacity to 100GW. In addition, the natural gas supply capacity will be doubled.

     Chinese solar panel makers are now rapidly recovering from the financial crises caused by excessive production after exports to Western markets slowed, due mainly to anti-dumping suits. Their recovery is being driven by the government's policy to promote renewable energy.

     From the viewpoint of public investment, the Chinese government is now shifting its policy focus from investment in roads, railways, industrial parks as well as other engineering projects toward spending to promote energy supply structure changes for a cleaner, more advanced system to power its economy.

Reducing dependence

China's move to reduce its reliance on coal as a way of upgrading its economic structure is reminiscent of Japan's shift following the two 1970s oil crises. Japan then began to transform its energy-intensive industrial structure into an economy more driven by the creation of intangible values.

     The challenge for Beijing is how to downsize, without causing confusion, the wide range of coal-backed industries, from small coalmines and transportation services like railways and trucking businesses to thermal power generation and plant equipment suppliers.

     The failures of coalmines and the collapse of property bubbles in coal production centers like Inner Mongolia Autonomous Region and Shanxi Province are increasing the potential for public unrest.

     Beijing's campaign for a shift to clean energy started in the late 1990's under the leadership of Premier Zhu Rongji, but fell through in the face of fierce resistance from the coal industry.

     It is far from clear whether the new energy policy will make blue skies the new normal for Beijing in 2020.

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