The energy crisis is bringing the country to its knees and, after a period of green proclamations from Beijing, the focus has shifted back to coal production. The energy crisis is bringing the country to its knees and, after a period of green proclamations from Beijing, the focus has shifted back to coal production.
China has ordered its mines to increase coal production in order to cope with the ongoing energy crisis. The country is experiencing an electricity shortage caused by the surge in fossil fuel prices; many villages are suffering daily blackouts and industrial activity has also been brought to its knees. Beijing's State Council has asked hundreds of mines to step up their operations — a decision at odds with the recent green pledges made by President Xi Jinping.
The problem with electricity right now affects the entire world. In Italy, astronomical increases in energy bills have been announced for the coming months; in the United Kingdom, several electricity supply companies have gone bust; from India to Germany, some industrial activities have been scaled back to save energy. As the world has restarted at a pace similar to pre-pandemic levels, demand for fossil fuels has surged again while production struggles to keep up. This has sent the price of coal and other materials soaring — a factor that, combined with the logistical and transport problems of this period, has translated into a widespread energy crisis.
Among the countries in the greatest difficulty is China, which more than any other has drawn heavily on its coal stockpiles during these months of economic and industrial restart. Today there are hundreds of factories in the north-east of the country that have had to halt production; according to Goldman Sachs, up to 44 per cent of Chinese industrial activity, particularly that relating to steel, aluminium and cement, has been hit by the energy shortage. In villages the situation is no better, with daily blackouts, traffic lights switched off and lifts deliberately taken out of service.
Faced with this situation, the leading international financial institutions have cast a shadow over the near future of the Chinese giant, already under pressure from the crisis at property giant Evergrande. Goldman Sachs has cut its growth forecasts for China in 2021 from 8.2 per cent to 7.8 per cent, while projecting 5.5 per cent for 2022.
Beijing has not stood idly by. The State Council has asked 72 coal mines located in the Inner Mongolia region — the country's second-largest energy-producing area — to increase their output by nearly 100 million tonnes per year, an increase of more than a third on current levels. Another hundred or so mines in the Shanxi region will have to increase their production by around 55 million tonnes per year, even as some facilities are out of action due to flooding.
In addition, Chinese officials have raised the prospect of reopening several mines that are currently idle, while tax exemptions for the sector have also been planned. Finally, coal imports from Australia, suspended for some time for geopolitical reasons, will resume.
China's about-turn on coal runs counter to statements made in recent months. President Xi Jinping has repeatedly spoken in favour of the ecological transition, committing to reducing coal-related emissions so as to bring the country to carbon neutrality by 2060. In one of his recent public speeches, he said that China will no longer fund coal-fired plants abroad and that every foreign investment in the energy sector will be made with a green focus. Now, however, a China beset by the electricity crisis is once again placing all its bets on fossil fuels — a topic that is likely to be at the centre of discussions at the forthcoming Cop26.
