The Chinese Coal Monster - running out of puff

The Chinese Coal Monster - running out of puff

In July of this year I wrote a story called The Chinese Coal Monster drawing attention to the fact that China would soon account for 50% of global coal production and consumption. 10% per annum growth in Chinese coal is clearly unsustainable and I posed the question "How long can this go on?"

An article published in the Wall Street Journal earlier this week called "China's Coal Crisis" suggests the answer to this question is not much longer.

Policy makers in Beijing are mulling an annual cap of between 3.6 billion tons and 3.8 billion tons in the next five-year plan, running from 2011 to 2015, the state-run Xinhua news agency reported earlier.

State-run media reported that Beijing is considering capping domestic coal output in the 2011-2015 period, partly because officials worry miners are running down reserves too quickly to meet the needs of a rapidly expanding economy.

Imposing a cap would be significant as China's mining sector is already finding it hard to keep up with domestic coal demand, which has grown around 10% annually over the past decade.

Even if no official limits are introduced, China can't keep growing coal output much beyond another decade, analysts say. The mining sector is constrained by chronic infrastructure bottlenecks, especially road and rail, and those coal deposits that are easiest to mine have already been tapped.

Experts are starting to predict when China's coal reserves will run out—a nightmare scenario in a country where 70% of its energy is derived from coal.

The end of cheap coal

There are two reasons to believe that coal prices are likely to soar in the years ahead. First, a spate of recent studies suggests that available, useful coal may be less abundant than has been assumed — indeed that the peak of world coal production may be only years away. One pessimistic study1 published in 2010 concluded that global energy derived from coal could peak as early as 2011.

Second, global demand is growing rapidly, largely driven by China. Demand rose modestly in the 1990s (0.45% per year), but since 2000 it has been surging at 3.8% per year. China is both the world's biggest producer of coal (40% of global production) and its biggest consumer. Its influence on future coal prices should not be underestimated.

Forecasting future supplies of coal is a murky business, largely because of the unreliability of national estimates. China claims that it has enough coal to fuel its growing economy at current rates. According to data collected in the 2000–10 national resource survey by the China's Ministry of Land and Resources, the country's proven reserves of coal total 187 billion tonnes, the second-largest reserves after the United States. For China, that is about 62 years' worth of coal — at 2009 rates of consumption (roughly 3 billion tonnes a year). This simple 'lifetime' calculation is popular with industry and politicians but it can generate a false sense of security over the actual state of reserves.

'Proven recoverable reserves' are estimates of the national coal resources that geologists believe are technically and economically feasible to mine. New mining technology and higher coal prices could, in principle, increase the size of those reserves. But the overwhelming global trend, as revealed by national coal surveys over the past few decades, is for the size of countries' estimated reserves to shrink as geologists uncover restrictions — such as location, depth, seam thickness and quality — on the coal that can be practically extracted.

For example, both German and South African reserves have fallen by more than one-third between 2003 and 2008. The first British coal survey, in the nineteenth century, suggested that the nation had enough coal to last 900 years. The current reserves lifetime is only 12 years, and the British coal industry is a tiny fraction of its former size. Similarly, the first official US coal survey, in the early twentieth century, suggested that the country had enough coal for 5,000 years. That estimate shrank to about 400 years in 1974 and stands at 240 years today. There are exceptions to this trend: estimates of reserves in Indonesia and India have grown. However, in aggregate, estimates of global coal reserves have dropped at a faster rate in recent years than can be accounted for by mining alone.

The world changes only when enough people have made a choice to change themselves. At what point will we each say, “Enough!” and choose a different path? Is anything keeping you from making that choice right now?

As you finish reading this article I invite you to say it quietly to yourself.

“Enough!”

If you listen closely with your heart, you may be able to hear the life that shares our planet say,

“Thank you.”