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What will the Chinese government do to solve the coal shortages in Northwest China?

By Crofton Lee
web posted October 4, 2021

Chinese coal operationSince the founding of The People’s Republic of China, the Chinese government has controlled the price of coal, setting mandatory restrictions on consumption. Instead of allowing the coal economy to change and grow according to the laws of supply and demand, the Chinese government tightly governed all aspects of the coal market. In order to allow to devote more energy into its industrial plants, the government would set a price ceiling on coal, and provide subsidies to cover the cost. These policies have allowed China to exponentially increase its production of coal. From 2015 onwards, however, China has begun to decrease its overall coal output. This is almost directly related to the Paris agreement on climate change, which was reached in 2015 and called for “a stabilization of [global] temperatures somewhere between 1.5˚C and well below 2˚C” (Economist). Because China sits atop the list of carbon emitters, they needed to make significant change in order to help achieve these global temperature goals.

These changes have not been without consequence, however. During the coronavirus-induced lockdown, China shut down many coal plants, with the idea of transferring to more green energy sources like hydropower or solar power. After the pandemic, however, China’s economy has resumed strong growth, but coal mine output has failed to keep up, resulting in a major coal shortage. China’s electricity generation has increased by 616 Terawatt-hours (13%) in the first 8th months of 2021. Likewise, Consumption growth in the service sector has increased by 22% and primary industries by 20%, with manufacture and residential user consumption increasing by 13% and 8% respectively. However, coal mine production has only increased by 6% compared with 2020 (Reuters). As a result, the supply of coal has plummeted, and can no longer meet the enormous demand. According to an article written by John Kemp, an online market reporter, coal prices have more than doubled, from $90 per ton to $210 per ton.

As a direct result of this coal shortage, the Chinese government has started a mandatory coal rationing program in multiply northeastern provinces. The government has taken control of all basic home thermostat systems, setting a “heat limit” at 26˚C, or 78.8˚F. According to BBC, some people were taken to local hospitals after they used stoves in poorly ventilated rooms for heating. In other cases, residents of high-rise buildings have had to climb down 10-20 flights of stairs as a result of a stoppage of elevator functions. One video circulating social media shows cars traveling on one side of a busy highway in complete darkness, as the power cuts have shut off traffic and street lights.

Seeing the harsh consequence of the governments decisions brings to question who gives them the choice of how to spend electricity. It would make far more sense to allot a specific quota of electricity to families, while reserving a portion of available electricity for public utilities. This allocation of resources would benefit families by allowing them to choose how to ration their own electricity, while also lessening governmental responsibility. A decision like this, however, would result in a loss of control for the government, something that the Chinese administration of today would never let happen, especially not in a situation like this, where they feel the need to clamp down even more to prevent further shortages.

Instead, China’s energy bureau has made efforts to source coal from Inner Mongolia, so as to lessen the pressure on local coal plants. These plans have been met with varied amounts of success, and China might need to rely on imported coal from neighboring nations to solve the energy crisis. Consequently, the government risks losing much of its precious control over the coal market. No one knows for sure just how much time will pass before these coal shortages end, but the clock is ticking for the Chinese government, and as the shortage time lengthens, they drift closer and closer to a loss of precious control over a highly desired commodity. ESR

(c) 2021 Crofton Lee.

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