China Forgets About The Climate And Alleviates Energy Shortages With The Blow Of Coal

Beijing has made it very clear what its priorities are when choosing between environment and growth. The communist party ordered a few weeks ago to increase the production of coal (a very polluting energy source) to generate electricity and alleviate the energy crisis that was seriously endangering the country’s economic growth. Beijing’s wishes have come true. Everything indicates that, at least in the short term, China will continue to prioritize economic growth over the climate agenda to avoid a further slowdown in the economy.

Coal reserves in Chinese power plants have recovered in a few weeks. The energy crisis that the ‘Asian giant’ is experiencing led Beijing to ask Chinese miners for greater coal production to alleviate energy shortages. In addition, China has plans to continue building such power plants in the short term . If the largest polluter in the world does not meet its commitments, the efforts of the rest of the countries would be almost in vain.

China has increased coal production to 11.5 million tonnes a day since mid-October in a bid to increase supply and lower prices, the National Development and Reform Commission revealed on Sunday . Coal prices have been falling for eight days in a row, falling to 1,500 yuan ($ 234) per ton, easing pressure on power generators.

Reserves are recovered
Coal reserves are recovering in the country’s main power plants. Inventories at plants in northeast China, the region hardest hit by the energy crisis since September, nearly doubled in October, enough to support 32 days of consumption. In addition, total coal inventories in power plants are expected to exceed 110 million tons in three days, as published by the Caixin Global newspaper .

Same strategy with diesel
On the other hand, Beijing has also asked state refineries to expand diesel production to end rationing at gas stations. The National Development and Reform Commission (NDRC) say they have been working with national oil giants to increase the supply of diesel through various formulas.

In October, China National Petroleum (CNPC) supplied 23% more diesel than last year through increased imports, expanded production and reduced exports. China Petroleum & Chemical (Sinopec) is also operating at full capacity and is expected to produce 50% more diesel compared to the January-August average.

Julius Baer analysts explain that after these measures “things seem to start to cool down in the energy markets, particularly in the coal and natural gas segments . Prices in some segments have fallen by between 40% and 50%. % from early October highs. We closely monitor China’s coal mining, Russian gas flows, and global coal exports, which we view as self-regulatory market mechanisms that were activated for economic or political reasons. ” explain the experts of the Swiss bank.

The importance of gas and coal
These economists acknowledge that China’s efforts to boost domestic coal mining appear to be paying off. On the other hand, in Europe, political pressure is increasing on Russia to boost gas supply to Europe.

“The energy crisis has resulted from an industry-driven and energy-intensive V-shaped recovery, short-term rigidity of fossil fuel supply chains and complex interconnections of energy markets,” They point from Julius Baer. However, in the case of China, the energy crisis has other additional components.

These economists believe that energy prices may rise again if restrictions on China’s coal mining are resumed. For now, “we believe that the push from China’s coal mining, Russian gas flows to Europe and a general and gradual rebound in fossil fuel production and trade will continue to drive the normalization of energy markets.”