China reinforces its emission reduction stance

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As the clarion call for emission reduction and cleaner energy environment worldwide ricochets across borders and continents with supports tilting to the left and to the right, China says she’s doing everything within her power to curb air pollution by some percentage by 2020 which is just two years away.

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China’s State Council according to Wood Mackenzie has on the 3rd of July 2018 released full text of a three-year action plan to curb air pollution by 2020.

The plan according to Wood Mackenzie’s China-based analyst calls for prioritizing district heating with coal-based combined heat and power (CHP) plants and more switching from coal to gas or electricity with Henan province saying that it will switch a further 1 million households by October 2018. China has since 2013 cut thermal coal consumption by 350 Mt in the heating and cement sectors according to Woods. Although further reductions will come but challenges switching to gas completely due to cost and domestic supply limitations is anticipated to be there.

Woods stated further that heating demand in northern China was 300 bcm gas equivalent but actual consumption only about 30 bcm, imagining therefore the potential impact on global gas markets if China were to switch fully, or quickly. Woods saying that it expects gas supply prioritization and rationing to continue to serve heavily polluted residential areas of the Beijing-Tianjin-Hebei cluster and Fenwei plain.

“We expect reliance on clean coal and its use in boilers above 35 steam tonnes per hour will continue for heating.”

The action plan which the report explains as part of a policy measure looks to continue to retire inefficient coal-fired power units under 300 MW, or build high efficiency, low emission (HELE) units as replacements.

The plan also includes meeting supply target of 2 million electric vehicle (EV) sales by 2020. While it would be tough to hit the target for the passenger car segment alone given the gradual phase-out of subsidies according to Woods, inclusion of urban utility and public transport would ease pressure and help control pollution.

On its plan to tightening its fuel specification and vehicle emission standards, the country has taken a significant step up to ensure a unified fuel specification standard to be enforced for road diesel, off-road diesel and tanker diesel engines starting from January 2019. Adding that most giant refineries are geared to meet this challenge of supplying a uniform standard fuel from next year, but some small independent players may struggle. Stating also that the current plan will impose more stringent supervision on fuel blending, which will further compress the marketplace for independent refiners and fuel blenders.

With air pollution in China said to be spreading to more cities and inland provinces, with the affected region now home to 37% of China’s population, contributing 41% of the GDP, nothing else but the recently announced ‘blue sky action plan’ that offers tougher limits and proposes a quicker shift to cleaner fuels such as LNG and electricity, and high grade iron ore, coal and metals will be more like it.

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