BEIJING - China's
coal industry will develop vigorously over the
next five years and see bright prospects for the
long term, Wang Xianzheng, deputy director of the
State Work Safety Administration, said in a
Beijing forum recently.
Coal is China's
main source of energy, producing some 70% of the
country's primary energy supply. The eleventh
five-year plan, the blueprint for China's
development from 2006-2010, established a
fundamental energy strategy that is based on coal
as well as the development of multiple
alternatives, Wang said at the Sixth National
Congress of Coal Science and Technology.
In recent years, China has established 177
high-yield and high-efficiency mines. In 2004, the
mechanization level of the formerly
state-owned major mines
reached 82.7%. The death rate per million tons of
coal produced fell to 3.081 in 2004, from 5.77 in
2000. The number at major state-owned mines stood
at less than 1.00. Coal production rose to 1.956
billion tons, from 999 million tons in 2000.
However, China's coal industry is still far behind
its counterparts in developed countries, Wang
said, and illustrated a series of problems such as
the incomplete shift from an extensive economic
mode to an intensive economic mode and the lack of
technological innovation.
Powered by
coal-fired electricity, China's rocketing economy
has driven the coal industry into a new era. In
2005, the total installed power generation
capacity will reach 510 million kilowatts, up
15.7% from a year earlier, which will require the
coal supply to rise accordingly by 120-180 million
tons of coal per year.
Driven by growing
electricity demand and rocketing oil prices,
domestic consumption of coal and liquid fuels
produced from coal will see an upswing, Wang said.
Meanwhile, the country will cut overall coal
production by 120 million tons, since 4,000
small-sized mines out of 10,000 might be closed by
year-end, Wang said. However, the closures would
create a bigger market for mines with safe
production conditions, he stressed.
Under
China's current energy consumption standards,
China will consume over 2.2 billion tons of coal
by 2010. Currently established and operating mines
can only provide 1.67 billion tons. By 2010, coal
produced in mines with safe working conditions is
projected to reach 1.85 billion tons, up from 1.2
billion tons in 2004.
Coal prices to
remain stable next year Despite a slide
over the last few months, coal prices in China
have been on the rise again since entering into
the fourth quarter. An official of the Coal Sales
Office (CSO) of Shanxi province, the
biggest coal-producing province in China,
predicted that coal prices will remain stable in
the coming year thanks to the robust growth of the
Chinese economy.
The recent slide in
prices mostly affected coal for coke production,
which was due to falling demand from the steel
industry, while other major coal products
maintained stable price levels, according to a
meeting held recently by CSO. However, coal prices
should remain on an upward course in the long run,
said Xu Lianzhong, an official of the National
Development and Reform Commission, suggesting that
coal prices may rise in the event of oil or power
price hikes and the removal of caps on investments
in high-energy consuming sectors, whose expansion
is closely related to coal prices.
ADB
helps seal carbon credit sales A coal
mine/coal bed methane utilization project in
northeast China entered into agreements recently
with two separate buyers under the Clean
Development Mechanism (CDM), according to the
Asian Development Bank (ADB). The transactions
were structured by ADB's Clean Development
Mechanism Facility and Clearworld Energy, a clean
energy development company headquartered in Beijing.
The
seller in the transaction is Fuxin Mining Group
and the buyers are ICTJ Limited and a consortium
led by Natsource. The transaction includes
innovative pricing structures that will provide
economic benefits to the seller. The project will
improve coal mine methane and coal bed methane
extraction, distribution, and utilization at mines
around Fuxin, Liaoning province, said
the bank.
The extraction operations will
both boost safety in the mines and supply methane,
a clean fuel, to residents, industry, and
electricity generation schemes. The process
reduces greenhouse gas emissions by capturing and
using methane that would otherwise be released
into the atmosphere during the mining process.
The project attracted strong competition
from buyers. This was helped by the fact that
underlying project finance had been secured, with
ADB approving a loan for US$15.8 million in
November 2004. The bank said there was strong host
country support for the project from both the
central government and the Liaoning provincial
government, and that it complied with ADB's social
and environmental guidelines.
The CDM is a
market-based financial instrument set up under the
Kyoto Protocol that allows industrialized
countries to invest in developing country projects
and acquire greenhouse gas emission reduction
credits, or carbon credits, that they can then use
to meet their greenhouse gas reduction targets
under the protocol. The Kyoto Protocol sets
binding targets for industrialized countries for
the reduction of greenhouse gas emissions that
would lower the risk of global climate change. As
a greenhouse gas, methane is 21 times more potent
than carbon dioxide.
ADB's CDM facility
was set up in September 2003 to provide technical
and administrative assistance to eligible projects
in parallel with project identification and loan
processing. ADB undertook a call for expressions
of interest from entities interested in buying
carbon credits from the project in March 2005. The
larger volume of credits from the project were
purchased by ICTJ Limited in association with a
major oil and gas trading house. ICTJ Limited is a
company established by the shareholders of ICECAP
Limited to carry out trading activities in carbon
emissions.
Dave Allen, a director of ICTJ,
said the company is very pleased to have played
its part in closing this ground-breaking
transaction with Fuxin Mining Group, and that they
believe the deal will become a template for future
sales of carbon emission reductions out of China.
The Transaction Services division of Natsource,
the other entity engaged in the transaction, led a
syndicate that included KfW, a large German
development bank. This syndicate will receive an
initial allocation of credits. Natsource President
Jack Coge said the deal shows the potential for
improving the safety conditions in the mining
sector, reducing greenhouse gas emissions and
producing clean affordable energy.
