A mapping of new coal power and steelmaking projects by CREA and GEM shows that Chinese power and steel companies continue to invest in coal-based production capacity at alarming rates, with new projects in China exceeding the rest of the world several-fold. The coal power and steel sectors are China’s two largest emitters of CO2, and there is no sign of investment in coal-based capacity being scaled back yet, despite the country’s carbon neutrality targets. A complete shift of new investments into clean capacity is needed to put China on track to peak CO2 emissions and avoid a glut of unneeded power and industrial capacity.
The new coal power and steel projects started in 2021, once completed and operated, will emit as much CO2 annually as Florida, the third-highest emitter among U.S. states.
Key findings
- Construction was started on 33 GW of new coal power plants in 2021, the most since 2016 and almost three times as much as the rest of the world put together.
- 25 GW of new coal power plants were added to the grid, a drop from 2020 but still significantly more than the rest of the world put together. After accounting for plant retirements, which slowed down as well, China’s coal power capacity continued to increase while that in the rest of the world continued to fall.
- Permitting new coal power projects was essentially frozen in 2021, as the leadership emphasized strictly controlling “high emissions” projects. However, reflecting shifting political signals, permitting has been restarted in 2022 with a bang, with 5 coal power projects totaling 7.3 GW of capacity cleared for construction in just the first six weeks of the year.
- China is rapidly replacing aged coal-based steel plants with new capacity. 74 million tonnes of new coal-based steelmaking capacity was approved in just one year, rebounding from a hiatus in 2020, and 15 times the annual average capacity additions in the rest of the world in 2016–2020. The capacity approved in 2021 also exceeds all of the coal-based steel capacity under development in the rest of the world.
- New coal-based power plants and integrated steel plants have a typical lifetime of 20–40 years and will lock the sectors further into coal dependency. There is no space for this new capacity to be utilized under the goals of the Paris Agreement. The new coal-based steel projects initiated in 2021 alone will entail approximately 70–110 billion USD in stranded assets when the carbon emission reduction targets are realized, and the coal power plants imply a further stranded investment of 20 billion USD.
Policy recommendations
- Direct all new power generation investments into clean energy, and increase scale of these investments to match the projected growth in electricity demand, in order to peak power sector CO2 emissions as a matter of urgency. Given that China’s power sector has been the main source of increases in global fossil emissions in the past two years, this would be a crucial contribution to meeting the goals of the Paris agreement. Such an increase is also eminently achievable given the scale that China has already achieved in clean energy, requiring less than a doubling of annual capacity installations.
- Align plans for investment in new iron & steel capacity with the aim for heavy industry sectors to peak their emissions early, increasing the share of non-coal-based steelmaking (direct reduced iron, hydrogen-based technology and electric arc furnaces), and retiring or relining older plants rather than replacing them with new coal-based capacity.
Read the full briefing in English here.
Read the full briefing in Chinese here.