Energy-guzzling China is facing a coal conundrum. Rapid urbanization and industrialization will keep China's coal consumption at record highs of around 4 billion tons per year by 2015. At the same time, the country will have to fight for coal security and to keep its supply line uninterrupted, according to the first energy outlook report from China's Energy Research Institute (ERI).

Swelling urban populations in pursuit of better housing, appliances and vehicles are keeping their foot on the gas when it comes to China's energy consumption. They will continue to drive the shift from low-end, noncommercial energy like firewood to high-quality commercial energy like piped gas. The spread of urban centers increases the demand for electricity, more than 75 percent of which in China is generated from coal-fired power plants.

The biggest challenge to keeping the lights on is transporting coal across the country from the mineral-rich northwest to the highly populated nine provinces of the southeast coastline. Estimates peg coal demand in the southeast in 2015 to be 23 percent of total coal demand in the country, or 880 million tons. Experts at the Energy Research Institute have recommended that China move away from a system hauling coal across the country and instead increase imports to ease pressure on transportation.

"Traditionally, we transport coal from the west to the east, from north to south. This has a very, very high cost," said Yang Yufeng, senior researcher at the institute and co-author of the report. "We need to more effectively use the international coal market to import more coal, especially for our southeast coastline."

To ensure easy access to coal where it is most needed, the report recommends establishing a nationwide stock system. Such a system would be designed to connect southeastern, central, northeastern and northwestern China with the largest stockpile allocated to the demand-heavy southeast. Yet another recommendation from the institute is to set up global coal futures trading centers in coastal cities like Shanghai to ensure long-term supply of coal and ease supply bottlenecks.

China's focus on maintaining steady coal supply underscores how unprepared it is to wean its economy away from the cheap but dirty fuel. And it is more than the geographic expanse of the country that complicates energy policy decisions. "Any action the government is going to take, you have to consider this huge population. Any action that you take in China, however tiny, it will affect 1.3 billion people," said Xuedu Lu, adviser on climate change at the Asian Development Bank (ADB).

Could 'Airpocalypse' make a difference?
China has been taking big strides in addressing climate change and the mitigation of greenhouse gases, Xuedu said, including reducing its energy intensity per unit of gross domestic product by 19 percent. The reduction came at the cost of closing small power plants and iron and steel production facilities.

China has incentives to cut emissions, since it faces devastating climate change impacts. Grain production could fall by 10 to 20 percent with a temperature rise of between 1 and 2.5 degrees Celsius, according to the ADB. More than 80 percent of glaciers in western China have retreated in the last decade alone, exacerbating the already serious water supply crunch. More than 11,000 miles of China's coast is threatened by rising sea levels, including the cities of Shanghai and Guangzhou.

China has committed to cutting its carbon dioxide intensity by between 40 and 45 percent by 2020 compared to 2005 levels and increasing its share of non-fossil-fuel energy to 15 percent. The government has undertaken to further cut energy intensity by 17 percent from the 2010 level by 2015.

However, Yang said, it will not be easy for China to switch to other fuels. One example is the use of natural gas, which has benefited the United States but is not as cheap or as abundant in China. "A specific difference is that in the near future, the United States can replace its traditional coal [use] by power generation plants using gas, but China cannot. This means China cannot, like United States, control its large emissions," Yang said. "Although we do a lot of work in renewable energy and some other clean energy, but coal still is the dominant fuel today in China."

"Last year, China consumed as much coal as the rest of the world, but if it hadn't made all these efforts, it would have been much worse," said Jennifer Turner, director of the China Environment Forum. She said that the smog that has overtaken many parts of the country in recent months has given China's Ministry of Environmental Protection a foot in the door in regulating coal-fired power plants and will allow it to develop a framework to control greenhouse gases and pollutants together.

"The 'Airpocalypse' could be the best thing that's happened, in that it has started a different kind of conversation about the cost of coal," Turner said. "It's a good thing. Especially when you control them together, it raises the cost of coal, which is a good thing."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC., 202-628-6500