China’s air pollution crisis is more evident than ever. A new research report, conducted under the World Health Organization’s Global Burden of Disease project, shows that over 1.2 million premature deaths were caused by PM2.5 pollution (fine particles like soot, mostly resulting from fossil fuel combustion). That accounts for 15 percent of the total deaths in China during 2010 and 40 percent of global air pollution-related deaths. The data also showed that Chinese people’s average exposure to PM2.5 increased 50 percent from 1990 to 2010, compared to 10 percent globally.
Burning coal is a leading cause of air pollution in China, coal fired power plants release dangerous pollutants such as SO2, NOx and particulate matter that contributes to PM2.5 pollution. Of course, burning coal is also a major source of the carbon pollution that is changing our climate.
The crisis was especially severe in Beijing earlier this year, when air pollution levels soared, “hitting pollution levels 25 times that considered safe in the U.S.”
After this so called “airpocalypse,” Chinese government officials and the public are paying increased attention to air pollution and the impacts of coal fired power plants. Seven high level government officials (including several vice ministers) issued a joint proposal during the annual political conference in March 2013, calling for a cap on coal consumption in key regions to clean up air pollution. The Beijing government has also released a plan to reduce air pollution.
It’s clear that addressing China’s air pollution crisis will require reducing coal consumption. In response to the air pollution crisis, Deutsche Bank issued a report on measures needed to bring air quality to acceptable levels. Their conclusion was that to meet national air quality targets even by 2030, China’s coal consumption will need to peak and decline within this decade. That would have big impacts on the global coal market – as Bloomberg News reported, “Global shipments of thermal coal could be 18 percent lower than forecasted by 2015 should China, the biggest importer, toughen measures to curb air pollution to safe levels.”
In fact, this trend has begun, and a note from Goldman Sachs predicts that “2013 will represent a watershed event for the seaborne market” because China’s thermal coal imports will fall this year, the first time that has occurred since the financial crisis in 2007-2008.
The prospect of reduced Chinese coal demand is already impacting the business plans of coal producers. A proposed coal export terminal in Australia was recently put on hold with the project backers citing “weak Asian demand,” as well as community opposition. The Wall Street Journal reports that for Chinese coal producers, “Faced with slowing domestic demand and attempts to reduce pollution, diversifying into other countries and commodities is the way forward.” Immediately after the Deutsche Bank report, Peabody’s stock fell 4.6%, “the result of an analyst citing the potential for Chinese coal demand to wane as the country fights pollution” according to the Motley Fool.
The U.S. coal industry is betting on China’s appetite for coal to justify its proposed Pacific Northwest terminals. But, the reality is that public opposition to coal is growing and people are demanding cleaner air. At the same time the government is creating policies to cap coal production and consumption, posing big risks for any coal producer counting on a growing Chinese coal market.