China’s recent concern over pollution and climate change may result in a shift in coal consumption, particularly affecting Australian coal assets, a new report has said.
China is on its way to implementing stricter environmental regulation and boosting investment in renewable energy and energy efficiency, in order to tackle pollution and climate change.
It recently opened its doors to foreign investors to fund green projects and decided to put on hold new coal-fired power stations, indicated as the main source of widespread and harmful pollution in major cities.
However, according to a new report by the University of Oxford, commissioned by HSBC’s Climate Change Centre of Excellence, China’s green forward steps could have serious consequences on the Australian coal industry – the main supplier of China’s coal.
The report, Stranded Down Under? Environment-related factors changing China’s demand for coal and what this means for Australian coal assets, argues that the changes in the Chinese system are putting pressure on coal assets, leading mines to become “uneconomical”.
Ben Caldecott, co-author of the report and director of the Stranded Assets Programme, said, “China’s demand for coal is changing as a result of environment-related factors, including environmental regulation, developments in cleaner technologies, air pollution, improving energy efficiency, developments in gas markets and political activism.
“This could lead to less demand from China and lower coal prices, which would increase the risk that Australian coalmines, reserves and coal-related infrastructure become stranded assets.
He added, “These developments are not factored into the positions that most coal owners and operators are currently taking. Policymakers need to wake up to these risks as well.”