What’s happening? A report by think tank Ember highlights that China’s state-owned enterprises (SOEs) are accelerating the country’s energy transition away from its historical reliance on coal by significantly investing in wind and solar power. Central SOEs have increased wind and solar capacity nearly five-fold since 2011, accounting for 40% of solar and 70% of wind capacity in 2022. Increased renewable energy investment has reduced coal’s share of electricity generation from nearly 80% in 2000 to 60% in 2023. As coal’s role in meeting electricity demand growth recedes, the report suggests China may soon see an absolute decline in coal power and outlines a series of recommendations to ensure a smooth, equitable transition from a social and economic perspective. (Carbon Brief)

Why does this matter? China’s energy transition progress is crucial on a global level as the country accounts for 60% of global coal-fired electricity generation and coal-fired power emissions. In 2023, China’s total CO2 emissions from coal-fired power generation reached 5.56 billion tonnes, an all-time high almost 6% higher than 2022’s total due to a 6.7% increase in electricity demand across the country. However, despite record emissions, coal’s share of the total electricity generation mix fell to 60.68% last year, down from over 72% a decade ago.

Renewable round-up – As emphasised in the Ember report, heavy SOE investment in renewables has ensured coal’s share of the electricity generation mix has not soared in tandem with electricity demand, signalling a “critical turning point” in China’s transition journey. According to the International Energy Agency, China installed 301 GW of renewable capacity in 2023 and commissioned as much solar as the entire world managed in 2022. China’s focus on renewables expansion is crucial given the China Electricity Council forecasts electricity consumption to increase another 6% year-on-year by the end of 2024.

‘Beyond diversification’ – However, the report explains that a new set of challenges will emerge as China moves into the next phase of absolute coal power decline, meaning the country must devise a “beyond diversification” strategy to ensure a smooth transition. For example, despite heavy SOE investment in renewable energy, these enterprises often also have coal-related financial interests. One SOE, for example, spent CNY8bn ($1bn) on coal mining exploration and just CNY824m on hydropower projects in H1 2023. Ultimately, coal is deeply ingrained in the Chinese economy and society, meaning an absolute decline in coal generation will have “far-reaching ramifications, particularly within the broader socio-economic assemblages that have evolved” around the coal industry.

Considering coal-dependent communities – These “ramifications” will be most significant in China’s coal-producing provinces, such as Shanxi, where coal contributed to 80% of tax revenues and provided 55% of jobs in 2022. Therefore, ensuring a just transition for coal-dependent communities by ensuring these regions undergo economic diversification is crucial to mitigate the “adverse effects on local communities and workers who have long relied on the coal-electricity sectors.” The report recommends that China adopt a method of “gradualism and experimentation” to ensure a seamless transition.  

A template for success? – Despite the challenges posed, China’s progress so far in transitioning away from coal should act as a template for other coal-dependent economies. India, for example, still generates 70% of its electricity from coal-fired plants and is expected to experience a similar 6% annual increase in electricity demand as China in the years ahead. However, in stark contrast to China’s 301 GW of installed renewable energy capacity in 2023, India has installed a comparatively small 15 GW in each of the past two years. While China is well on its way to absolute coal decline, India still has some way to go.