China Market Insider Paradigm Shift: Climate Protection Prioritized Over Construction of New Chemical Plants

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Construction work on the largest coal chemical plant on earth has just been suspended in the Shaanxi province, reports the business magazine Caixin. In Inner Mongolia, another province with many coal-chemical projects, new approvals have also recently become more difficult, the magazine reports. Across the country, not only large-scale coal chemical projects but also petrochemical projects are falling victim to the axe of the newly strengthened climate change activists.

Beijing/China – A key target of emission commissioners at the moment is clearly the production of ethylene and similar feedstocks from coal. "Coal chemical project suspended due to its insatiable appetite for energy," read the Caixin headline about the freezing of the mega-project in Shaanxi.

In the course of China's efforts to reduce its energy consumption and achieve its ambitious climate protection targets, the coal-fired ethylene production project set up by the state-owned ‘Shaanxi Coal’ and the ‘Chemical Industry Group’ in the town of Yulin in the northwest province of Shaanxi had already been suspended on July 2, the respected business magazine reported.

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The project, which was expected to be completed by 2025 with an investment of 126 billion yuan (about 19.4 billion dollars), failed to pass an official "energy-saving evaluation" before being suspended, Caixin writes.

The Beijing headquarters is currently pressuring local governments in the provinces to respect the previously set caps on energy consumption, the report says. This is happening "in the wake of ambitious national carbon dioxide pledges", Caixin writes. "Large-scale coal chemical projects are thus becoming subject to increasingly stringent energy controls."

From Saul to Paul: China wants to save CO₂ from 2030 onwards

China's state and party leader Xi Jinping had promised last autumn that China's carbon dioxide emissions would peak by 2030 and that the country's entire economy would become climate-neutral by 2060.

The Development and Reform Commission of the city of Yulin, i.e. the top local planning authority, had already reacted to the intentions of the Beijing headquarters at the beginning of June by announcing that it would stop the ‘blind development’ of projects with high energy consumption and high emissions from now on, writes the magazine.

Coal chemistry, which had experienced something of a renaissance in China not so long ago, has now come under the scrutiny of Chinese climate change activists mainly because of the intensity of CO2 emissions in the processes of converting coal into chemicals. This CO2 emission intensity of coal chemistry was "ten to 20 times higher than the national average per unit of gross domestic product" in 2019, according to Chinese media reports.

New coal chemical projects in China are facing difficulties

China's Inner Mongolia province, known for its large coal deposits, is also moving away from coal chemistry during the 14th Five-Year Plan that has just begun, Caixin writes. "In principle, no new modern coal chemical projects will be approved anymore."

The National Development and Reform Commission (NDRC), China's top planning agency, had also begun to impose stricter ‘dual controls’ on energy consumption and energy intensity (i.e. CO2 emissions per unit of GDP), adopted in 2011, back in May.

Liu Dechun, a top official in charge of environmental protection at the NDRC, had reprimanded several Chinese provinces at the time whose values for these two key indicators had risen instead of falling, Chinese media had reported in May. Energy consumption must be reduced in various industries, including power generation, steel industry as well as the "petrochemical industry and chemical process engineering", the Beijing planning bureaucrat said.

Projects with big appetite for energy have come under scrutiny

In addition to those in the coal chemical industry, the first major projects in the petrochemical industry have already been suspended. China's leading refiner Sinopec has cancelled the planned expansion of its Maoming site in the southern province of Guangdong, the consulting agency JLC reported at the end of June.

A coal-to-ethylene glycol project with a planned new capacity of 1.2 million tons per year of the ‘Tongkun Group’ in the coastal province of Zhejiang was also recently cancelled without replacement, reports a trade medium of the chemical industry in China, the Zhongguo Huagong Xinxi Zhoukan.

From now on, large-scale chemical projects in particular – both coal- and oil-based – will obviously find it much more difficult than before to obtain the necessary permits in China. Or companies will have to prepare to at least reduce the volume of their planned chemical factories. Such a reduction is currently the best hope for the largest coal chemical plant on earth by "Shaanxi Coal", China's trade media said.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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