China's coal-chemicals boom risks repeating the mistakes of the past
China's coal-chemicals boom risks repeating the mistakes of the past
China's coal-chemicals boom risks repeating the mistakes of the past
cross-posted from: https://mander.xyz/post/54065349
cross-posted from: https://mander.xyz/post/54065242
With global oil and gas prices soaring at the start of the Iran war, China quietly broke ground on three major coal-to-gas and coal-to-chemical projects worth roughly $10 billion in two regions with abundant coal resources.
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But as a Chinese saying goes, “three feet of ice does not form in a single day”. China’s push to use coal as a substitute for imported oil and gas has been gathering momentum since the Russia-Ukraine war began in 2022, prompting a recalibration of energy security priorities in Beijing and beyond.
The policy raises new concerns, threatening China’s climate goals and growing reputation as a global clean energy leader by creating renewed demand for coal.
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Over the past three years, China has entered a new cycle of investment in so-called "modern coal chemicals", differentiated from conventional coal chemicals. Four pathways - coal-to-gas, coal-to-liquids, coal-to-olefins, and coal-to-ethylene glycol - account for the bulk of new modern coal-chemical capacity under development.
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Coal chemicals are often presented as an emerging industry, but the technologies themselves are more than a century old.
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These modern processes were developed in the early 20th century and expanded during periods of wartime fuel shortages. For example, Germany relied heavily on synthetic fuels during the Second World War while South Africa developed similar technologies in the apartheid era to reduce vulnerability to international sanctions.
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The current expansion is not China's first attempt to build a major coal chemical industry.
A previous boom emerged during the 2010s, driven by many of the same arguments: high oil prices, concerns over energy security and expectations that technological improvements would unlock a new era of coal-based industrial growth.
The outcome was far from successful. Dozens of projects were proposed, but many were delayed, suspended or scrapped before completion, and there were difficulties among those that did get off the ground.
Three of China's four operating coal-to-gas projects reportedly spent much of the past decade operating at a loss, and several large coal chemical facilities generated only marginal returns despite government support.
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Converting coal into fuels and petrochemical products also releases substantially more carbon dioxide than conventional oil- and gas-based alternatives, which themselves are a major source of emissions.
Proponents argue that coupling production with green hydrogen and carbon capture could resolve the emissions problem, but the arithmetic doesn't support this.
Sinopec's flagship Dalu coal-to-olefins plant, paired with a 10,000 tonne-per-year green hydrogen demonstration, displaces less than 2% of the plant's annual coal use. Replicating this across the proposed buildout would consume enormous quantities of clean energy just to partially decarbonise an inherently dirty process.
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Rather than locking in another generation of coal-dependent infrastructure, China should learn from the lessons of the past and seek a cleaner and more viable industrial future.
