Prospects of the Chinese coal chemical industry in an increasingly carbon-constrained world
The coal chemical industry utilises coal as both energy and feedstock to produce gases, liquids and solids, which are then synthesised into various fuels and chemicals. In China, it is generally classified into two categories: traditional versus modern coal chemicals. In 2020, the Chinese coal chemical industry processes near one quarter of national coal throughput, and accounts for about 5.4% of national carbon dioxide (CO2) emissions. As coal chemicals’ potential to slow China’s rising oil and gas imports bodes well with Chinese leadership’s rising energy security anxiety amid geopolitical tensions, coupled with strong political desire for investment-driven growth exaggerated by a sluggish post-pandemic economic recovery, especially at the local level, the coal chemical industry becomes the only major coal consuming sector in China that still possesses great potential for substantial capacity expansion as well as emissions spike in the coming decades. Without an appropriate decarbonisation strategy in place, further expansion of the industry is expected to contradict with China’s dual carbon goals of peaking national carbon emissions before 2030, and achieving carbon neutrality before 2060.
Despite of its large industrial scale, the Chinese traditional coal chemical industry has long suffered from overcapacity, legacy assets, single product structure, and heavy pollution among other chronic weaknesses. Thus, the coal chemical industry is continuously subject to increasingly stringent and sometimes disruptive energy and environmental regulations. In the above context, the modern coal chemical is prioritised by key stakeholders especially local government and the coal industry to supplement petrochemical manufacturing and climb up the value chain. Nevertheless, unless the modern coal chemical industry could outperform its petrochemical counterpart in net-zero transition once China enters the era of carbon neutrality goal after 2030, long-term prospects of the Chinese coal chemical industry as a whole would still look challenging.