China has ordered its two top coal regions to boost output and will allow coal-fired power utilities to charge customers higher prices. The country has seen record high prices and shortages of electricity that have led to power rationing across the country, crippling industrial output.
Inner Mongolia is China’s second-largest coal-producing province, with 72 mines, mostly open pits, which had previously been authorized an annual capacity of 178.45 million tons. The new notice proposed they increase their production capacity by 98.35 million tons combined, according to Reuters calculations.
Neighboring Shanxi province, China’s biggest coal region, had to close 27 coal mines this week because of flooding, according to The Guardian. The province was ordered to raise output in its 98 coal mines by 55.3 million tons over the remainder of the year, an official from the provincial government confirmed on Friday.
Shanxi will also allow some 51 coal mines that had already hit their maximum annual production levels to keep producing in the fourth quarter and to raise capacity by 8 million tons, which is expected to add 20.65 million tons of extra supply.
Coal consumption climbing in China
Coal is the main energy source in China, widely used for heating, power generation, and steel making. Last year, it made up nearly 60 percent of the country’s energy use. Coal is also the country’s major source of carbon emissions,
Because of its reliance on coal to produce electricity, China is the world’s largest contributing country to CO2 emissions—a trend that has steadily risen over the years—now producing 10.06 billion metric tons of CO2.
Power shortages have spread to 20 provinces in recent weeks as north-eastern China has kicked off the winter heating season, forcing the government to ration electricity during peak hours and some factories to suspend production.
It was the suspended production levels last month that weighed negatively on China’s economic outlook, reports CNN Business. All in all, these drastic steps underscore the challenges facing Beijing as it attempts to balance the country’s need for power with President Xi Jinping’s push for a carbon-neutral China by 2060.
Earlier this year, China shut down hundreds of coal mines — or reduced production in the functioning ones — amid a national push to reduce carbon emissions. But the move backfired when coal supply fell sharply, even as demand surged due to industrial growth and extreme weather conditions.
This has driven coal prices to record highs and resulted in widespread shortages of power. And as coal prices continue to rise, more power plants are seeing their balance sheets fall into the red and even face shutting down.