The new policy underscores the government's effort to clean up air
quality, a point of contention that has greatly fueled public grievances in
recent years.
The government has also readjusted its targeted energy mix for
2016. Under the new blueprint, non-fossil fuels will make up 13.2% of the
country's energy, an increase from 12% this year. The ratio of natural gas will
also increase to 6.2% from 6% while coal usage will be reduced to 62.6% from
around 64.4% this year.
Oversupply and lower demand have already dragged coal prices down
to multiyear lows.
China's benchmark power coal price increased 1 yuan per tonne to
average at 372 yuan per tonne from December 16-22, according to the Bohai-Rim
Steam-Coal Price Index.
"The government's renewed push to phase out coal use will
only keep coal prices further depressed," said Gao Jian, an analyst at SCI
International, a Shandong-based energy firm.
While coal-fired power in China has gradually abated in recent
years in tandem with the country's slowing manufacturing sector, coal is still
largely responsible for China's power generation, and China comprises nearly
half of the world's coal consumption. As a result, many parts of the country,
including Beijing and Shanghai, continue to grapple with toxic smog that
shrouds cities, sometimes for days at a time.
Earlier this month, the capital city of Beijing issued its
highest-level pollution alert for the first time when the air-quality index
topped 300. The U.S. Environmental Protection Agency said an index reading
above 300 is "extremely rare" in the U.S. and generally occurs only
during events such as forest fires.
"Due to environment concerns, the government has been quite
aggressive in introducing renewable energy into the market, but it might take a
long time before we see a real shift because prices will remain as the main
factor determining people's habit," said Li Li, director of research at
Guangzhou-based ICIS.
For the next five years, the Chinese government also aims to add
over 20 million kilowatts of installed wind power and more than 15 million
kilowatts of installed photovoltaic power, the National Energy Administration
said in a statement online.
Source: Nasdaq
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