Papers Delivered at International Conference on Cleaner Production
Beijing, China -- September 2001 -- Paper 22 of 30

Policy Study in the Development of Clean Coal Technology

Yu Zhufeng and Yu Jie
Clean Coal Engineering & Research Center of Coal Industry
No.5 Qingniangou Road, Beijing, 100013, China

Abstract The coal dominated energy production and consumption mix in China will not change in a considerable long period of time to come. The low efficiency and serious pollution of coal in mining, processing and utilization have confined the national economic development to a considerable extent. Energy, resources and environment have become the core issues in the sustainable social and economic development of China. The vigorous development of clean coal technology is not only the need of current economic development, but also the practical option for the Chinese long-term energy development and one of the inevitable options as well for realizing the sustainable development. This paper gives several examples to explain that China has made certain progress in recent years in the development of clean coal technology. The State has formulated successively a lot of national policies relating to the development of clean coal technology, including technical policies, taxation policies, policies for eliminating backward processes and technologies and policies for emission control of pollutants. However, the development of clean coal technology still has many obstacles, such as management obstacle, policy obstacle, information obstacle, technological obstacle and financial obstacle. Of these obstacles, the insufficient incentive policies would affect the breakthrough of other obstacles and solution of problems. The Tenth Five-year Plan period is an important period for readjustment of the Chinese energy mix. The formulation and perfection of clean coal technical policies as early as possible would play an active promoting role in giving the full play to the advantages of resources, perfection of energy mix, increase of energy efficiency and improvement of energy environment of China. The paper puts forward specific suggestions for the optimization of clean coal technology policies during the Tenth Five-year Plan period.

Keywords Clean Coal Technology, Policy, Energy, Clean, Environment

1. Development of clean coal technology is the practical option for the energy development in China

In recent years, due to the readjustment of energy mix and industrial structure and other factors, the energy demand and consumption in China have changed. Since 1996, in contrast to the general growth situation of energy consumption in the developed countries, the Chinese energy consumption has shown a negative growth (see Fig.1). In 1999, the total energy consumption in China was 1,220Mt. Comparing the energy consumption mix of 1999 with that of 1996, the share of coal decreased from 74.6% to 67.1%, oil increased from 18% to 23.4%, natural gas increased from 1.8% to 2.8% and hydropower increased from 5.5% to 6.7% (See Table 1). In the end-use energy consumption mix, the share of coal has been reduced from 38% of 1995 to 33%. However, coal has always been the main source of energy in China. The coal dominated energy production and consumption mix will not change in a considerable long period of time to come.

Fig. 1 China’s GDP and Energy Consumption Growth in Recent Years

The low efficiency and serious pollution of coal in mining, processing and utilization have confined to a certain extent the national economic development. Energy, resources and environment have become the core issues for the sustainable social and economic development of China (See Fig. 2). It is no doubt that China, as the world largest coal producing and consuming country, should vigorously develop the clean coal technology for the entire process of coal mining, processing and utilization so as to increase coal utilization efficiency and reduce environmental pollution, and should take clean coal technology as the focal point of technical renovation in the energy industry. This is not only the need of the current economic development, but also the practical strategic option for the Chinese energy development and one of the inevitable options for realizing the sustainable development.

Table 1 The Total Amount and Mix of China's Energy Consumption in Recent Years

Source: “China Statistics Abstracts 2000”

Fig. 2 Situation of Air Pollution in China in Recent Years

2. Review of Clean Coal Technology Development in China

The Chinese government attaches great importance to the development, popularization and utilization of clean coal technologies. According to the instruction of the State Council, the National Leading Group for Clean Coal Technology Popularization Planning was established with the State Planning Commission as the group leader, former State Science and Technology Commission and State Economic and Trade Commission as vice group leaders and 13 ministries, commissions and administrations under the State Council as members. The "9th Five-year Plan of the Chinese Clean Coal Technology and Development Outline to the Year 2010" and "China's Agenda 21" approved by the State Council and printed and distributed by the State Planning Commission in 1997 took clean coal technology as one of the important measures for implementing the sustainable development strategy. These documents later became the guiding documents for the promotion of Chinese clean coal technology development.

In the National Technology Innovation Conference held in August 1999, the acceleration of commercialized development of clean energy and clean production technology was clearly put forward. Around this task, the government departments concerned have done a great deal of work. Clean coal technologies and commercialization are one of the key contents of work. By the end of 2000, based on the work of "Clean Vehicle Action" carried out by the National Environmental Protection Administration and relevant ministries and commissions under the State Council, the clean energy action was initiated. Several cities were selected for test. The test work is still undergoing actively.

In recent years, the State has spent large amounts of funds to conduct R&D on relevant technologies. A number of demonstration projects have been constructed by using the introduced foreign technologies or independently developed domestic technologies to effectively promote the development and application of clean coal technologies. More than 20 sets of 220t/h-410t/h CFB boilers with foreign technologies or equipment have been put into operation successively. The work on the intellectual right for the domestically developed 220t/h-410t/h CFB boilers is underway. A pilot-scale 15 MW PFBC power plant has been put into trial operation in Wangjia Power Plant in Xuzhou. The project of Yantai IGCC demonstration power plant in Shandong has been approved by the State Development Planning Commission and is inviting for bidding now. The localization of technology and equipment for the commercial demonstration projects of flue gas desulfurization by using several typical foreign technologies (such as in-bed injection of calcium, semi-dry desulfurization process by rotary spraying, sea water desulfurization and electron beam desulfurization) is undergoing. Success has been achieved in the commercial demonstration of coal water mixture (CWM) application in Beiyangdian Power Plant and Yanshan Petrochemical Plant. The State Development Planning Commission has approved to conduct feasibility study on the construction of commercial direct coal liquefaction plants. The exploration and development of coalbed methane (CBM) have also obtained encouraging results.

However, there are still many obstacles to the development of clean coal technologies in China.

• Management Obstacle: The development of clean coal technology involves different sectors and regions. The management and coordination are not adequate. The research efforts are not concentrated. It is not well combined with the energy conservation projects and environmental protection projects. The research projects are overlapping or duplicate at low level.
• Policy Obstacle: The State incentive policies to the clean coal technology development are not strong enough. The combination and mutual support of technical policies with environmental protection policies, energy policies, industrial policies, energy conservation policies and high and new technology policies are not sufficient. Some of these policies are even contradicted to each other.
• Information Obstacle: Both the internal exchanges of clean coal technologies among different regions, enterprises and departments in China and external exchanges with foreign countries are not sufficient. Many foreign companies do not understand very well the market demands for clean coal technologies in China. Thus, the channel for the new technologies to enter into the Chinese markets is not smooth.
• Technology Obstacle: The localization of technologies of large CFB boilers, high-efficient power generation and flue gas desulfurization can not reach the commercialization level.
• Financial Obstacle: The financial shortage problem exists in all stages from R&D to engineering demonstration and commercialization. This problem is especially serious in the stage of engineering demonstration or development and trial-manufacture of products.

Among so many obstacles mentioned above, the policy factor is the most important. The development of clean coal technology is the integration of technology, economy and environmental protection. Its development is across many industries and involves most of the regions and many enterprises in China. It generally needs high investment and long payback period. Its social efficiency is higher than economic efficiency. Thus, it is difficult to gain a rapid development and overcome other obstacles without the government policy support.

3. Continuous Formulation and Perfection of Chinese Policies for the Development of Clean Coal Technology

With the advance of clean energy and clean production technology, the government has promulgated many laws and regulations regarding clean coal technology, such as "Coal Law of the People's Republic of China", "Energy Conservation Law of the People's Republic of China", "Air Pollution Prevention and Control Law of the People's Republic of China", etc. It is clearly defined in the Coal Law that "State is to develop and popularize clean coal technology" and "Government encourages coal mining enterprises to develop coal preparation and processing and to comprehensively develop and utilize coalbed methane, coal refuse, coal slimes, stone-like coal and peat". The development of clean coal technology has been put into the clauses of the Coal Law. In the Energy Conservation Law, it is encouraged to "develop and popularize fluidized bed combustion, smokeless combustion, gasification and liquefaction suitable to the types of Chinese coal and improve coal utilization efficiency". In the Air Pollution Prevention and Control Law, stress is put on the prevention and control of air pollution caused by coal combustion. It is put forward that "The State should carry out coal preparation and processing to reduce sulfur content and ash content of coal and should impose restrictions on mining of high sulfur and high ash coal", and "for domestic stoves, the time limits should be set for using coal briquette with binder for sulfur capture and other clean fuel to gradually replace direct combustion of raw coal". The air pollution prevention and control law is under modification and revision.

At the same time, many environmental protection and energy conservation policies relating to the development of clean coal technologies were formulated and promulgated, playing a good promotion role to the development of clean coal technology.

The policies can be classified into four categories. The first category is the technical policies to encourage development. For instance, in "An Outline of China's Technical Policies for Energy Conservation" promulgated jointly by the State Planning Commission, State Economic and Trade Commission and State Science and Technology Commission, there are detailed regulations and relevant policies regarding the development of fluidized-bed combustion for power generation, new technology of coal combustion integrated combined cycle power generation and new processes of co-generation of gas, heat and electricity, gradual adoption of new gasification technologies, coal preparation and processing, fine coal briquette, steam coal blending and construction of mine-mouth power plants", etc. In "A Guide to the State Present Priority Areas of High Technologies for Commercialization Development", clean coal technologies such as "development and utilization of coalbed methane resources, high efficiency and low pollution coal combustion power generation system, super-critical coal-fired power generator sets of large volume are taken as the priority areas for energy development. In the " Catalogue of Industries to Encourage Foreign Investment" issued by the State Planning Commission and State Economic and Trade Commission, clean coal technologies such as "design and manufacture of complete sets of coal gasification equipment, manufacture of equipment and additives for high concentration CWM, comprehensive utilization of coal, construction and operation of clean coal fired power plant" are included. In the "Key Points of Technical Policies for Comprehensive Utilization of Coal Refuse" promulgated jointly by the State Economic and Trade Commission and Ministry of Science and Technology, it is put forward to take coal refuse technologies including coal refuse power generation, coal refuse building materials and products, reclamation and refilling and non-toxic treatment of coal refuse as the main direction for R&D to develop comprehensive utilization technologies and products of coal refuse with high scientific and technical contents and high added value. In the "Notice about Printing and Distribution of 'Focal Points of Localization Planning for Key Technologies and Equipment of Coal-fired Power Plants'", the State Economic and Trade Commission clearly indicates that the flue gas desulfurization of coal-fired power plants is the main measure to control SO2 pollution.

The second category is the taxation policies to encourage development. For instance, in the "Opinions on Further Development of Comprehensive Utilization of Resources" issued by the State Economic and Trade Commission and other departments, approved by the State Council, it is defined that the focus of support should be put on the resources comprehensive utilization projects, which should enjoy preferential taxation and credit policies. In the "Notice on the Issues Relating to Implementation of Credit Policies and Strengthening of Environmental Protection" by the People's Bank of China, it is stressed that "Monetary departments at various levels should pay attention to the protection of natural resources and environment in the credit work and must take the support to protection of ecological resources and prevention and control of pollution as one of factors for consideration in giving bank loans so as to promote the coordinated development of economic construction and environmental protection". It is also stressed that "Monetary departments at various levels should not provide loans to those who run counter to the State industrial policies, adopt the backward production forms, seriously waste resources and pollute environment."

The third category is the policies for eliminating backward processes and technologies. Approved by the State Council, the State Economic and Trade commission promulgated No.6 Order in January 1999 the “Catalogue of the Eliminated Backward Production Capacities, Processes and Products (First Batch)”. The first batch of production capacities, processes and products which violate the State laws and regulations, are backward in production forms and poor in product quality, have serious environmental pollution problems and have high energy consumption are ordered to eliminate within a specified time limit. It covers 114 items in 10 industries, including coal, metallurgical, non-ferrous metals, electric power and building industries. These items include closing down a number of small coal mines, small paper mills, small leather plants, small glass factories, small cement plants, small iron and steel plants and small coal-fired power plants and imposing restriction on the use of backward kiln and coal combustion technologies. In December 1999, the State Economic and Trade Commission issued No.16 Order "Catalogue of the Eliminated Backward Production Capacities, Processes and Products (Second Batch)", which set the time limit for elimination of 119 items in 8 industries, including coke making by indigenous process, 0.4-0.7 t/h boilers with vertical water pipe and fixed grate.

The fourth category is pollutant emission control policies. It is put forward in the "Notice on Some Opinions Regarding Practicing Clean Production" issued by the National Environmental Protection Administration that the practice of clean production should be taken as a main content for establishing a comprehensive decision-making mechanism for environment and development and should be combined with technical renovation of enterprises, strengthening of enterprise management and establishment of modern enterprise system as well as control of emissions and control of total amount of emissions. In the State No.5 Document (1998) "Reply of the State Council Regarding the Issues of Acid Rain Control Areas and SO2 Control Areas", the range of two control areas are defined. It is also defined that China should practice the total amount control for SO2 emission, collect 0.2 yuan/kg for SO2 emission and forbid the construction of new coal mines with sulfur content higher than 3%. These regulations have been put into practice in the cities defined for these two controls. The charge for SO2 emissions in the cities such as Beijing and Hangzhou has been increased to 1.2 yuan/kg. These measures have effectively promoted the application of clean energy and clean coal technologies.

4. Incentive Policies for Clean Coal Technology Development Need Further Completion and Improvement

The 10th Five-year Plan period is an important period of China for the readjustment of energy mix. It is clearly put forward in the "10th Five-year Plan for the National Economic and Social Development" that "Energy construction must give full play to the resources advantages, optimize energy mix, improve energy efficiency and strengthen environmental protection". Clean coal technology integrates energy conservation, environmental protection and technology innovation. In the environmental protection, it is the measure which can "treat a disease by looking into both its root cause and symptoms". In the energy conservation, it can increase the overall efficiency. In the technical innovation, it can promote the readjustment of industrial structure and product mix. In the energy security, it can ensure a long-term stable supply of clean energy. Its commercial application has a direct bearing on the State energy strategies, energy technology level and social and economic development. It will inevitably become one of the focal points of the Chinese energy development during the 10th Five-year Plan period.

Clean coal technology involves four areas and a dozen of technologies, covers development at different levels, including R&D, engineering demonstration and commercialization and relates to many industrial sectors and most of regions. Different regions and different industries have urgent needs of different types and levels of technologies. Therefore, the National People's Congress, Political Consultative Conference, ministries and commissions under the State Council and local governments at different levels have attached high importance to the policy study and formulation. In combination with the formulation of the 10th Five-year plan, the government departments concerned are organizing experts to conduct studies and formulation of relevant policies.

At present, the CCERC is conducting studies on the "Study of the Relevant Policies for Clean Coal Technology Development during the 10th Five-year Plan Period" and "Present Status of Clean Coal Technology and Development Strategies" for the State Development Planning Commission and State Economic and Trade Commission, respectively. The experts' study results show that although China has made big progress in the aspect of energy and environment laws, regulations and policies in recent years, China's clean coal technology policies still can not play the mandatory role of laws and regulations and nor play the economic incentive role. Further promotion is needed in the aspects of energy prices, environmental economy, financial priority, reduction and exemption of tax, emission charges, etc. Only in this way, it is possible to give incentives to enterprises for them to use clean coal technologies of their free will.

The principles for the formulation of clean coal technology policies:

1. Policy designing should be based on the scientific analysis of multi-disciplines and multi-sectors. The in-depth policy study and investigation on technical development and an all-sided feasibility analysis and demonstration should be carried out.
2. Attention must be paid to the combination of the mandatory role of environmental laws and regulations and incentive role of economic means. The disposition and regulation role of the market economy should be given the full play.
3. It should combine the characteristics of local economy, environment and energy supply and take into account the differences of regions. It should also give considerations to the characteristics of different industries and supplement each other with their advantages.
4. It should combine with the relevant policies of industries, environmental protection, energy conservation, clean energy and high technologies, combine with the readjustment of industrial structure and energy mix and State support to technical innovations. It should pay attention to the integrity and correlativity of policies so as to form a complete policy system.
5. The attention should be paid to the authority and practicality of policies so as to ensure the effective implementation.

Policies that need study, formulation and perfection:

1. Macro-management Policies: These include the State macro-planning for clean energy development, macro-planning for clean coal technology development, development plan of the key clean coal technologies during the 10th Five-year plan period, State clean energy development policies, industrial structure readjustment policies, etc., so as to form the guidance and coordination to the industries and local governments in their development of clean coal technologies and guide the formation of the market mechanism for clean energy development.
2. Technical Policies: These include industrial policies, energy conservation policies and specific policies relating to individual technologies, policies to encourage replacement of traditional technology by advanced technology, encourage improvement of energy efficiency and equipment level, eliminate and restrict the use of backward processes and technologies.
3. Monetary and Taxation Policies: The government should formulate a series of support and incentive policies in the aspects of investment, taxation, supplement, low interest loans, prices, and acceleration of deprecation, etc., to encourage and support independent development and commercial demonstration of various technologies, encourage absorption of funds from capital market and direct foreign investment and develop Chinese clean coal technology at a high starting level.
4. Environmental policies: The basis for pollution charge should be changed from concentration of emissions exceeding the limit to the total amount of emissions. On this basis, the amount of pollution charges should be increased and the credit system for pollutant emissions should be practiced as early as possible. Through rationalization of emission standards and total amount control of emissions, we can support the development of advanced technologies and eliminate the backward technologies.
5. Based on the formulation and improvement of relevant policies, we should further define the supervision and execution departments, determine the fines for those who violate these regulations, intensify the enforcement of laws and keep up the dignity of laws, regulations and policies.