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China rethinking plans to build coal-to-gas plants

BEIJING – China’s coal-to-gas industry has struggled through a difficult year that has spurred doubts among government officials about keeping this technology on a fast-track for development.

The plants turn coal into a cleaner-burning gas, which in urban areas can replace dirtier fuels and help combat smog, and more than 45 plants have been proposed for construction.

But in Inner Mongolia, one of the first plants to start operations failed to meet expectations, suffering technical problems and financial losses that soured investors.

There also has been more debate within China about the environmental trade-offs that would result from a large-scale expansion of the industry.

Coal-to-gas plants spew huge amounts of carbon dioxide that would significantly increase China’s greenhouse-gas emissions. They also require big volumes of water in scarce supply in western and northern regions where most of the plants would be located.

All of this has helped kindle more opposition to the industry among Chinese government energy planners.

“I think the sentiment has greatly changed. They have expressed a lot of skepticism,” said David Fridley, an engineer at the Lawrence Berkeley National Laboratory in California, who works in cooperative projects with senior staff at China’s Energy Research Institute.

That shift is reflected in a report released in September by the Chinese government on industries singled out for priority development in western China.

Coal-to-gas plants were included in a preliminary draft of that report but were dropped from the listings in the final document, according to Chi-Jen Yang, a Duke University researcher who has been tracking the industry’s growth.

“This is considered a major blow because investment will not be qualified for tax benefits, Yang said.

In December, a Chinese news service reported that the government also may freeze approvals for most of these projects during the five-year plan that runs through 2020.

Under the freeze, the government would allow only four plants already under construction to move forward, according to China Energy News, a state-run news outlet that offers a window into government policies.

Second thoughts about turning coal into gas are part of a broader rethinking of China’s energy future as the nation pushes ahead with hydropower, solar, nuclear, wind power, and improved energy efficiency to reduce reliance on coal.

Coal still provides more than 70 percent of China’s electricity.

But during the past two years, the rate of growth in China’ coal consumption has slowed dramatically.

In 2014, it is possible that China’s coal use may not grow at all, or even register a slight decline compared with 2013.

Through the year, the industry has battled low prices and surpluses. Last summer, things got so bad that coal-industry officials asked the government to help cut production to shore up sagging markets.

In November, China’s shift away from coal and other fossil fuels gained an international spotlight as President Xi Jinping and President Obama made a joint announcement in Beijing to combat climate change.

Obama set a new goal for cutting U.S. greenhouse-gas emissions by 2025. Xi said China had agreed to reach a peak in greenhouse gas emissions by 2030 and have 20 percent of its energy by that year come from sources other than fossil fuels.

For major mining companies, turning coal into gas has offered the prospects for a huge new market that could help launch a rebound.