I recalled when I was young, my dad used to buy and burn coals in our in-house stove to heat our apartment in the winter. And later in middle-school, as we moved into new apartment with central heating, I saw many large tall chimneys emitting white smoke on my way home. Today, sadly I barely see blue skies on sunny days in my home city and I see people wear masks everywhere. Rising temperature caused by climate change exacerbates the air pollution problem which threatens our health every single day in China.
China, with 65% of energy consumption relying on coal, is inevitably the world’s largest carbon dioxide emitter (1). To ensure energy access to 1.4 billion people, China almost has no choice but to depend on the least-costly coal as the primary energy source. However, in recent years, with air pollution surfaces and really impacts us in daily life, Chinese government starts to impose stricter regulation on the overall coal industry to curb the green gas emission. From the perspective of China Coal, one of the largest state-owned coal producer, it embarks a new era with significant challenges in its fundamental operating models but also pushes for innovation and progression towards the common goal of environmental sustainability.
With the combination of overcapacity from the previous years’ capital investment and China’s long-term commitment to reduce coal consumption, coal producers face tremendous business pressures. This is no exception to a state-owned company. First, China Coal is going through the pain of industry consolidation and shutdown of smaller coal mines that do not comply with the newly stricter regulatory standards. With declining coal price, China Coal has to withstand the financial pressure on the daily business operations before being able to diversify its operations from coal production and power generation. Along the process, China Coal is also facing the pressure to lay off its employees as it reduces capacity. Second, paradoxically, some of the traditional low-efficient coal exacting practice are becoming obsolete with the new regulatory standards. The company has to invest on new technologies to improve operations, production process, and even the ways which it conducts its business. This requires not only company’s financial capital despite financial hardship, but also longer-term vision and strategic thinking for a successful transition (2).
On the positive side, as a state-owned enterprise, China Coal has financial power backed by the government to make progress ahead of the other smaller scale, privately owned producers. It has focused on several aspects. First, the company has centered its corporate social responsibility initiative on managing sustainability for old mines. It involves systematic planning of land restoration with water and plants. 5 restoration projects have been recognized by the government as a blueprint for other smaller mining companies. Second, it also has invested tremendously in improving product quality especially towards “clean-coal” products which generate significantly less carbon dioxide during combustion at power generation phase. As a return, the company builds competitive advantage and is able to be less subject to the coal price volatility due to its offering of premium products. Third, it also incorporates more scientific analysis and systematically central planning on production across different coal mines for the company based on realistic estimates of the demand. Previously, company adopted an annual top-down production plan which emphasized on growth as a state-owned-company without paying attention to the actual demand. The company tended to end up with over production issues mid-to-end of the year. This phenomenon not only lead to inefficient cost structure but also excessive emittance of carbon dioxide (4) (5).
However, China Coal has to push itself even harder on long-term strategies to face the upcoming challenges in the China coal industry while addressing climate change concerns. I strongly think, as a state-owned enterprise, China Coal not only has the resources but also has the responsibility to lead the revolution in the industry towards initiatives such as clean-coal technology and mining-site sustainability management, etc. It has to become a role model so that other private companies can follow suite and join force to reduce emission of carbon dioxide the coal industry in China. In addition, China Coal should also collaborate with coal power generation companies to push for better technologies to improve the efficiency in the traditional power combustion plants. As efficiency improves, the greenhouse gas emission can be stalled partially.
Curbing greenhouse gas emission in the coal industry is no easy task while providing enough access of power to everyone in China. China Coal has to take up its responsibility together with the government to become the role model to lead at the end of the day.
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- China Coal Company Website http://www.chinacoal.com/index.html
- “China Coal CSR Report 2014”, http://www.chinacoal.com/n42790/n42797/c822984/content.html
- “China Coal CSR Report 2015”, http://www.chinacoal.com/n42790/n42797/c960158/part/960164.pdf