China’s annual coal production, at 3.24 billion tonnes (Gt) in 2010, accounted for nearly half of the global total.  In this comprehensive analysis of China’s coal value chain, Jianjun Tu examines the industrial organization and structure of China’s coal production, transport, and consumption.  Tu’s study shines a light on one of the world’s largest and most complex energy markets and should be read by anyone with an interest in the future of coal, climate change, or global energy markets.

Key topics covered include:

• Review of China’s Coal Industry Policy
• Coal Supply: Resources, Reserves, and Production
  • Industry Structure and Organization
  • Production Costs
  • The Role of Government
• Coal Demand: Overview of Coal Consumption in China
  • Power Generation
  • Iron and Steel Industries
  • Chemicals
  • The Role of Government
• Coal Transport: Rail, Sea, River and Road Transport Networks
• Coal Grey Markets: the Untold Story of China’s “Unofficial” Coal Market

Abstract:

Burning of biomass for cooking is associated with health problems and climate change impacts. Many previous efforts to disseminate improved stoves – primarily by governments and NGOs – have not been successful. Based on interviews with 12 organizations selling improved biomass stoves, we assess the results to date and future prospects of commercial stove operations in India.

Specifically, we consider how the ability of these businesses to achieve scale and become self-sustaining has been influenced by six elements of their respective business models: design, customers targeted, financing, marketing, channel strategy, and organizational characteristics.

The two companies with the most stoves in the field shared in common generous enterprise financing, a sophisticated approach to developing a sales channel, and many person-years of management experience in marketing and operations. And yet the financial sustainability of improved stove sales to households remains far from assured. The only company in our sample with demonstrated profitability is a family-owned business selling to commercial rather than household customers. The stove sales leader is itself now turning to the commercial segment to maintain flagging cash flow, casting doubt on the likelihood of large positive impacts on health from sales to households in the near term.

Voluntary opt-in programs to reduce emissions in unregulated sectors or countries have spurred considerable discussion. Since any regulator will make errors in predicting baselines and participants will self-select into the program, adverse selection will reduce efficiency and possibly environmental integrity. In contrast, pure subsidies lead to full participation but require large financial transfers.

We present a simple model to analyze this trade-off between adverse selection and infra-marginal transfers. We find that increasing the scale of voluntary programs both improves efficiency and reduces transfers. We show that discounting (paying less than full value for offsets) is inefficient and cannot be used to reduce the fraction of offsets that are spurious while setting stringent baselines generally can. Both approaches reduce the cost to the offsets buyer. The effects of two popular policy options are less favorable than many believe: Limiting the number of offsets that can be one-for-one exchanged with permits in a cap-and-trade system will lower the offset price but also quality. Trading ratios between offsets and allowances have ambiguous environmental effects if the cap is not properly adjusted. This paper frames the issues in terms of avoiding deforestation but the results are applicable to any voluntary offset program.

As the world's fifth largest coal exporter and a key swing supplier between the Atlantic and Pacific coal markets, South Africa is a crucial player in global markets.  While the country has long been Europe's major supplier of coal, South African exports have begun to shift east and are steadily becoming a major source of coal supply for the Asian coal boom.  This strategic positioning sets the stage for South Africa to become an even more important player in determining how the world trades and prices coal. 

In the coming decade South Africa will face a number of difficult decisions around how to meet increasing domestic coal demand while dealing with climate concerns, increasing exports, and building the infrastructure that would enable the country to significantly expand market share in the global coal trade.  In many ways, the fate of South Africa's coal sector now hangs in the balance.

This paper explores the interplay between South Africa's domestic and export thermal coal markets and what might shape their development in the future. The paper first examines the industrial organisation and political-economy of the coal sector in South Africa.  An overview is provided of coal mining companies, how the current market structure emerged historically, the development of rail and port facilities, and coal costs and prices. Policy and legislative developments are also described. Finally scenarios are developed for local and export coal markets.