Lack of momentum for the sustainable development of coal

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According to the China Phosphorus Coal Industry Network, due to the mismatch between administrative measures for capacity reduction and market-based deleveraging, there is no policy support for the separate handling of debts associated with mines that are shut down as part of capacity reduction efforts. As a result, companies reduce their production capacity but not their debts, and their debt-to-asset ratios rise instead of falling. From the perspective of the companies’ own development, some of the eliminated outdated production capacities still carry debts, while capacity replacement and the establishment of new advanced production capacities still require financial investment. Since the implementation of the coal production capacity replacement policy, it has played a positive role in balancing the development of advanced production capacities with the phasing out of outdated ones, reducing excess coal production capacity, and promoting the transformation and upgrading of the coal industry. However, due to the relatively slow development of market-based platforms for trading capacity replacement quotas as well as of long-term mechanisms for such replacements, issues such as excessively high prices for these replacement quotas and high costs associated with capacity replacement have arisen.