Hands give the signal, feet apply the brake | A decade-long review of coal chemical industry policies

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Hands issue instructions, feet apply the brakes | A decade-long review of coal chemical industry policies Author/Source: Huahua Network – Coal Chemical Industry Date: 11-30-2018 Clicks: 4 In 2017, across the country, the number of enterprises that were shut down or required to undergo rectification due to failure to meet environmental standards was not in the hundreds or thousands, but rather in the tens of thousands; this even led to significant changes in the ecosystem of certain industries. With 2018 already well into its half, another significant document aimed at tackling pollution control issues was put into effect – the \"3-Year Action Plan to Win the Battle for Clear Skies\" issued by the State Council. This marks China’s experience with the most intense environmental protection campaign in its history. For the modern coal chemical industry, this is yet another major test. Undoubtedly, during the 12th Five-Year Plan period, modern coal chemical industry was one of the biggest highlights in the petroleum and chemical sectors. At the same time, due to the characteristics of resource endowments and local investment impulses, **there is considerable volatility in policies regarding the development of the coal chemical industry; it has always been in a contradictory state of “giving the green light while simultaneously applying the brakes.” Throughout this process, environmental protection issues have always been an **important starting point and focal point for the industrial policies governing the coal chemical industry. Since late 2004, out of considerations regarding energy strategic security, **has decided to carry out a modern coal chemical industry demonstration project. But by 2008, due to the high level of enthusiasm for investments in coal chemical projects in areas rich in coal, the **National Development and Reform Commission quickly stepped in to impose restrictions, issuing a notice on issues related to the management of coal-to-oil projects, which stipulated that all such projects other than the Shenhua Group’s coal direct liquefaction project, which was already under construction, should be halted. To address the shortage of natural gas in China, since 2009, **four projects have been approved one after another, including the Datang International Keqi project for producing 4 billion cubic meters of synthetic natural gas per year from coal. Coincidentally, coal-to-oil projects were urgently halted, and many regions began to plan for and develop projects such as coal-to-olefins and coal-to-natural gas. By 2009, the State Council promptly issued the \"Several Opinions on Curbing Overcapacity and Redundant Construction in Certain Industries and Guiding the Healthy Development of the Industry,\" stipulating that, in principle, no new pilot projects should be approved in the next three years. In June 2010, the **National Development and Reform Commission issued the \"Notice on Regulating the Development of the Coal-to-Natural Gas Industry,\" taking back the authority to approve projects related to coal-to-natural gas production. Local authorities at all levels are required **not to approve or register coal-to-natural gas projects without authorization. By 2011, the policies had become stricter. **The National Development and Reform Commission issued the \"Notice on Regulating the Orderly Development of the Coal Chemical Industry,\" explicitly prohibiting the construction of projects for producing olefins from coal via methanol with an annual capacity of 500,000 tons or less, projects for producing methanol from coal with an annual capacity of 1 million tons or less, projects for producing dimethyl ether from coal with an annual capacity of 1 million tons or less, projects for producing oil from coal with an annual capacity of 1 million tons or less, projects for producing natural gas from coal with an annual capacity of 2 billion cubic meters or less, and projects for producing ethylene glycol from coal with an annual capacity of 200,000 tons or less. Large-scale coal processing and conversion projects that exceed the aforementioned standards must be approved by the **National Development and Reform Commission. By May 2012, the situation seemed to be easing. **The National Development and Reform Commission issued the \"Several Opinions on Supporting the Healthy Development of Industries in Xinjiang,\" stating that during the 12th Five-Year Plan period, full use will be made of Xinjiang’s coal resource advantages. Within the limits set by water resources and ecological carrying capacity, efforts will focus on carrying out demonstration projects in coal chemical processing, with an emphasis on coal-to-natural gas production, in order to promote the rapid development of coal chemical industry zones in Ili and Zhundong. In the same year, the **National Development and Reform Commission** and the **Energy Bureau** compiled the \"Plan for Demonstration Projects in Advanced Coal Processing\", which stipulated that during the 12th Five-Year Plan period, major demonstration projects would be carried out in seven areas: coal liquefaction, coal-to-natural gas, coal-to-olefins, coal-to-ammonia-urea (with a capacity of 1 million tons per year for ammonia production per unit), coal-to-ethylene glycol, upgrading of low-grade coal, and coal-to-aromatics. Through the development of demonstration projects, by 2015, China would have essentially mastered large-scale integrated technologies for producing 1–1.8 million tons per year of coal-based indirect liquefied gas, 1.3–2 billion standard cubic meters per year of coal-to-natural gas, 600,000–1 million tons per year of coal-based synthetic ammonia, 1.8 million tons per year of coal-based methanol, 600,000–1 million tons per year of olefins produced from coal via methanol, 200,000–300,000 tons per year of coal-based ethylene glycol, as well as 1 million tons per year of upgraded low-grade coal; it would also possess the capability to design and construct such projects as well as to manufacture the key equipment required. In 2013, the State Council even proposed in the \"Action Plan for Air Pollution Prevention and Control\" to accelerate the industrialization and scaling up of the coal-to-natural gas industry, on the condition that the strictest environmental protection standards are met and water supply is ensured. Thus, from 2013 to the present, a total of 19 coal-to-natural gas projects have received approval from the **Energy Bureau. The coal chemical industry seems to have encountered much-needed relief after a long drought. But by 2014, things changed again, and **it seemed to become stern once more. In July, the **Energy Bureau issued a notice on regulating the scientific and orderly development of the coal-to-oil and coal-to-natural gas industries, prohibiting the construction of coal-to-natural gas projects with an annual production capacity of 2 billion cubic meters or less. The construction of coal-to-oil projects with an annual production capacity of 1 million tons or less is prohibited. Further optimize the allocation of production resources for coal-to-oil/gas projects. Coal supply must primarily meet the needs of residents’ daily life and power generation. It is strictly prohibited to develop coal-to-oil/gas projects in provinces that are net importers of coal ； It is strictly prohibited to divert water for domestic use, agriculture, and ecological purposes, as well as to use groundwater for coal-to-oil (gas) production. For areas where the water intake has reached or exceeded the control targets and the total emissions of key pollutants exceed the limits, the approval of new coal-to-oil (gas) demonstration projects is suspended. For projects that do not comply with industrial policy regulations, strict controls are imposed in areas such as resource allocation, land use for construction, environmental assessment, and loan financing. For projects not included in the **coal-to-oil (gas) demonstration list, localities are prohibited from arbitrarily initiating and constructing them in violation of regulations. It is necessary to strengthen the management of the entire process of demonstration projects, from project initiation and implementation, through mid-term evaluation, to post-evaluation. After the demonstration project is completed, it is necessary to promptly monitor and evaluate energy efficiency, resource consumption, and the treatment of waste gases, wastewater, and solid waste, as well as to conduct proper summary evaluations to ensure the effectiveness of the implementation of the demonstration project. 2014 was a turning point. For the coal chemical industry, policies have become increasingly detailed and stringent since 2014. In February 2015, the Ministry of Industry and Information Technology and the Ministry of Finance issued the \"Action Plan for the Clean and Efficient Utilization of Coal in the Industrial Sector,\" encouraging enterprises to increase the degree of processing and transformation of coal resources based on market demands, raise the level of product refinement, and vigorously develop new types of coal chemical industries such as those related to clean energy and new materials. In March 2015, the **Energy Bureau issued the \"Provisional Measures for the Management of the Certification of Coal Chemical Industry Pilot Projects,\" which stipulates the contents of certification for such projects, the procedures for management during certification, the preparations required prior to certification, the processes involved in on-site certification, and the actions to be taken after certification. In April 2015, the **Energy Bureau issued the Action Plan for the Clean and Efficient Utilization of Coal (2015–2020)**, stipulating that modern coal chemical industry demonstration projects should be established in areas with abundant coal resources, sufficient water supplies, favorable ecological conditions, and convenient transportation, taking into account the ecological environment and water resource availability in those areas. The construction of modern coal chemical projects is prohibited in the key ecological function areas designated as restricted and off-limits under the National Main Functional Zone Plan. Strictly control project construction in water-scarce areas. Promote the integrated development among coal chemical industries and sectors such as power generation, oil and gas chemicals, steel, and building materials in areas that meet the requirements. In May 2015, the **National Development and Reform Commission issued a notice regarding the implementation of plans for the development of the petrochemical industry. The notice stipulated that methanol-to-olefins plants should have an annual production capacity of 500,000 tons or more; their overall energy efficiency should be above 44%; the coal consumption per ton of olefins produced should be less than 4 tons; the fresh water required per ton of coal converted should be less than 3 tons; wastewater discharge should be reduced to near zero levels; and solid waste should be recycled. In July 2015, the revision of the Water Pollution Prevention and Control Law lowered the barriers to public participation, imposed stricter regulations (such as prohibiting discharges across river basins and increasing penalties), promoted pilot programs for emission permits, and enhanced the joint liability of environmental assessment and testing agencies. In December 2015, the Ministry of Environmental Protection issued the \"Environmental Access Requirements for Modern Coal Chemical Industry Projects (Trial)\", which served as a basis for conducting environmental impact assessments for such projects. Regarding planning and layout, the \"Access Conditions\" require that modern coal chemical projects be located in optimized and key development areas; priority should be given to sites with relatively abundant water resources and good environmental capacity, and such locations must also comply with environmental protection plans. New modern coal chemical projects are strictly controlled in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Pearl River Delta, and water-scarce areas. The \"Access Requirements\" stipulate that coal types with high levels of aluminum, arsenic, fluorine, oil, and other rare elements, for which the processing techniques, pollution control technologies, or comprehensive utilization methods are not yet mature, should be strictly restricted from being used as raw material coal or fuel coal. Regarding water usage, the \"Access Conditions\" stipulate that water-saving measures should be strengthened to reduce the consumption of fresh water; in areas where conditions permit, mine drainage water and recycled water should be given priority, and the use of groundwater for production purposes is prohibited. Coastal areas should use seawater as circulating cooling water, while water-scarce areas should give priority to water-saving technologies such as air cooling and closed-loop systems. The use of surface water must not encroach on water for ecological purposes, domestic use, and agriculture. In addition, the \"Access Requirements\" also set corresponding requirements regarding the site selection for modern coal chemical industry projects, wastewater treatment, pollutant emissions, solid waste disposal, prevention of groundwater pollution, environmental risk mitigation measures, and environmental monitoring. In December 2015, the Ministry of Environmental Protection issued the \"Administrative Measures for Post-Evaluation of the Environmental Impact of Construction Projects (Trial)\\", which came into effect on January 1, 2016. The document states that there are significant environmental risks in the metallurgy, petrochemical, and chemical industries; the locations where such projects are built are sensitive. For projects that continuously emit heavy metals or persistent organic pollutants and that exhibit conditions not in line with the approved environmental impact assessment reports during operation, a post-project environmental impact assessment should be conducted. Track, monitor, evaluate, and assess its actual environmental impact as well as the effectiveness of pollution prevention, ecological protection, and risk mitigation measures, and propose remedial plans or improvement measures. On August 1, 2016, the new “**List of Hazardous Wastes**” came into effect, specifying the list of hazardous wastes related to coal chemical industry. On August 3, 2016, the General Office of the State Council issued the “Guiding Opinions on Adjusting the Structure, Promoting Transformation, and Increasing Efficiency in the Petrochemical Industry”. The Guidelines state that modern coal chemical industries must be developed in an orderly manner, in accordance with the requirement that \"in areas in the central and western regions where the resource and environmental conditions are suitable, such industries should be developed in conjunction with the development of large-scale coal bases, and in line with the requirements for environmental approval.\" Regarding the coordinated optimization of industrial layout, the Guidelines state that it is necessary to take into account factors such as resource supply, environmental capacity, safety guarantees, and industrial infrastructure in order to improve the layout of the petrochemical industry. The development of the 7 major petrochemical industrial bases along the coast should be carried out in an orderly manner, with new projects related to oil refining, ethylene, and aromatics being introduced to these industrial bases step by step. Strengthen the planning and construction of chemical industrial parks, carry out pilot projects for smart chemical parks, and conduct comprehensive evaluations and information disclosure in accordance with the law. In regions in the central and western parts of China that meet resource and environmental conditions, the modern coal chemical industry should be developed in an orderly manner in conjunction with the development of large-scale coal bases, in accordance with environmental access requirements. On November 10, 2016, the General Office of the State Council issued the \"Implementation Plan for the Permit System for Contaminant Emissions Control\". According to the provisions of the Implementation Plan, new projects must apply for a pollution discharge permit before carrying out any actual pollution discharge activities. The pollution discharge permit specifies details such as the types of pollutants permitted to be discharged, their concentrations, emission amounts, and discharge destinations, and it also includes information on pollution control facilities and environmental management requirements. On December 25, 2016, the Environmental Protection Tax Law of the People’s Republic of China was approved by the Standing Committee of the National People’s Congress. Starting from January 1, 2018, China began to impose an environmental protection tax. The pollutants subject to this tax include air pollutants, water pollutants, solid waste, and noise. The existing standards for pollution discharge fees were used as the minimum amount for the environmental protection tax; the tax rate for air pollutants was set at 1.2 yuan per pollution unit ； The cost for water pollutants is 1.4 yuan ； For solid waste of different types, the tax rate ranges from 5 yuan to 30 yuan per ton ； The fee for noise exceeding the allowed level is ranging from 350 yuan to 11,200 yuan per month. On December 26, 2016, China released the “13th Five-Year Plan for Energy Development”, which outlined the key projects related to coal deep processing during the 13th Five-Year Plan period: 1. Coal-to-oil: Phase II of Shenhua Ningxia Coal Industry in Ningxia; Lines 2 and 3 of Shenhua Ordos in Inner Mongolia; Phase II of Yankuang Yulin in Shaanxi; Ganquanbao in Xinjiang; Ili in Xinjiang; Yitai in Inner Mongolia; Bijie in Guizhou; and eastern Inner Mongolia ； 2. Coal-to-natural gas: Zhundong in Xinjiang, Yili in Xinjiang, Ordos in Inner Mongolia, Datong in Shanxi, and Xingan League in Inner Mongolia. In February 2017, the **Energy Bureau issued the ‘13th Five-Year Plan for Demonstrative Projects in the Field of Deep Coal Processing.’ This plan set forth further requirements regarding technology and environmental aspects for such demonstration projects during the 13th Five-Year period, emphasizing the need to act in accordance with available resources and to apply the strictest environmental protection standards. In March 2017, the National Development and Reform Commission, in conjunction with the Ministry of Industry and Information Technology, issued the \"Plan for the Innovative Development and Layout of the Modern Coal Chemical Industry.\" The Plan introduces for the first time the concept of establishing modern coal chemical industry demonstration zones. During the 13th Five-Year Plan period, it plans to develop four such demonstration zones in Ordos in Inner Mongolia, Yulin in Shaanxi, Ningdong in Ningxia, and Zhundong in Xinjiang, in order to promote the clustered development of this industry and create world-class modern coal chemical industry demonstration zones. The Plan outlines 8 key tasks for the coal chemical industry: 1. Carry out in-depth demonstrations of industrial technology upgrades. 2. Accelerate the integrated development of related industries. 3. Carry out efforts to tap potential and transform leading enterprises. 4. Plan and layout a demonstration zone for the modern coal chemical industry. 5. Organize and implement the resource city transformation project. 6. Advance international industrial cooperation steadily. 7. Vigorously enhance the capability to provide complete sets of technical equipment. 8. Actively explore ways to reduce carbon dioxide emissions. Thus, from water to gas, from smoke to slag, from scale to processes, from layout to tasks, **every aspect of the coal chemical industry is covered in detail.