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Recently, at a meeting on the analysis of the coal industry’s economic performance, the China Coal Transport and Marketing Association released a noteworthy figure: since the beginning of this year, coal consumption in China has been relatively weak, experiencing negative growth for the first time since 2017. It is expected that there will still be room for growth in coal demand next year, while coal supply will remain relatively stable. Why is coal consumption declining? Is this data a short-term fluctuation, or the beginning of a long-term trend? Against the backdrop of the proposals in the 15th Five-Year Plan, which explicitly call for bringing coal and oil consumption to a peak, how should we understand the changing role of coal? The main reason for the decline in coal consumption is the reduced use of coal in thermal power generation. The coal-fired power generation sector remains the main driver of coal consumption. This year, there has been rapid growth in the installation capacity and power generation from new energy sources; it is estimated that approximately 370 million kilowatts of new wind and solar power capacity will be added throughout the year. With sustained high growth, the effect of large-scale substitution by new energy sources becomes more evident; the share of coal-fired power generation capacity continues to decline, and the amount of electricity generated by coal-fired power plants is restricted. At the same time, affected by factors such as the ongoing adjustment in the real estate market, coal demand in the two traditional coal-consuming industries of steel and building materials has also decreased. Some believe that the decline in coal consumption is a sign of weak economic momentum. But that is far from the truth. With the further advancement of China’s energy transition and industrial structure upgrading, the relationship between the growth rate of coal consumption and the growth rate of the macroeconomy has shifted from a strong correlation to a weak one. On the one hand, driven by the need for high-quality economic development, energy-intensive industries such as steel and building materials are no longer focused on simple scale expansion, but rather on improving quality and efficiency as well as reducing energy consumption and emissions. The continuous decline in coal consumption per unit of output means that we can use less coal to support steady economic growth. On the other hand, China’s economic structure is undergoing transformation and upgrading toward low-energy-consuming sectors such as high-end manufacturing and modern service industries. The contribution of these new drivers to the growth in energy consumption is reflected more in electricity demand than in direct coal consumption. In the future, electricity consumption across society will continue to rise, but there is an increasingly clear trend of a decoupling between the growth rate of electricity use and that of coal consumption, with more of the electricity demand to be met by renewable energy sources. Is this first occurrence of negative growth a sign that a turning point in coal consumption has been reached? In the short term, demand for coal remains resilient. The China Coal Transportation and Marketing Association expects that there will still be room for growth in China’s coal demand next year. Affected by the decline in the price of green electricity, the growth rate of new energy installations and power generation is likely to slow down next year. The increase in renewable energy power generation will not be sufficient to cover the rise in electricity demand, thereby leaving room for the development of thermal power; demand for coal for electricity generation is expected to continue growing ； The coal chemical industry enjoys relatively good profitability. New production capacity in this sector is being put into operation one after another, and the capacity utilization rate is expected to remain high, which will drive rapid growth in the demand for coal used in the chemical industry. In the medium to long term, the downward trend in coal consumption is irreversible. “The 15th Five-Year Plan period is the final stage for achieving carbon peak targets, and as the main source of energy supply in China, coal represents a key area in efforts to reach this goal. Our country will gradually reduce coal consumption while ensuring a secure supply of energy. However, this is not a sharp decline; it is predicted that coal consumption will peak around 2027 and then enter a plateau phase. Coal use in the power and chemical industries will continue to increase, while its use in sectors such as steel, building materials, and consumer goods will decline at a steady pace. Only thereafter will coal consumption enter a more pronounced downward trend, with its role shifting gradually from that of a primary energy source to that of an energy source for last-resort use. Negative growth in coal consumption is an inevitable outcome of China’s transition toward a green and low-carbon economy, but it is by no means the end of the coal industry. Regarding this, we should have three clear understandings: abandon concerns over total volume and focus on systemic resilience. The focus of future energy security will shift from ensuring a large supply of coal to establishing a new type of power system based on multiple complementary sources. The role of coal is that of a reliable and economical \"regulator\" and \"backup power source\" in this system. Therefore, a portion of advanced coal-fired power units and their capacity will become valuable resources for system regulation, and their value needs to be reflected through new market mechanisms. Go beyond the perception of fuel and explore new opportunities in raw materials. Coal is not only an energy source but also an important industrial raw material. In the chemical industry, coal can be transformed into high-end materials, special fuels, and the like; this process itself has a “carbon sequestration” effect. The shift from fuel to raw materials is the key path for the coal industry to break through its development limits and align with the \"dual carbon\" goals. Since the beginning of this year, the production of major coal-based chemical products has continued to increase, and the demand for coal in these sectors has become a key factor in offsetting the declines in other industries. Policies and the market should encourage this high-value-added transformation. Abandon the “campaign-style” approach to reducing coal use; adhere to the principle of “establishing new systems before phasing out the old ones”. The energy transition is a marathon. We must respect our country’s resource endowment of abundant coal, scarce oil, and limited gas, as well as its stage of economic development. Until new energy sources can fully support the system independently, it is essential to ensure sufficient coal production capacity and a resilient supply chain. Reaching the peak is the goal, but a smooth transition and ensuring there are no gaps in energy supply are the prerequisites. For the first time in nearly nine years, coal consumption has declined. This does not signal an economic downturn; rather, it reflects the determination to pursue transformation and upgrading. The story of coal is not over yet; it is entering a new chapter of transformation. (Author: Wang Yichen)