China Environmental Law

Here’s some welcome news. 

The National Development and Reform Commission (NDRC) said yesterday it would remove the pricing caps on coal from next year and adopt a market-oriented pricing mechanism.

The caps will be removed sometime in 2009 so that the cost of coal will reflect “the real demand and supply, the resource scarcity and environmental costs associated with the commodity.”  Well, a few of the “environmental costs” at any rate.  The government will retain the right to “take measures when there are sharp fluctuations in coal prices.”

The government has used this period of falling energy prices to adjust its energy pricing structure.  Green Leap Forward and China Green Buildings have nice posts on China’s proposal to impose a gasoline and diesel tax. 

The coal pricing move comes on the heels of plummeting coal prices which are 30% to 40% off their mid-year highs.  I suspect the price drop is even more dramatic than these percentages suggest because the actual price of coal during the summer and early autumn crunch was significantly above the government set prices.

Coal companies and those townships which rely heavily on coal production are expecting heavy sailing.

“Due to the closure of many manufacturing units and the lackluster real estate market, there will be a significant contraction in demand for thermal coal for power generation as well as metallurgical coal for steel production,” Huang [Shengchu, president, China Coal Information Institute] said.

“I believe the coal producers will experience a worse chill next spring,” he added.

As a result some are calling for a price floor.  Others appear unsympathetic to the plight of the industry.

“Coal enterprises should utilize this time to conduct internal reforms and also upgrade their technology to boost competitiveness,” Wang [Shuhe, deputy administrator and chief engineer, State Administration of Coal Mine Safety] said.

Hmm, maybe this would be a great time to install coal washing equipment and “give the coal a bath.”