Economic Impacts of Debottlenecking Congestion in the Chinese Coal Supply Chain

About the Project 

The KAPSARC Energy Model of China (KEM China) project began in 2014 to study energy and environmental issues in China, focusing initially on the coal supply industry. KEM China has been developed to understand China’s energy economy and fuel mix, how they are impacted by government intervention, as well as their interaction with global markets. It optimizes supply decisions, minimizing fuel and technology costs, while taking into account the effect of government regulation on prices and the environment.

Key Points 

• The extraordinary pace of development of China’s coal industry created transportation bottlenecks, which increased the price of delivered domestic coal and impacted global seaborne coal prices. 
•  Congestion costs added extra costs of energy supply to the Chinese economy, calculated to be RMB 228 billion in 2011. 
• Debottlenecking has reduced the price of Chinese domestic coal delivered to the coastal regions and contributed to the reduction in global seaborne prices since 2011. 
• Our analysis suggests that the existing tariff structure retains most of the economic efficiency of marginal cost pricing. 
• Though many of the infrastructure expansions delivered strongly positive rates of return, some may represent pre-investment in future needs.