Approach and potential of replacing oil and natural gas with coal in China

Abstract

China’s fossil energy is characterized by an abundance of coal and a relative lack of oil and natural gas. Developing a strategy in which coal can replace oil and natural gas is, therefore, a necessary and practical approach to easing the excessive external dependence on oil and natural gas. Based on the perspective of energy security, this paper proposes a technical framework for defining the substitution of oil and natural gas with coal in China. In this framework, three substitution classifications and 11 industrialized technical routes are reviewed. Then, three scenarios (namely, the cautious scenario, baseline scenario, and positive scenario) are developed to estimate the potential of this strategy for 2020 and 2030. The results indicate that oil and natural gas replaced by coal will reach 67 to 81 Mt and 8.7 to 14.3 Gm³ in 2020 and reach 93 to 138 Mt and 32.3 to 47.3 Gm³ in 2030, respectively. By implementing this strategy, China’s external dependence on oil, natural gas, and primary energy is expected to be curbed at approximately 70%, 40%, and 20% by 2030, respectively. This paper also demonstrates how coal, as a substitute for oil and natural gas, can contribute to carbon and pollution reduction and economic cost savings. It suggests a new direction for the development of the global coal industry and provides a crucial reference for energy transformation in China and other countries with similar energy situations.

Keywords

coal replacing oil and natural gas / energy security / external dependence / energy strategy / China

Introduction

For decades, the demand for oil and natural gas in China has been growing rapidly due to continuous industrialization and urbanization. However, China has a relatively weak capacity for the domestic exploitation of oil and natural gas. Oil and natural gas supplies are over-reliant on imports, with external dependences of 67.8% and 37.9% in 2017, respectively [¹]. China is currently experiencing a critical period with regard to its energy transformation, and a prerequisite for success is ensuring the security of its energy supply. It is, therefore, necessary to actively seek a substitution plan for oil and natural gas with mature technology and strong self-sufficiency capacity, in addition to enhancing the exploitation and curbing the consumption of oil and natural gas.

As China’s main energy source, coal is a good substitution choice for oil and natural gas. In terms of resource reserves, coal has an absolute advantage, as China has reserves of approximately 5.9 Tt [²]. In 2017, surplus recoverable reserves of coal accounted for more than 93% of fossil resources [³]. In addition, coal is basically self-sufficient, with a low external dependence of only 7.7%, which benefits from a large-scale capacity for coal exploitation in China. In 2017, the effective capacity of coal exceeded 4.78 Gt, and the output was as high as 3.52 Gt [⁴]. Additionally, the technologies that can be used to replace oil and natural gas with coal are mature. Since the 11th Five-Year Plan, advanced coal conversion technologies with their own intellectual property rights have been industrialized [⁵]. Various technical routes for deep processing and power generation of coal have reduced the import demands of oil and natural gas to some extent. Overall, exploring the approach to and potential of coal as a substitute for oil and natural gas offers an essential reference for judging the evolution prospects of coal, oil, and natural gas against the background of energy structure transformation in China.

To date, scholars have studied some technical routes by which coal could replace oil and natural gas. Kong et al. [⁶] quantified the net energy change resulting from substituting imported oil with coal as it changed into a liquid from a life-cycle perspective. The International Energy Agency (IEA) [⁷] and Liao et al. [⁸], using scenario analysis, estimated the potential of coal to electricity (CTE) used in electric vehicles (EVs) as a substitute for oil. These studies provide useful insights into the development of specific technical routes. However, the evidence in these studies is generally insufficient to create an overall development strategy for coal, oil, and natural gas. However, some studies have used the ridge regression method to analyze inter-fuel substitution in the transportation, chemical, and iron and steel sectors [⁹–¹²]. Their results showed the possibilities and trends of coal as a substitute for oil and natural gas in these sectors but lacked quantification of the substituting capacity.

Generally, it is difficult to accurately estimate the potential of coal as a substitute for oil and natural gas for two reasons. First, to the best of the authors’ knowledge, no study has been conducted on the possibilities of coal replacing oil and natural gas from the perspective of an energy security strategy. Moreover, substitution types and corresponding technical routes lack scientific classification. Second, some technical routes have only been developed recently, and relevant statistical data are still lacking [¹³].

This paper addresses these two issues by developing the technical framework of a strategy for substituting oil and natural gas with coal. The framework considers three substitution types and 11 industrialized technical routes. The flexibility of the framework provides an opportunity to incorporate more industrialized technical routes in the future. Based on this, we use three scenarios to it quantifyies, in three scenarios, the potential of replacing oil and natural gas with coal in China for 2020 and 2030. Additionally, it discusses the effects, impacts, and implications of replacing oil and natural gas with coal in China.

Framework for the strategy of replacing oil and natural gas with coal

Strategy concept

China’s oil consumption has grown rapidly at an average annual rate of 5.9% since 2000. Nevertheless, oil production had a relatively small increase and even declined after 2015. As a consequence, China’s external dependence on oil has increased continually, exceeding 30% in 2002, exceeding 60% in 2015, and approaching 70% in 2017. The same is true of natural gas. Although China has vigorously promoted the exploitation of natural gas in recent years, the growth rate of production has been lower than that of consumption. The external dependence on natural gas exceeded 20% in 2011 and was close to 40% in 2017, as shown in Fig. 1. The IEA [¹⁴] and BP [¹⁵] predicted that China’s external dependence on oil and natural gas would remain high, exceeding 70% and 40%, respectively, for some time. This reveals that the domestic supplies of oil and natural gas are seriously insufficient. However, the geopolitical complexities of major oil-producing countries, such as Iran and Venezuela, are likely to exert long-term pressure on the security of oil supply in China.

To ensure the overall security of China’s energy supply, at the Sixth Meeting of Central Leading Group on Finance and Economy in 2013, Chinese government emphasized the need to promote a revolution in energy supply and to establish a diversified supply system. As a major component of the energy supply system, coal is being vigorously promoted to be used in a clean and efficient way. With the substantial support of the government, a variety of technical routes that convert coal, as raw material, into energy or chemicals have been industrialized. Simultaneously, the capacity to replace oil and natural gas with coal has gradually increased in scale. In this paper, this strategy is referred to as the strategy for replacing oil and natural gas with coal.

Coal can replace oil and natural gas in roughly three forms. In the first form, coal produces fuels, which act as substitutes for oil and natural gas fuels (such as coal to oil). This is called A substitution. In the second form, coal manufactures organic chemicals that can substitute oil- and natural gas-derived chemicals (such as coal to olefin). This is called B substitution. In the third form, coal accomplishes the functions of oil and natural gas (such as coal power generation used for EVs, thus acting as a substitute for gasoline or diesel consumed by traditional vehicles). This is called C substitution, also known as functional substitution.

Figure 2 indicates that oil consumption accounted for 20.0% of primary energy consumption at 800 Mtce (560 Mt) in 2016 [¹⁶]. Approximately 98.9% of the oil was consumed in the refining industry to produce oil fuels (gasoline, diesel, kerosene, and fuel oil) and petrochemical materials (naphtha). A total of 492 Mtce of oil fuels was expended in the terminal sectors, and the transport and domestic sectors accounted for the vast majority of the consumption. The industrial sector consumed 73 Mtce of petrochemical materials to produce chemicals. In the strategy in which coal substitutes oil, the principal feature is that coal serves as the raw material to produce the products traditionally produced by oil or to accomplish the functions traditionally realized with oil as the raw material. Specifically, A substitution is used to produce refined oil or blending oil, B substitution to produce refined oil-derived chemicals, and C substitution to accomplish the functions of refined oil. In summary, the strategy in which coal substitutes oil indirectly increases the domestic supply capacity of oil to decrease external dependence on oil.

In 2016, China consumed 271 Mtce (205.8 Gm³) of natural gas, accounting for 6.8% of the primary energy consumption. Of this amount, 58 Mtce of natural gas was used in the thermal power and heating sectors where natural gas was separately converted into electricity and heat. A total of 210 Mtce of natural gas was consumed in the terminal sectors, with the industry sector comprising the largest portion of 54.9%. Moreover, the domestic sector accounted for 23.6%. In all of the above sectors, natural gas generally has the advantages of cleanliness and low carbon emissions compared with coal; hence, it is difficult to substitute natural gas with coal. Furthermore, the natural gas chemical industry, which, for example, uses natural gas to synthesize ammonia and methanol, was restricted by national policies for further development. Therefore, coal is not considered a substitute for natural gas in the chemical industry. When substituting natural gas with coal, the principal feature is to produce synthetic natural gas as fuels with coal as the raw material (A substitution). In summary, this strategy adds a secondary production capacity for natural gas to reduce dependence on imported natural gas.

Technical routes by which coal replaces oil

In terms of A substitution, the major technical routes in China include direct coal liquefaction (DCL), indirect coal liquefaction (ICL), coal to methanol to gasoline (CTMTG), coal tar hydrogenation (CTH), coal to methanol fuel (CTMF) and coal to ethanol fuel (CTEF). The 1.08 Mt DCL project put into production in 2010 by the China Energy Investment Corporation (CHN ENERGY) has achieved long-term stable operation. This exemplifies that DCL technology, with its own intellectual property rights, has been commercialized. The 4 Mt ICL project operated in 2016 by CHN ENERGY has taken a leading position globally by adopting the high-temperature Fischer-Tropsch synthesis with its own intellectual property rights. By 2017, the capacities of CTMTG and CTH in China reached 1.5 Mt and 4.63 Mt, respectively. Of these amounts, the capacity proportions of the key technologies, which have their own intellectual property rights, were up to 93.3% and 79.5%, respectively. The vehicles fuelled by CTMF have been piloted in provinces of Shanxi, Shaanxi, Guizhou, Gansu, etc.

In 2017, 43 CTMF production bases that had more than 0.1 Mt in capacity created a nationwide capacity of 11 Mt. In addition, China put seven CTEF projects into operation with a total industrialization capacity of 0.86 Mt by 2017.

For B substitution, China’s main technical routes involve coal to methanol to olefin (CTMTO), coal to methanol to arene (CTMTA) and coal to glycol (CTG). The CTMTO technology has been proven commercially and had an industrialization capacity of 12.8 Mt in 2017. As the core conversion technology, the DMTO of the Dalian Institute of Chemical Physics and the SMTO of Sinopec are widely applied in CTMTO projects. For coal to propylene, the Lurgi of German is chiefly used as a key technology. The industrialization potential of the CTMTA technology is still being demonstrated. By 2017, the total capacity of CTMTA projects reached 0.47 Mt. In 2009, the Fujian Institute of Research on the Structure of Matter took the lead in the industrialization of the CTG technology worldwide. Subsequently, CTG projects adopting the Ube of Japan and Shanghai Pujing technologies were operated consecutively. In 2017, the industrialization capacity of China’s CTG projects reached 2.88 Mt, of which the capacity of key technologies with their own intellectual property rights reached 91.3%.

CTE for driving EVs (CTE(EV)) is the only mature technical route in the C substitution category. In recent years, China’s EV industry has developed rapidly with the support of policies and subsidies. By the end of 2017, there were 12000 electric locomotives, 0.24 million electric buses, and 1.23 million and 0.17 million light EVs for passengers and commerce in China, respectively. Regarding the structure of electricity expended by EVs, CTE contributes the most, with a proportion of approximately 65%.

Technical route by which coal replaces natural gas

In China, the technical route by which coal replaces natural gas refers to the route of coal to synthetic natural gas (CTSNG). Four CTSNG projects were put into production by 2017: the 2 Gm³ CTSNG project by the Xintian Corporation and the 1.38 Gm³ CTSNG project by the Qinghua Group in Xinjiang Uygur Autonomous Region, the 1.33 Gm³ CTSNG project by the Datang Corporation and the 0.4 Gm³ CTSNG project by the Huineng Corporation in Inner Mongolia Autonomous Region. These projects use TREMPTM of Denmark and DAVY of Britain as their methanation technologies.

Methodology and data

Calculation method

System boundary

Figure 3 shows the system boundary for the estimation of replacing oil and natural gas with coal. Because some plants use fuel coal to generate electricity and heat during production, while others are met by external electricity and heat supply [¹⁷], it is difficult to quantify the amount of fuel coal per unit of product for each technical route. Therefore, this paper only considers the coal used as a raw material in the production process. The oil refining process is a joint production system (oil produces products such as diesel, gasoline, and naphtha through refining) which requires an appropriate allocation procedure to calculate the consumption of each product [¹⁸]. Given the energy properties of these products, the net calorific values of these products are used to allocate the oil they consume.

Coal consumption model

As the coal consumption factor varies by technical route, the coal consumption for each technical route is calculated separately, as shown in Eq. (1).

(1)C_i=P_i\times C{F}_i,

where C_i is the coal consumption of the ith technical route, P_i is the annual production of the ith technical route, and CF_i is the coal consumption factor of the ith technical route.

Oil and natural gas substitution model

Accordingly, oil (natural gas) substitution for each technical route is given by

(2)S_i=P_i\times S{F}_i,

where S_i is the oil (natural gas) substitution of the ith technical route, P_i is the annual production of the ith technical route, and SF_i is the oil (natural gas) substitution factor of the ith route.

Substitution efficiency model

A key parameter, substitution efficiency, is defined as the ratio of oil (natural gas) substitution and coal consumption to represent the degree of coal savings, as shown in Eq. (3).

(3){\eta }_i={\displaystyle \frac{S_i}{C_i}},

where h_i is the substitution efficiency of the ith technical route.

Scenario definition

To analyze the potential of coal substituting oil and natural gas, a development scenario for various technical routes should be set first. Since the 13th Five-Year Plan, China has successively promulgated the 13th Five-Year Plan for the Demonstration of Coal Deep-Processing Industry [¹⁹] and the Plan for the Innovative Development of the Modern Coal Chemical Industry [²⁰]. Based on the above policies, three development scenarios are designed.

The 13th Five-Year Plan for the Demonstration of Coal Deep-Processing Industry proposes to use the process of technological development to determine the pace of industrialization. This elucidates that large-scale expansion for capacity cannot be performed at the current technological level. The tone for the steady development of the coal deep-processing industry is clarified by this plan, which is called the baseline scenario. The construction period of demonstration projects is generally five years. However, for some projects with immature technologies, poor anti-pollution measures or low return on investments, the construction cycle is frequently longer. For instance, the total operation and construction scale of CTSNG projects reached 32.7 Gm³ in 2010 [²], while the operation projects only had a capacity of 5.1 Gm³ in 2017. This signifies that most of the construction projects at that time were not completed on schedule for various reasons. The period from 2017 to 2020 lasts three years; hence, 60% of the construction projects in mature technical routes are expected to be put into production by 2020. In addition, for immature technical routes (e.g., CTSNG and CTMTA), construction projects are deemed to have a lower operation ratio of approximately 40% according to previous experience. In 2030, all construction projects are taken as being in operation. Similar to the situation of the construction projects for 2020, the planned projects with mature and immature technical routes are also considered to have completion ratios of 60% and 40% by 2030, respectively.

With gradual improvement in technological maturity and the continuous improvement in equipment autonomy, the coal deep-processing industry has developed an engineering foundation for large-scale demonstration in recent years. Furthermore, China’s oil and gas supply may face long-term challenges due to the unpredictable international situation with regard to the economy and politics and the geopolitical complexity of some major oil producers. Thus, from the perspective of energy security, there is likely to be a scenario in which China advances the coal deep-processing industry more actively for a large-scale demonstration to effectively curb the increase in oil and natural gas imports. This is referred to as the positive scenario. With the energetic support of the country, demonstration projects have a shorter construction period. For example, the 4 Mt ICL project by CHN ENERGY was completed in approximately 4 years. Therefore, 70% of the construction projects with mature technical routes are treated as being completed by 2020. For immature technical routes, the projects under construction have a lower completion ratio of 50%. By 2030, all construction projects are expected to be completed. The planned projects are put into production at ratios of 70% with mature technical routes and 50% with immature ones.

However, there are several challenges (e.g., the reverse distributions of coal and water resources, low environmental capacity at the bases of the coal deep-processing industry, and the arduous task of national carbon reduction) hindering the progress of the coal deep-processing industry. For example, the most recent environmental law implemented in 2015 resulted in a reduction in the number of projects approved in the environmental impact assessment that year. In this context, China may be more discreet in investing and deploying demonstration projects, which is called the cautious scenario. Based on this, 50% of the construction projects with mature technical routes and 30% of those with immature ones are expected to be put into operation by 2020. For 2030, all construction projects are expected to be in production. Regardless of mature technical routes or immature ones, the operation ratio of the planned projects in 2030 is equal to that of the construction projects in 2020.

The 13th Five-Year Plan for Electricity Development indicates that the ownership of EVs in China will reach up to 5 million by 2020, with 4.6 million light EVs and 0.2 million electric buses and trucks each [²¹]. To further reduce pressure on oil supply, the scale of the EV industry will continue to expand rapidly from 2020 to 2030, with ownership likely to reach 80 million by 2030 [⁸]. Authoritative studies have performed in-depth analyses of three scenarios for CTE(EV) [⁷,⁸,²²]. Therefore, their results are directly cited in this paper.

Data sources

Data sources for consumption and substitution factors

There are two main sources from which to acquire consumption and substitution factors for each technical route. The first-hand data about the input and output of representative coal chemical plants are collected and an inventory of coal consumption factors for 2017 created. These plants use mainstream technology and scale equipment. For example, the DCL and ICL plants surveyed occupy 100% and more than 50% of the total capacity for each technical route, respectively. Therefore, data from these plants could represent the actual operation levels of various technical routes. Given the progress of production technology, a combination of interviews with engineers and policy analysis is used to estimate coal consumption factors for 2020 and 2030. Other data missing in the field study, particularly the coal consumption factor of CTE(EV) and the substitution factors of all technical routes, are supplemented and estimated by the data published in the literature [⁷,¹⁶,²³]. Detailed consumption and substitution factors for each technical route are listed in Table 1.

Data sources of annual outputs

Because many technical routes have been developed for only a few years, the number of plants in operation is relatively low. The annual outputs of plants in 2017 are collected through web research. Meanwhile, benefitting from strict supervision and assessment systems, detailed information on plants under construction (and their plans) is surveyed by a feasibility study and environmental assessment reports. The capacities of plants in operation, those under construction, and those that are planned are given in detail in Fig. A1. Combined with the definition and literature background of the scenario, the annual outputs for each technical route in 2020 and 2030 are estimated, as tabulated in Table 2.

Results and discussion

Status quo for the substitution strategy

In 2017, China consumed 72.89 Mtce of coal to replace 44.92 Mtce (31.30 Mt) of oil. The strategy of coal substituting oil had a substitution efficiency of 61.3% and reduced external dependence on oil by 1.6%. Figure 4 demonstrates details on a variety of substitution types. In A substitution, 23.18 Mtce of coal was used in producing 13.73 Mt of liquid fuel to substitute 15.16 Mtce of oil with a substitution efficiency of 65.4%. CTMF and ICL were the leading substitution routes, accounting for 38.2% and 21.8%, respectively. In B substitution, 11.19 Mt of CTMTO, 0.28 Mt of CTMTA, and 1.19 Mt of CTG were produced by 38.87 Mtce of coal. These routes substituted 15.16 Mt of oil with a substitution efficiency of 47.6%. CTMTO offered major substitution with a proportion of up to 91.4%. In C substitution, 31.8 TWh of CTE(EV) was generated by 10.84 Mt of coal. The route reduced oil demand by 11.06 Mtce. C substitution had the highest substitution efficiency of 102.0%.

CTSNG used 6.54 Mtce of coal in synthesizing 3.27 Gm³ (4.02 Mtce) of natural gas in 2017. The strategy of coal substituting natural gas decreased the external dependence on natural gas by 1.4% with a substitution efficiency of 61.4%.

Potential of the substitution strategy

Potential of coal replacing oil

In 2020, 115 Mtce, 132 Mtce and 160 Mtce of coal will be consumed to replace 87 Mtce (61 Mt), 99 Mtce (69 Mt), and 125 Mtce (87 Mt) of oil under cautious, baseline, and positive scenarios, respectively, as exhibited in Fig. 5. Correspondingly, the substitution efficiencies will be 75.4%, 75.0%, and 78.0%, which shows increases of more than ten percentage points from 2017, respectively. In 2030, the use of coal in the three scenarios will increase by 59.9%, 68.6%, and 62.9%, respectively, compared to the values in 2020. Simultaneously, oil substitution adds 52.9%, 67.9%, and 58.5%, respectively. Accordingly, the substitution efficiencies in 2030 that will reach 72.1%, 74.7% and 75.9% are lower than those in 2020 and higher than those in 2017.

The contributions of diverse substitution types clearly change. For A and B substitutions, the contributions drop to 24.2%–26.2% and 27.6%–30.7% in 2020, respectively. However, there is a marked addition to the contributions in 2030, which reaches 30.0%–30.3% and 33.3%–39.2%, respectively. The contribution of C substitution first increases from 24.7% in 2017 to 43.2%–48.3% in 2020 and then falls to 30.7%–36.4% in 2030.

More specifically, CTE(EV) surpasses CTMTO as the greatest contributor to oil substitution by 2020. The contribution ratio of CTMTO drops to 23.7%–26.8%, which is lower than that of CTE(EV) by approximately 20 percentage points. For 2030, CTE(EV) continues to contribute the most in both the baseline and positive scenarios, while it is overtaken by CTMTO for the contribution ratio in the cautious scenario.

Potential of coal replacing natural gas

Figure 6 shows the potential of substituting natural gas with coal in 2020 and 2030 in China in three scenarios. It is observed in Fig. 6 that for the cautious, baseline and positive scenarios, CTSNG uses 16 Mtce, 21 Mtce and 26 Mtce of coal to synthesize 11 Mtce (8.7 Gm³), 14 Mtce (11.4 Gm³) and 18 Mtce (14.3 Gm³) of natural gas in 2020, respectively. The substitution efficiency of CTSNG adds approximately six percentage points to the 2017 value. Besides, the coal consumption of CTSNG in 2030 grows to 3.5 times, 3.3 times, and 3.1 times that of 2020, respectively. The production of natural gas rises to 3.7 times, 3.5 times and 3.3 times that of 2020, respectively. The substitution efficiency increases by approximately four percentage points compared with that of 2020.

Effects of the substitution strategy on energy security

Figure 7 plots the changes in external dependence on oil, natural gas and primary energy due to the development of the strategy for replacing oil and natural gas with coal in different scenarios. Compared with the situation without substitution, the implementation of the strategy in 2020 and 2030 results in obvious reductions in external dependence. Specifically, the positive scenario achieves maximum reductions, followed by the baseline scenario, and cautious scenario.

In contrast to 2017, the external dependences on oil, natural gas and primary energy separately obtain reductions of 1.4–2.7 percentage points, 1.8–3.6 percentage points, and 0.9–1.7 percentage points in 2020 and 2.5–4.6 percentage points, 5.6–8.7 percentage points, and 2.3–3.8 percentage points in 2030, respectively. Coal plays an increasingly remarkable role in replacing oil and natural gas. In contrast to 2017, coal replacing natural gas had a stronger effect than coal replacing oil in 2020 and 2030, and the gap between them is widening.

In the cautious scenario, the external dependence on oil somewhat declines compared with the situation without substitution, although it is on the rise in the time series. The external dependences on natural gas and primary energy first increase and then fall below 40% and 21% in 2030, respectively. In the baseline scenario, the increase in the external dependence on oil is effectively curbed. The external dependences on natural gas and primary energy are consistent with that of the cautious scenario and decline to 38.5% and 19.7% in 2030, respectively. Especially for the positive scenario, the external dependence on oil remains in a relatively stable state by being curbed below 70% consistently. By 2030, natural gas has a favorable capacity for domestic supply with a lower external dependence than in 2017. Simultaneously, the external dependence on primary energy decreases to 19.0%.

According to the 13th Five-Year Plan for Energy Development, the self-sufficiency ratio of China’s primary energy is expected to be above 80% by 2020 [²⁴]. There is still a gap of 2.6 percentage points between the self-sufficiency ratio of primary energy and the planned target, even if the strategy of coal replacing oil and natural gas is implemented in the positive scenario. Therefore, an additional scale of non-fossil energy should be exploited to partly substitute the imports of oil and natural gas to achieve the planned target. The Revolution Strategy in Energy Production and Consumption (2016–2030) claims that China maintains a high rate of self-sufficiency in primary energy from 2021 to 2030 [²⁵]. Implementing the strategy of coal replacing oil and natural gas in baseline and positive scenarios reduces the external dependence on primary energy to below 20% by 2030, which meets the requirement of the policy above.

Impacts of the substitution strategy on climate change, the environment, and the economy

As the largest carbon emitter in the world, China faces tremendous pressure to reduce emissions [²⁶]. Therefore, China must make serious efforts to meet its reduction commitments. With the progress of energy-saving and emission reduction technologies, the strategy of coal replacing oil and natural gas has shown great potential for carbon reduction. Huang et al. [²⁷] estimated that the coal deep-processing industry could contribute to 205 Mt and 405 Mt of carbon reduction in 2020 and 2030, respectively, by a combination of technology upgrades, carbon capture, storage and carbon capture, utilization, and storage and other technologies. Moreover, Li et al. [²⁸] calculated that raising the entry threshold, eliminating outdated capacity, improving existing plants and enhancing operation loads could provide a total carbon reduction potential of 265 Mt across the coal power generation industry in 2020. It is clear that the strategy of coal replacing oil and natural gas contributes remarkably to achieving reduction commitments.

China is vigorously promoting the clean and efficient utilization of coal. Compared with 2010, the emissions of SO₂, NO_x, and dust from coal production and consumption are expected to be respectively reduced by 29%, 30%, and 20% by 2020 and 48%, 50%, and 38% by 2030 [²]. Specifically, the introduction of ultra-low emissions standards substantially reduced SO₂, NO_x, and dust emissions from the coal power generation industry by 65%, 60%, and 72%, respectively, in 2017 compared with 2014 [²⁹]. The emission factors of these pollutants from the coal deep-processing industry are estimated to be reduced by more than 10% in 2020 and 30% in 2030 compared with 2017 [³⁰]. In total, the development of a strategy for replacing oil and natural gas with coal is consistent with the requirements of environmental friendliness.

With the high probability of increasing oil and natural gas prices in the future [³¹], the economic advantage of the strategy for replacing oil and natural gas with coal is gradually becoming more obvious. For example, added values per unit product for almost all technical routes in the coal deep-processing industry are rising remarkably along with oil prices [²⁷]. This indicates that products from the coal deep-processing industry have lower costs than those from the oil refining and petrochemical industries at high oil prices. Although EVs currently have higher overall economic costs than vehicles powered by petroleum-based fuels [³²], the EV market share will increase by 25% and 42% when gasoline prices increase from 3.8 USD/gal to 5.7 USD/gal, and 7.6 USD/gal, respectively [³³]. The IEA [¹⁴] predicted that China would expend more than 200 and 350 billion USD to import oil in 2020 and 2030, respectively. Therefore, developing a strategy for replacing oil and natural gas with coal could reduce economic costs while maintaining an adequate supply of energy.

Implications of the substitution strategy on energy transformation

China is promoting a revolution in energy production and consumption and building an energy sector that is clean, low carbon, safe, and efficient [³⁴]. To curb China’s coal demand, as the country is the world’s main coal consumer, the power generation, deep processing, iron and steel, and building material industries, as well as the domestic sector, are facing major transformations [³⁵]. The policies involved with replacing natural gas and electricity with coal and industrial adjustment result in decreased coal consumption in the latter three sectors [³⁶–³⁹]. Therefore, coal power generation and deep-processing industries will account for more coal consumption in the future, which is consistent with the results obtained in this paper. This indicates that the direction of coal transformation is shifting from the consumption of the whole industry to intensively developing coal as a substitute for oil and natural gas. In essence, coal is transformed from traditional fuel to a combination of raw material and fuel and from a basic energy to a strategic energy. For China’s energy transformation, the strategy of replacing oil and natural gas with coal is a critical way to ensure energy security under current conditions.

Against the global background of the decreasing use of coal, China’s strategy of replacing oil and natural gas with coal provides new opportunities for the development of the coal industry. Other countries with similar energy situations, such as Poland, South Africa, and Indonesia, might use China’s experience for reference in developing coal power generation and deep-processing industries. However, there are some aspects that are worth noting or strengthening when implementing this strategy in China. Specifically, the concept of ecological civilization should be upheld to build a green industrial system that prioritizes resource conservation. Innovation in key technologies (e.g., methanation catalysts for CTSNG and synthesis catalysts for CTMTA) and equipment (e.g., large-scale and advanced gasifiers and air separation plants) should persist over time. Meanwhile, research on and the application of subversive technologies such as one-step synthesis of olefin/arene and CO₂ to methanol/olefin should be energetically deployed to open new technical routes for replacing oil and natural gas [⁴⁰]. Comprehensive consideration should be given to resources, the environment, transportation, market, and other factors to avoid the obtuse deployment of demonstration projects. Furthermore, the government should formulate practical plans and policies to enhance the competitiveness and risk resistance of the industry. Standards for clean production, safety and environmental protection should be promptly established to promote the standardized and unified management of relevant enterprises.

Conclusions

The uniqueness and advantages of China’s strategy for replacing oil and natural gas with coal lie in numerous technical routes, advanced independent technologies, world-leading industrialization levels and broad prospects for progress. As substitution efficiencies have improved since 2017, replacing oil and natural gas with coal will hopefully achieve levels of 67–81 Mt and 8.7–14.3 Gm³ in 2020 and 93–138 Mt and 32.3–47.3 Gm³ in 2030, respectively. The implementation of this strategy in the positive scenario contributes the most considerable substitution effect to curbing external dependence on oil, natural gas and primary energy at 68.9%, 37.0%, and 19.0%, respectively, in 2030. The strategy of coal replacing oil and natural gas would be a major step toward reducing carbon emissions, environmental pollution, and economic costs, which might be a crucial path toward realizing coal utilization with cleanliness and high efficiency. Developing this strategy has vital strategic and practical significance for relieving China’s dependence on imported oil and natural gas in the future.

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