Understanding the employment and fiscal consequences of coal phase-out in China

Clark, A. (2021). Understanding the employment and fiscal consequences of coal phase-out in China. IIASA YSSP Report. Laxenburg, Austria: IIASA

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Abstract

China hosts more than half of global coal-fired power generation capacity and has the world’s largest coal reserves. If China’s 2060 carbon neutrality goal is to be achieved, domestic demand for coal is expected to shrink by at least 90% by 2060. This analysis uses asset-level data on coal plants and mines to construct a coal production-consumption network and to model the impact of coal power plant phase-out on coal power industry employment and net tax revenue.
At a constant rate of productivity increase, significant job losses in the coal industry will occur regardless of climate policy. Under a carbon-neutral trajectory, coal power generation will peak within a few years and decline thereafter, accelerating declines in coal demand, and reinforcing the effect of productivity gains on on coal jobs. In turn, declining tax revenues from capital and labour reduce the net fiscal contribution of the coal power sector.
For labour-efficient provinces, productivity gains have less impact relative to total mining jobs, and vice versa. Under the baseline scenario (current policies), employment supported by coal power drops to under 1 million by 2036, 500,000 by 2042, and 250,000 by 2045. Fiscal revenues rise initially, peaking with capacity in 2023. The ¥350-400 billion in total tax revenue annually up to the mid-2030s compares to estimated annual subsidies of ¥300-350 billion, suggesting the net fiscal contribution of coal power is less than ¥100 billion per year, without accounting for unpriced externalities.
Changes in coal industry employment are relatively unaffected in all but the most aggressive of climate policy scenarios. The tax base for coal is more capital-intensive than labour-intensive, since initial job losses do not induce a decline in tax revenue, and in each scenario, sharp declines in tax revenues begin only when capacity retirements accelerate.
The largest sources of employment, through operation of coal plants, are the ‘Big Five’ power generation companies, supporting 41% of China’s coal jobs between them. 30-40% of these jobs are lost by 2030, and another 30-40% by 2040. The Big Five are also the largest contributors to tax revenues nationally, at ¥140 billion between them. This remains steady until 2030, falling by over half by 2040 in most cases, and collapsing to less than 10% of the starting value by 2050.

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