Environmental policies, and in particular clean-air measures, are set to constrain coal demand in China. Yet for now, one out of every four tonnes of coal used in the world is burned to produce electricity in China.

This makes China power sector the largest user of coal in the world by far, and as such, any fluctuation in China’s domestic power system can push global coal demand up or down significantly.

For example, if power demand in China remains stable, global coal demand is set to decline more than 1% per year. But with power demand growth of 10% – similar to the first decade of this century – global coal demand would grow over 3% per year.

Or, with annual growth in hydro output in China of about 1.5%, global coal demand grows at 0.2% per year. But 10% annual growth in hydro output would lead to a decline in global coal demand.

As another example — a shutdown in 2017 of small boilers in China, owing to clean air policies, triggered gas demand in China which in turn pushed up LNG prices in China and around the world.

Given that coal in China is the largest single source of primary energy in the world by far, the interlinkage between fuels and geographies sets Chinese coal in the centre of the energy stage.