China’s Net Zero Strategy Relies on an Unlikely Tool: Lots of Coal

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Flexible Power

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Last year, China achieved a breakthrough by meeting new electricity demand nationwide with clean sources, pushing coal power generation down for the first time in a decade. President Xi Jinping called for the country to reproduce that feat going forward, even as the grid faces new pressure from artificial intelligence, electric vehicles and factory buildouts.

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Inner Mongolia has emerged as a leader in this campaign, cutting thermal-power generation by 4.2% last year — more than any other province, according to research by the Center for Research on Energy and Clean Air (CREA).

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The region is the nation’s top producer of wind power and now boasts China’s biggest energy-storage systems, with 25 gigawatts of battery capacity installed. But its coal-power network also played a central role. China’s policymakers are pushing for the country’s coal plants to be retrofitted wherever possible by 2027 in order to better support the renewables era. The idea is for the plants to become a more flexible power source, able to run at lower capacity, as well as to ramp up and down more quickly as required.

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“It’s a practical part of this larger puzzle — on one hand, to fill in this need for flexibility and then on the other hand, it is also a strategic move to make coal less important to the power system,” said Biqing Yang, an energy analyst at UK-based think tank Ember who wrote a recent report on the issue.

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Inner Mongolia has completed all of its coal-power retrofits ahead of schedule, according to Huang Zhiqiang, the region’s executive vice chairman, and running hours at the newly flexible plants have fallen in the last two years accordingly.

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But that hasn’t stopped the region from developing more coal power. Inner Mongolia also had China’s largest pipeline of coal power plants under construction last year, more than 20 gigawatts of capacity, according to Global Energy Monitor (GEM). 

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“Inner Mongolia in particular has a lot of local incentives to keep building, and there’s overall a bias toward overbuilding capacity rather than risk shortages,” said David Fishman, a principal at the Lantau Group who focuses on China’s power sector.  

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Policymakers still describe coal power as a necessary layer of energy security. The fear is that renewables and batteries, whose economics remain uncertain, will fail to keep up with growing electricity demand. Lagging infrastructure and a power market that still favors long-term contracts mean that new renewable energy capacity in China doesn’t always translate to an equivalent increase in generation.

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But the coal construction boom may extend the fuel’s use long after clean resources can provide sufficient backup, according to Kevin Tu, managing director of Agora Energy China, a Beijing-based think tank.

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“If retrofitting coal-fired power plants for better flexibility is used as an excuse to permit more greenfield power capacity, then this could be quite counterproductive,” he said at a press briefing in June.

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Coal to Chemicals

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A new growth spurt in the region’s already formidable coal-to-chemicals industry also threatens to turbocharge emissions.

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To date, China has invested in 75 projects to convert coal deposits into chemicals used in manufacturing, plastics production and fuels, according to GEM. Coal use in the sector rose 70% between 2019 and 2025, Bloomberg Intelligence data show, and Inner Mongolia became the industry’s central hub. 

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The Iran war’s soaring oil prices gave coal-based production an extra boost. Across China, 34 projects are in the pipeline, seven of which are in Inner Mongolia, including a 23.8 billion yuan ($3.5 billion) coal-to-olefins project that entered construction this spring.