Peak coal: why the industry's dominance may soon be over

The analysts point to three reasons for the eclipse of coal in China. First, growth in demand for energy in China is slackening. Second, burning coal faces serious environmental limits, notably air pollution and water shortages – and, in the future, carbon limits. And finally, there are more viable alternatives, such as renewables, natural gas, and nuclear.

Growth in China's energy demand is waning because GDP growth is slowing. That's because GDP growth is now based less on industrial activity and more on the services economy, and because China is making big strides in using its energy more efficiently. More than 17,000 industrial and other enterprises currently have mandatory targets for improved energy efficiency.

Meanwhile, concern about smog is now a major political issue in China. The regular TV footage of near-zero visibility in major cities has been backed up by recent research findings that dirty air is cutting more than five years off the life expectancy of the half-billion citizens of northern China.

Meanwhile the water needed for power station cooling towers is running out. Most of the country's coal reserves are in the dry west. Tianyi Luo of the World Resources Institute last year found that 51 percent of planned future coal power stations in China were in provinces with "extremely high water stress": Inner Mongolia, Shanxi, Shaanxi, Ganshu, Ningxia and Hebei.

In the search for alternatives, China is now the world's biggest investor in renewables. It spent $56 billion in 2013 alone. That has made China the world's largest generator of both solar and wind energy. Along with hydro-dams, solar and wind now deliver 9 percent of China's electricity. Meanwhile, shale gas is on the horizon, and some 40 percent of the nuclear power plants currently under construction in the world are in China, where 28 nuclear plants are under construction.

Certainly, Chinese investment in coal has not ceased. In 2013, the government approved a series of major mining projects that are expected to increase coal production by 2-3 percent in the coming years. But with an economy still growing by 7 percent a year, the trend is in the right direction.

A final reason why China is on course to reduce its dependence on coal is its climate policy. Surprising to some, China already has rules to curb its soaring carbon emissions. So far, these relate only to reducing the carbon intensity of its economy – that is the number of tons of carbon emitted per dollar of GDP. China is committed to reducing carbon intensity by 40-45 percent from 2005 to 2020. Progress looks good, according to a study by the European Commission's Joint Research Center last November. In 2012, the economy grew 8 percent but emissions grew only 3 percent.

The extent of progress partly reflects the gross inefficiency of the Chinese energy industry in the past, however. China currently produces 29 percent of global CO2 emissions, despite having only 15 percent of the global GDP.

Nonetheless, on the back of its carbon efficiency targets, China seems to be on the verge of setting specific emissions targets. Initially, they will allow a continued rise in emissions, which remain less than half those of the U.S. if measured per head of population. But eventually there will be a peak. The big issue is when.

Earlier this month, He Jiankun, chairman of China's advisory committee on climate change, said China was likely to introduce carbon caps in its next five-year plan, starting in 2016. This caused a stir, and he later clarified that this was his personal view only, not government policy. China's chief negotiator at international climate talks, Xie Zhenhua, responded that experts were still divided on when to peak China's CO2 emissions, though it would happen "as soon as possible."

The detail may be hazy, but the big picture is becoming clear. China expects to peak coal burning soon, and, despite continued economic growth, that should lead to a peak in CO2 emissions perhaps a decade later.

Since China burns half the world's coal, this matters hugely for the planet. But it is more than that. Because where China goes, other developing countries follow. India, the other coal superpower, is increasingly beset by smog and rampant corruption in the coal industry, which provides 70 percent of the country's electricity. But there are signs that India could be ripe for change too.