The Coal Trap

In the cool, moist climes of southern Guizhou province, more than 10 million villagers have rotted teeth, arsenic poisoning or knock-knees, because they hang-dry corn and hot peppers indoors over coal-heated stoves (then proceed to eat it).

The stoves are also to blame for the No. 1 killer of rural women: respiratory disease. The World Bank recently called Linfen--a coking city in northern Shanxi province--the world's most polluted city. Of the world's 20 most polluted cities, 16 are in China. By 2009, the International Energy Agency predicted in November, China will overtake the United States as the world's biggest emitter of CO2--a decade earlier than it originally thought.

Beijing aims to reduce the country's energy consumption by 20 percent by 2010 and has pledged to reduce key pollutants like sulfur dioxide by at least 10 percent over the same period. Central policymakers also have begun to tinker with taxes, tariffs and commercial mechanisms to clean up the energy industry. China's state energy conglomerates are investing heavily in mechanized mines, next-generation power plants and coal-based fuel alternatives to oil.

But grand plans are not easily implemented in China. Beijing is pushing coal-based power plants that are clean, efficient and big. But it's had a tough time enforcing orders to dismantle or retrofit the smallest and dirtiest facilities. For a short time in 1999-2000, Beijing stopped approving new plants. But as soon as the freeze was ended, "everybody and his mother went out and built a power plant," says Joseph Jacobelli of Merrill Lynch in Hong Kong. Provincial and city officials are preoccupied with finding more energy, amid growing electricity shortages. There have been rolling blackouts in the south and southeast since 2002, because China's coal-distribution system can't keep up with demand.

The official Xinhua News Agency said last month that the 2006 goals for energy efficiency and pollution reduction would not be met. By midyear, energy use and sulfur dioxide emissions had edged up 1 and 6 percent, respectively, as provincial party leaders who'd vowed to help modernize power plants were reneging on their pledges. "China is adapting to new [energy] technologies faster than the United States," says veteran Beijing-based energy analyst James Brock. "The problem is the embedded interests, which perpetuate the existing system."

Beijing first caught on to the concept of clean coal--a catchall phrase for improvements ranging from modernizing mines to developing clean liquid or gasified coal for cars and power plants--in the 1980s. Back then, China's energy needs were relatively modest--the country was a net exporter of oil. Today China imports 40 percent of its crude oil. High oil prices, along with the country's noxious coal plants, have motivated Beijing to embrace new clean-coal technologies once deemed uneconomical. In fact, the government and state firms are sinking a reported $128 billion into new pipelines and plants that can gasify or liquefy coal--turning it into relatively clean diesel fuel for vehicles, methane for power generation and dimethyl ether for transport, home cooking and heating.