Traffic Jam in Beijing

Energydesk reporter Zachary Davies Boren is in Beijing

I arrived in the Chinese capital just as everything started kicking off. What everyone’s been talking about in newsrooms and on trading floors hasn’t yet caused a panic on the streets of Beijing.

I’ve spoken to some people pretty-in-the-know and here’s their (and my) take on the situation. Warning, this may stray a little out of energy — but most of it’s all relevant.

Coal: Stocks crater, Shenhua in tatters but new air pollution law to go ahead

This financial crash is not actually about energy. No matter. It’s still badly hurting China”s biggest energy companies, with coal stocks across the board plunging these past two days.

Shenhua, for instance, the largest miner in the world, saw its value crumble nearly 9 points by the time the Shanghai Stock Exchange closed on Tuesday. Shanxi fell even further, dropping 19 points. Following government intervention late last night, both have had a better Wednesday — which basically just means things haven’t gotten any worse.

An interesting piece in the Wall Street Journal points out that the misconception that Shenhua is exclusively a coal enterprise isn’t doing it any favours. The mining giant is actually more of a power company these days, making more money out of the less-talked-about generation side of its business.

But that flourishing sector, same as ChinaCoal’s move into gasification, reveals that the major players recognise the tailspin that the industry has found itself in. Some coal companies will bounce back, but it will mostly be of the ‘dead cat’ variety — meaning just because they can’t go any lower. And the coal price will stay depressed for a long time yet; its fall was supply-and-demand dynamics, a totally different thing.

Because it wasn’t all rosy before the stock market crashed either. This month 11 of the 37 listed Chinese coal companies announced losses for the first half of the year, which is way up from last year; and 70% of the country’s large and medium-sized coal companies have also lost money in 2015.

State-run power producer Huaneng, however, has posted 31.5% growth over that period.

Meanwhile, Reuters reports that the Chinese government is going ahead with a major new air pollution law that will enable it to both punish authorities that fail to meet standards, and introduce a coal cap.

And the AP says so-called ‘clean coal’ has emerged as a topic of energy cooperation between China and the US, with the two yesterday hashing out an agreement to share their carbon capture and storage (CCS) findings.

Basically, China’s ‘war on pollution’ and clean energy agenda won’t be stopped by the crisis.

Also maybe don’t listen to the big commodity guys. As they admit themselves: “At the moment none of us can read China.”

Oil and Gas: On the mend (kind of) but long-term prospects don’t look good

The price of Brent Crude has actually increased, such is the relief that China cut its lending rate yesterday. It’s now hovering around $43.50, up nearly 20 cents from yesterday — that’s how bad things got.

A Business Green analysis says we’re in for a growing glut, which could make expensive exploration projects such as Arctic drilling even more uneconomical.

The crisis will also probably impact China’s negotiations with Russia over a new gas supply contract, with experts saying it’s a pretty bad moment for them to be meeting; you can bet Putin is pleased.

And here’s another plug for our analysis of the energy impacts of Black Monday, a term which  though over-used is way better than ‘the great fall of China’.

Renewables: So far so good, but there’s danger ahead

Well it could get worse for renewables, especially if the narrative of decoupling coal consumption and economic growth is effectively challenged, but at the moment things look okay.

Better than okay for China Renewable Energy (CRE) which yesterday reported profit growth of more than 500% so far this year, albeit only to around $5 million.

And France doesn’t appear worried. Ecology Minister Segolene Royal said that although China has to better handle environmental protections, its economy will be healthier because it has “invested heavily in renewable energy, particularly solar”.

However, in an attempt to avoid western tariffs on Chinese solar panel exports, major manufacturers are looking to build factories elsewhere in south east Asia, namely Thailand and Malaysia.

Ultimately the way out of this mess for China is to reform its economy, and in turn move from investment towards sustainable consumption. If that happens – and it’s certainly not going to be easy as it tries to stave off financial ruin – then renewables have a pretty big role to play. The country’s climate targets aren’t going anywhere.

What could undermine renewables is the damage done to the credibility of China policymakers. As Premier Li stands in the firing line, so too could the Jinping administration’s recent environmental agenda. What’s more likely, however, is just that government ministries will be reformed, and the country’s over-reliance on coal, steel and heavy industry will be addressed.

In other non-China news

Energydesk: Total, the French fossil fuel giant, has ditched the coal part of its portfolio, Helle reports.

US: President Obama has accused fossil-fueled businesses – and namechecked the Koch brothers – of “standing in the way of the future” by trying to stop renewable energy progress, reports The Telegraph.

UK: There might be fracking in Cheshire. Cheshire East Council leader Michael Jones says he backs fracking in the area provided if its proven safe, a year after issuing anti-shale ‘assurances,’ the BBC reports.

India: To cut coal imports, the Modi government will institute a four-step plan to increase domestic production, reports Business Spectator.

Africa: The Western part of the continent is developing a massive air pollution problem, reports Quartz.