Shanxi mulls 1b ton annual cap on coal output

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Shanxi Province, the country's second largest coal production base, wants to limit its output growth, in light of natural resource taxation reform in western China that would allow coal producing provinces to benefit from growing prices.

The province is considering setting a limit on coal output before 2015 at 1 bil-lion tons per year, according to the region's five-year economic plan, which is part of ongoing discussions being held through the weekend in the province's capital city of Taiyuan.

Previously, coal-mining provinces usually sought to maximize output, as the nat-ural resource tax revenue set by local governments was based on coal weight, rather than actual market value.

However, coal production areas are now trying to prevent output from growing too fast, due in part to the new natural resources taxation policy, launched last year in Xinjiang Uyghur Autonomous Region and likely to come into effect across all of western China this year.

"Now local governments will be motivated to let their resources drain slowly, in light of future price increases," said Lin Boqiang, director of energy research with Xiamen University in East China's Fujian Province.

Shanxi produced a record 740 million tons of coal in 2010, only after Inner Mongolia, which overtook Shanxi for the first time in 2009 with annual output of 782 million tons to top the country.

By adding more clean energy, such as hydro, nuclear, wind and solar power to its energy portfolio, the nation has been able to reduce the proportion of coal in the energy mix, despite the fact that it still makes up nearly 70 percent of energy consumption and is likely to continue to be the dominant fuel in the foreseeable future.

China, the world's largest producer of coal, also became a net importer for the first time in 2009, as recession-hit international coal prices in 2009 were lower than China's average domestic benchmark spot price.

Such figures helped the country's total import volume more than triple from the previous year, while its exports halved, chalking up net imports of about 103 mil-lion tons.

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