The China coal-to-gas effect

The country's policy to cut coal production capacity has sent prices around the globe soaring. It’s good news for Europe's decarbonising efforts

Coal-to-gas switching in Europe's power sector has surged as more Chinese coal buying and some supply outages pushed coal prices higher. In 2014 and 2015 China's coal demand contracted as economic growth slowed and the government implemented measures to curb pollution. Meanwhile, the country's soaring coal output exacerbated a global supply glut. But this year China has taken steps to reduce the overcapacity by pledging to close 0.5bn tonnes over the next three to five years-a 15% cut on 2015 levels. The cuts have filtered through to European coal prices. Rotterdam coal futures have risen from around $47.85 per tonne in mid-October 2015 to almost $74/t at the same time this year. Between Sep