BEIJING China's increasing efforts to shift away from coal to cleaner fuels could put annual investments of around $21 billion at risk of being stranded, a research report estimated on Thursday.
China has relied heavily on coal to fuel its economic growth over the past three decades, and it now burns half the coal that the world consumes each year.
But a nationwide pollution crisis, increasing water scarcity and growing concerns over climate change mean Beijing wants to shift to cleaner energy sources. Analysts expect China's coal consumption to peak sometime between 2020 and 2030.
A quick shift, aided by a slower growing economy, would leave assets worth billions at risk of being unprofitable, according to the report by think-tank the Carbon Tracker Initiative and the Association for Sustainable and Responsible Investment in Asia.
"Lower-than-expected Chinese thermal coal demand threatens to leave those investors not actively assessing their Chinese coal holdings bearing the brunt of stranded assets and wasted capital," the report said.
Chinese coal companies spent around $21 billion in 2013 on exploring and developing coal resources, despite a government push to use more natural gas, nuclear power and renewables to generate power.
Based on estimates from the International Energy Agency for coal demand in 2020 under "business as usual" and "new policies" scenarios, the report said that up to 437 gigawatts of installed coal capacity could be at risk in 2020.
That would equal 40 percent of expected installed capacity by that year.
The report said companies such as Shanxi Coal International Energy Group (600546.SS) and Datang International Power Generation Co (601991.SS) were at risk from high debt levels amid falling coal prices, while poor quality of coal produced by China Coal Energy Co (601898.SS) could put that company at risk if there were strategic shutdowns.
Falling consumption would also have an impact on coal producers worldwide, because China is the world's biggest coal importer, the report said.
"This risk is of notable interest to Australian and Indonesia exporters," it said.
China plans to cap its coal consumption from 2015 at 3.9 billion tonnes and has banned the construction of new coal-fired power plants in the region surrounding Beijing as well as in the Yangtze and Pearl river deltas. Those regions have been told to make absolute cuts in consumption.
He Jiankun, a top climate adviser to the government, said at a conference earlier this week he expected consumption to peak at around 4-4.5 billion tonnes between 2020 and 2025.
(Reporting by Stian Reklev; editing by Jane Baird)