China orders coal mines to increase production as power shortages bite

China has ordered its coal mines to ramp up production in a bid to ease a power crisis, as the country struggles to balance its need forelectricity with efforts to tackle the climate crisis.

Authorities in Inner Mongolia, China’s second largest coal-producing province, have asked 72 mines to boost production by a total of 98.4 million metric tons, according to state-owned Securities Times and the China Securities Journal, citing a document from Inner Mongolia’s Energy Administration. The order, which was approved on Thursday, took effect immediately, the state media outlets said.

The figure is equivalent to about 30% of China’s monthly coal production, according to recent government data. Inner Mongolia’s energy authorities didn’t immediately respond to a request for comment by CNN Business.

The MV Epic St George LNG (liquid natural gas tanker) passes the Esso Oil refinery in Fawley, near Southampton, southern England on October 4, 2021. (Photo by Adrian DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)

Related article A global energy crisis is coming. There's no quick fix

Power shortages have spread to 20 provinces in recent weeks, forcing the government to ration electricity during peak hours and some factories to suspend production. These disruptions resulted in a sharp drop in industrial output last monthand weighed on the outlook for China’s economy.

News of the production order triggered a plunge in coal prices on Friday. Thermal coal futures on the Zhengzhou Commodity Exchange tumbled as much as 6.7%. Shares in major Chinese coal miners and power producers also plummeted. Yanzhou Coal Mining (YZCAY) fell 11% in Hong Kong. China Resources Power (CRPJY) slid 12%.

The order comes only days after China’s top economic planning agency asked the country’s three biggest coal producing provinces — Inner Mongolia, Shanxi, and Shaanxi — to deliver 145 million metric tons of coal in the fourth quarter, so that the “livelihood use of coal” is not interrupted, according to separate statements by the provincial authorities last week.

The Datang International Zhangjiakou Power Plant at dusk in Xuanhua District of Zhangjiakou City, north China's Hebei Province.

Related article China is facing its worst power shortage in a decade. That's a problem for the whole world

These steps underscore the challenges facing Beijing as it attempts to balance the country’s need for power with President Xi Jinping’s push for a carbon neutral China by 2060.

Coal is the main energy source of China, widely used for heating, power generation, and steel making. Last year, it made up nearly 60% of the country’s energy use. It is a major source of the country’s carbon emissions.

Earlier this year, China has shut down hundreds of coal mines — or reduced production in the functioning ones — amid a national push to reduce carbon emissions. It also slapped restrictions on imports of coal from its key supplier Australia, as political tensions between the two nations escalated.

As a result, coal supply fell sharply, even as demand surged due to industrial growth and extreme weather conditions. That has driven coal prices to record highs and resulted in widespreadshortages of power.

— CNN’s Beijing bureau contributed to this article.