We have received your proposal on "Further Improving the Clean and Efficient Utilization of Coal" and would like to provide the following response:

Coal is the main source of energy and an important industrial raw material in China, accounting for about 70% of the country's primary energy production and consumption structure in the long term. In 2018, China's raw coal production reached 3.68 billion tons, with a consumption of 3.9 billion tons, accounting for 69.6% and 59% of the country's primary energy production and consumption, respectively. The abundant coal resources and their economic viability make coal the most reliable and economical energy resource in China, and it continues to be an important support for the country's economic and social development. The central government and the State Council attach great importance to the healthy development of the coal industry and the clean utilization of coal resources. General Secretary Xi Jinping has elaborated on the new strategy of "Four Revolutions and One Cooperation" for promoting energy production and consumption, which provides directions for the scientific development of the energy and coal industries. Promoting the clean and efficient development and utilization of coal is a necessary path to achieve the revolution in energy production and consumption.

1. Establishing a national inter-ministerial coordination mechanism for the clean and efficient utilization of coal to address major related issues.

The efficient and clean utilization of coal involves various departments such as development and reform, industry, science and technology, and energy. Currently, a key regional coal consumption reduction and substitution working group has been established at the national level. It is composed of the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Ecology and Environment, the National Bureau of Statistics, the National Energy Administration, and the people's governments of key regions. The office is located in the National Development and Reform Commission, responsible for reviewing the working plans for coal consumption reduction and substitution in key regions and coordinating major related matters.

In response to China's energy resource endowment characterized by rich coal resources, limited oil resources, and insufficient gas resources, we have implemented the decision-making arrangements of the CPC Central Committee and the State Council, strengthened inter-departmental coordination, and formed a joint effort to promote the clean and efficient utilization of coal. First, we have implemented the State Council's "Strategic Action Plan for Energy Development" (2014-2020) and actively developed clean energy such as natural gas, nuclear power, and renewable energy to reduce the proportion of coal consumption and promote the continuous optimization of the energy structure. We adhere to the simultaneous development of non-fossil energy and the efficient and clean utilization of fossil energy, gradually reducing the proportion of coal consumption and promoting the clean and efficient development and utilization of coal. Second, the National Energy Administration and other departments jointly issued the "Opinions on Promoting Safe, Green Development, and Clean and Efficient Utilization of Coal" (National Energy Administration Document [2014] No. 571) and formulated the "Action Plan for the Clean and Efficient Utilization of Coal" (2015-2020) (National Energy Administration Document [2015] No. 141), which clearly define the development goals and tasks for different stages of promoting the clean and efficient utilization of coal, including scientifically regulating coal production and distribution, developing clean and efficient coal-fired power generation, improving coal-fired industrial furnace and kiln technologies, promoting the graded utilization of coal, and reducing dispersed coal combustion and pollutant emissions. These efforts aim to steadily achieve the clean and efficient utilization of coal. Third, the Ministry of Industry and Information Technology and the Ministry of Finance jointly issued the "Action Plan for the Clean and Efficient Utilization of Coal in the Industrial Sector." The National Development and Reform Commission, the Ministry of Industry and Information Technology, and other relevant departments developed the "Interim Measures for the Management of Coal Consumption Reduction and Substitution in Key Regions," the "Comprehensive Improvement Project for Energy Saving and Environmental Protection of Coal-fired Boilers," and the "Implementation Plan for the Industrialization of Major Energy-saving Technologies and Equipment." These measures mainly target four key industrial sectors: industrial boilers, coking, coal chemical industry, and industrial kilns. Based on cities with high coal consumption, special actions are being taken to promote energy-saving and clean production technology transformation in enterprises, improve the level of clean and efficient utilization of coal in the region, achieve coal control and reduction, and improve regional environmental quality. Fourth, in order to strengthen air pollution prevention and control, we have been promoting the ultra-low emission transformation of coal-fired power plants based on the principle of "centralized utilization and clean utilization." To accelerate the clean and efficient utilization of coal in non-power industries such as steel, the Ministry of Ecology and Environment, together with relevant departments, issued the "Opinions on Advancing Ultra-Low Emission in the Iron and Steel Industry," which clearly defined the targets for ultra-low emission transformation in the steel industry and implemented comprehensive environmental supervision throughout the entire process, aiming to significantly reduce coal-related pollution emissions and achieve ultra-low emission. In addition, the Ministry of Industry and Information Technology, in collaboration with the National Standardization Committee, has formulated and revised the "Guidelines for Energy Saving Design and Evaluation of Industrial Boiler Systems" and the "Energy Efficiency Limit Values and Energy Efficiency Grades for Industrial Boilers." The ministry has also issued the "Catalogue for the Elimination of High-energy-consuming and Outdated Mechanical and Electrical Equipment (Products)" and organized energy-saving inspection agencies to conduct targeted inspections on industrial boilers and other mechanical and electrical equipment that do not meet national energy efficiency standards, ordering the cessation of the use of outdated boiler equipment. Energy-saving inspection agencies at all levels have conducted special energy-saving inspections on industrial enterprises based on standards and the catalogue, urging production enterprises to cease the use of inefficient boilers and implementing standard-compliant transformations to eliminate low-efficiency and outdated boilers. In 2014, the National Development and Reform Commission, together with relevant departments, issued the "Implementation Plan for the Comprehensive Improvement Project for Energy Saving and Environmental Protection of Coal-fired Boilers," and in 2016, it issued the "National Energy Conservation Action Plan during the 13th Five-Year Plan" which clearly stated the need to intensify the energy-saving transformation of coal-fired boilers and actively promote the replacement of large boilers with small ones. The key areas of transformation include combustion optimization, low-temperature waste heat recovery, solar preheating, automatic control, main and auxiliary engine optimization, and frequency conversion control, among others. The country has allocated central budget funds to support the energy-saving and environmental protection transformation of coal-fired boilers in key regions such as Hebei, Henan, Shandong, and Shaanxi, promoting the improvement of the energy efficiency level and cleanliness of coal-fired boilers. In December 2015, the National Energy Administration, together with relevant departments, issued the "Comprehensive Implementation Plan for Ultra-Low Emission and Energy Efficiency Improvement in Coal-Fired Power Plants," vigorously promoting the ultra-low emission transformation.

2. The Issue of Increasing Efforts in Key Technology Research and Conversion of Scientific Achievements for Clean and Efficient Development and Utilization of Coal

The country has always attached great importance to the research, promotion, and application of clean and efficient coal utilization technologies. Various national science and technology plans (funds), such as the "973" Program, the "863" Program, the Science and Technology Support Program, and the National Natural Science Foundation, have supported relevant scientific research work. The country has increased stable support for relevant central-level research institutes (bases) by allocating basic operating funds, basic scientific research funds, special funds for national (key) laboratories, and special funds for the renovation and acquisition of central-level scientific institutions, thus supporting the improvement of their research infrastructure and independent research.

The country has launched the National Science and Technology Achievement Transformation Guidance Fund, which integrates the establishment of sub-funds for venture capital investment, bank loan risk compensation, and other methods to attract social and financial capital into innovative fields and support the transfer and transformation of scientific and technological achievements in various fields.

During the "12th Five-Year Plan" period, the "Clean Coal Technology Special Plan" was formulated and released, and the "Clean Coal Technology Scientific and Technological Development" special project was organized and implemented. According to the special plan and key task deployment, research and development and demonstration of key technologies in the direction of clean coal-fired power generation, coal-based clean fuels, and pollution control were vigorously carried out. The country has deployed more than 20 research projects in national science and technology plans such as the 973 Program, the 863 Program, and the Science and Technology Support Program, involving hundreds of research topics. At the same time, great attention has been paid to the construction of independent innovation capabilities in the coal industry. Since the "11th Five-Year Plan," three national engineering and technology research centers, including power station combustion, have been established with support. Four industry technology innovation alliances including coal development and utilization have been formed. The Green Coal-fired Power Generation National 863 Program Research and Development Base based on IGCC has been established, nurturing a group of scientific and technological talent teams, innovative enterprises, and the formulation of relevant industry standards in the coal field, significantly improving the independent innovation capability of China's coal industry. With the strong support of the above-mentioned national science and technology plans, the technical level of clean and efficient utilization of coal in China has been greatly improved, and innovation capabilities have been significantly enhanced, achieving a series of important phased achievements. In terms of clean and efficient coal-fired power generation, the average coal consumption for thermal power units in China has reached 321 grams of standard coal/kWh, and the total installed capacity of 660-1000 MW ultra-supercritical generating units has reached 100 million kilowatts, ranking first in the world. The average coal consumption for power supply is 290 grams of standard coal/kWh. The annual average coal consumption for the power generation units of Shanghai Waigaoqiao Power Plant Unit 3 has reached 276 grams of standard coal/kWh, reaching the leading international level. The world's first 600 MW supercritical circulating fluidized bed coal-fired boiler unit has been successfully put into operation in Baima, Sichuan, and the technology has reached the international advanced level. China's first 250 MW-level IGCC demonstration power plant has been put into operation, becoming the fourth country in the world to have a large-scale IGCC power plant that is independently designed, constructed, and operated. Coal combustion pollutant control technologies such as dust removal, desulfurization, and denitrification have entered the stage of promotion and application, and some key technologies have reached the international leading level. In particular, low-NOx combustion technology for medium and low-volatile coal has reached the international leading level. A 3,000-ton/day advanced coal gasification technology and equipment have been successfully developed, overcoming a large number of technical challenges such as large-scale advanced coal gasification, new technology for gas transformation, new coal gasification, direct liquefaction, and low-rank coal utilization, and the overall level has reached the international leading level. During the "13th Five-Year Plan" period, based on the scientific and technological innovation achievements formed during the "12th Five-Year Plan" period, the key special plan of the National Key Research and Development Program "Clean and Efficient Utilization of Coal and New Energy-saving Technologies" was deployed. It focused on coal-efficient power generation, clean coal conversion, coal-fired pollution control, industrial waste heat recovery and utilization, industrial process and equipment energy-saving technologies, and other aspects. Three batches of guidelines were issued from 2016 to 2018, and a batch of major generic key technologies and application demonstration tasks were launched, including the "R&D and Demonstration of Ultra-supercritical Circulating Fluidized Bed Boiler Technology," "Efficient and Flexible Secondary Reheating Development and Engineering Demonstration," and "700°C High-efficiency Ultra-supercritical Power Generation Technology," among others.

At the same time, the Ministry of Science and Technology, together with relevant departments, is studying and deploying major projects for clean and efficient coal utilization by 2030. It is planned to deploy tasks in five major directions: green coal development, clean coal combustion and efficient power generation, clean coal conversion, carbon capture, utilization, and storage (CCUS), and decision support for clean and efficient coal utilization. It will form a systematic layout that combines long and short-term goals and is carried out in a step-by-step manner. Efforts will be made to achieve breakthroughs in net efficiency of coal-fired power generation, exceeding 50% by 2030. The cumulative annual coal savings will reach 800 million tons of standard coal, and CO2 emissions will be reduced by approximately 2 billion tons. Coal-fired power generation units will achieve a ramping capability of 20%-100%, significantly improving the capacity to absorb and accommodate renewable energy grid integration. The mastery of complete carbon capture, utilization, and storage technologies with the capacity of capturing millions of tons of carbon.

Next, we will further strengthen the coordination among different departments and plans. We will increase support for basic research and key generic technologies needed in the field of clean and efficient coal utilization. We will also enhance support for scientific and technological talents and innovation teams, encourage enterprises to play a leading role in technological innovation, and promote close integration of industry, academia, research, and application. We will actively support the research and development, standard formulation, and promotion of technologies and equipment related to clean and efficient coal utilization. For key generic bottleneck technologies in clean and efficient coal utilization, we will actively coordinate the introduction of advanced foreign technologies, speed up digestion, absorption, and re-innovation of related technologies, and promote the transformation of scientific and technological achievements and the commercialization and industrialization of technologies.

3. On the improvement of policy support measures, encouraging clean and efficient development and utilization of coal, and formulating relevant financial and tax preferential policies to increase the policy support for clean and efficient development and utilization of coal through high-tech technologies in terms of financial subsidies, corporate income tax, value-added tax, and finance.

In recent years, the country has introduced a series of tax preferential policies to support clean and efficient development and utilization of coal and other related areas. Coal technology enterprises that meet the criteria can enjoy relevant tax preferential policies. Regarding corporate income tax, firstly, preferential tax rates are applied to high-tech enterprises, and eligible high-tech enterprises are subject to a reduced corporate income tax rate of 15%. Since 2016, the criteria for identifying small and medium-sized enterprises have been relaxed, and the scope of high-tech fields has been expanded. Secondly, research and development expenses of enterprises can be deducted before tax, and a certain proportion can be added before the calculation of income tax. In 2017, the additional deduction ratio for research and development expenses for technology-based small and medium-sized enterprises was increased from 50% to 75%, while other enterprises still apply a 50% ratio. In 2018, the restriction on not allowing deductions for overseas research and development expenses commissioned by enterprises was lifted, and the policy of increasing the deduction ratio for research and development expenses to 75% for technology-based small and medium-sized enterprises was expanded to all enterprises. Thirdly, a tax exemption is granted for technology transfer income below 5 million yuan, and the portion above 5 million yuan is subject to a halved tax rate. The transfer of non-exclusive license rights for more than 5 years is included in the scope of tax incentives for technology transfer income. Fourthly, venture capital enterprises investing in small and medium-sized high-tech enterprises are granted a 70% deduction of their taxable income based on the investment amount. The scope of preferential policies for investment has been expanded from small and medium-sized high-tech enterprises to seed-stage and early-stage technology-based enterprises, and the subjects eligible for preferential treatment have been expanded from venture capital enterprises to legal partners and individual investors of partnership venture capital enterprises. At the beginning of 2019, the scope of preferential policies for investing in early-stage technology-based enterprises was further expanded. Eligible high-tech enterprises engaged in clean and efficient development and utilization of coal can enjoy the above-mentioned tax preferential policies in accordance with the law. Regarding value-added tax, taxpayers providing technology transfer, technology development, and related technical consulting and technical services projects are exempted from value-added tax. Eligible technology-related enterprises engaged in clean and efficient development and utilization of coal can enjoy the above-mentioned preferential policies in accordance with the law. The Ministry of Finance and other departments actively support financial institutions and various channels of social capital to establish equity funds, industrial funds, green credit, etc. for the coal clean and efficient development and utilization industry, and actively support the development of the coal clean and efficient development and utilization industry.

In terms of subsidies for clean and efficient development and utilization of coal, the central finance department has taken the following measures: first, promote air pollution prevention and control work, guide local governments to increase investment. Since 2012, the central finance department has allocated funds through emission fees to provide subsidies for key cities in air pollution prevention and control to carry out coal-fired boiler dust control and transformation. Starting from 2013, in accordance with the requirements of the "Action Plan for Air Pollution Prevention and Control," the central finance department has established special funds for air pollution prevention and control to support the implementation of air pollution control work in the Beijing-Tianjin-Hebei region and surrounding areas, the Yangtze River Delta, the Pearl River Delta, and other regions, and support the reduction of coal consumption and industrial restructuring. Special funds can be used for the upgrading and transformation of old boilers and kilns in consideration of local needs. They can be used comprehensively for coal clean utilization and other air pollution prevention and control work. Secondly, starting from 2009, the central finance department has allocated special funds for cleaner production to support the demonstration of clean production technologies in relevant industries, including coal and other key industries, which play an important role in breaking through the bottleneck of clean coal production technology and accelerating its industrial application. Thirdly, in recent years, the central finance department has supported the implementation of comprehensive demonstrations of energy-saving and emission reduction policies in cities through subsidies for energy conservation and emission reduction. It provides comprehensive rewards for energy-saving and emission reduction work, including coal clean utilization, in demonstration cities.

Next, based on the implementation of existing policies, our department will give full consideration to your suggestions and actively work with relevant departments to improve the relevant systems, policies, and measures.

Thank you for your concern and support for the country's energy work.

State Energy Administration

September 2, 2019