The energy shock brought on by the Iran war is still percolating, but those shockwaves will not hit countries with equal intensity. The consensus believes China is well positioned to withstand the shock, given the ample commercial and strategic petroleum reserves at its disposal (at least three months), so long as this does not turn into a forever war which looks less likely with the ceasefire. The Chinese stock market performance also implies that investors have generally bought into this consensus.

But beyond China’s stockpiles, a basic reality appears to have been overlooked in the flurry of commentaries on the war’s impact on China. The country’s energy security isn’t really tied to oil or gas, for which the country does depend on imports. It has always been inextricably linked to coal. China consumes more than half of the world’s coal and it is the main commodity that powers Chinese industry and the electricity system.

That consumption is almost entirely domestically supplied, making the black, carbon-rich lumps China’s most secure energy resource that it can control. If necessary, China can certainly ramp up the use of coal plants to weather the energy crisis (Japan is taking similar actions), especially since China has excess coal capacity at the moment that’s nowhere near being fully utilized.

Cranking up coal may serve China’s near-term interests, but it is antithetical to Beijing’s aim, which is to genuinely hit the “peak coal” inflection point over the next few years. That agenda could be made more burdensome now that the Chinese coal industry, a major political constituency, can argue that it is critical to national security because coal provides reliability and insurance in times of volatility.

This is precisely why the question of peak coal is a more incisive window into underlying changes in China’s political economy than many other leading indicators. To be sure, peak coal has been prematurely predicted before. A decade ago, when Beijing clamped down on coal and heavy industry in an aggressive push to clean up air pollution, coal consumption dipped, leading analysts to predict its peak.

But coal has since rebounded with a vengeance, particularly since China’s domestic energy crisis of 2021 that led to massive blackouts. That unexpected disruption spooked the leadership and subsequently brought energy security to the top of the agenda, which meant reverting back to coal.

Whether the coal surge of the last few years was simply a temporary overcorrection or a new strategic direction is at the heart of the peak coal debate. However, in 2025 coal consumption essentially remained flat, while electricity power consumption rose 5 percent, implying that renewables made up most of the difference, according to China’s official statistics. A single year obviously does not make a trend, but the recent overcorrection should not be interpreted as China going down the coal-retrenchment path.

But Which Peak?

Since coal is foundational to China’s energy security, getting off it does not progress in a linear fashion. This is reflected in the fits and starts moves toward peak coal. Everything can be true and/or false in China, depending on which number you’re looking at. That generalization also applies to examining peak coal—it depends on which peak is in question. As a share of China’s total primary energy mix, coal has experienced a gradual decline for a decade (see figure 2). The same is true if looking at coal capacity as a share of total installed capacity (see figure 3).

Yet when it comes to total consumption and capacity expansion, the picture is notably different. Total coal consumption has risen markedly since 2022, which aligns with the rebound in commissioned capacity resulting from Beijing’s hard pivot to energy security after the domestic energy crisis noted above. In 2024 alone, China added a staggering decade-high of ~95GW of coal capacity, which is larger than the entire installed electricity capacity of Vietnam.

Even if only some of the planned capacity is built, this glaring paradox has injected more uncertainty into whether China is on course to peak coal. But there’s probably a simple explanation behind this paradox that rests on a defining feature of China’s political economy, which can be boiled down to “if you give an inch, they will take a mile.”

In this case, the “you” is the central energy regulator National Energy Administration and “they” the coal industry. As noted above, the regulator engaged in a campaign to shut down coal capacity both to address air pollution and to get ahead of the perennial excess capacity problem. Meanwhile, the pursuit of peak coal was gaining traction and was about to be written into China’s five-year plans. From the perspective of the coal industry, it looked like the writing was on the wall that its exalted place in the economy would diminish significantly.

Squeezed from different sides, the coal power industry clearly seized on the pivot to energy security in late 2021. Capitalizing on a panicked Chinese leadership during a moment of energy insecurity, the coal industry undertook another building spree because it knew that these moments of opportunity are short-lived. The energy regulator, too, was on their side issuing approvals as energy security became paramount.

With Chinese speed and scale, signs of an overcorrection quickly emerged, which almost certainly wasn’t what Beijing expected or wanted. If 2025 was an indication, it is likely that another cycle of clampdowns will come after the current volatility subsides. There’s next to nothing in the latest five-year plan that suggests China wants to double down on coal.

Just the opposite, in fact. What is prioritized as a strategic imperative is the energy transition that hinges on electrification. Not only have China’s solar power achieved cost parity with coal, the country has a deep industrial base and a comprehensive electro-tech ecosystem that is intent on manufacturing a new energy landscape, or an “electro-state” as some have come to call it. Peak coal is not only congruent with, but is also a necessary condition for, realizing this strategy.

If anything, another oil shock triggered by geopolitical gamesmanship further crystallizes for Beijing that China’s energy security doesn’t travel through the Strait of Hormuz, it runs through the electrification of everything.