In China’s clean energy transition, the “coal-to-gas” policy plays a vital role in replacing coal with natural gas, significantly cutting emissions in industrial and residential sectors while advancing a greener, low-carbon energy structure. Hunan, Hubei, and Jiangxi, key industrial hubs in Central China, have made notable progress in implementing this policy, though challenges remain. Further policy refinements are expected to address these issues.

I. Background of the “Coal-to-Gas” Policy

As a key policy in China’s clean energy transition, “coal-to-gas” aims to replace coal with natural gas, cutting emissions in industrial and residential sectors. Hunan, Hubei, and Jiangxi (H-H-J region), traditional industrial hubs in the Yangtze River’s middle reaches, are also pivotal in energy restructuring under the “dual carbon” goals. Advancing this policy in these provinces is vital not only for regional economic transformation but also as a microcosm of China’s broader energy revolution.

On December 25, 2024, the Jiangxi Provincial Government issued the Jiangxi Air Quality Improvement Action Plan, calling for the orderly advancement of “coal-to-electricity” and “coal-to-gas” projects. On June 17, 2024, the Huanggang Municipal Ecological Environment Bureau in Hubei Province released a public consultation notice on the Huanggang Air Quality Improvement Plan (Draft for Comments), prioritizing coal-to-gas adoption in industries like brick-making and ceramics. Earlier, on August 23, 2023, the Hunan Provincial Government introduced the Hunan Air Pollution Control “Blue Sky Protection” Action Plan (2023–2025), incorporating “coal-to-gas” and “coal-to-electricity” into its energy restructuring efforts. These policies underscore the provinces’ strong commitment to advancing the “coal-to-gas” transition.

The downstream industries in the H-H-J region are primarily ceramics, building materials, metallurgy, and chemicals, with a high dependence on coal due to its cost advantage. In 2023, natural gas usage in the region’s ceramic factories remained below 20%, reflecting a relatively slow transition. Meanwhile, in key ceramic production areas such as Guangdong and Sichuan, natural gas adoption has reached approximately 90%. As coal-to-gas conversion progresses nationwide, the H-H-J region is also taking steps to promote a steady transition.

II. Implementation Outcomes: Achievements and Divergent Models 

1. Significant Environmental Benefits, but Regional Disparities 

Since the rollout of the “coal-to-gas” policy, PM2.5 concentrations in Gao’an’s ceramic industry (Jiangxi) have dropped by 35%, SO? emissions in Yichang’s chemical industry (Hubei) have fallen by 40%, and dust emissions from Liling’s ceramic enterprises (Hunan) have decreased by 90%. However, in western Hunan, where upgrades have lagged, emission reductions remain below 20%. Overall, air quality in key industrial cities across the H-H-J region has improved, though progress in non-core industrial areas remains limited.

2. Economic Cost Pressures Vary by Region 

The three provinces’ subsidy policies revolve around “equipment retrofit subsidies + gas price incentives,” but with distinct focuses: Hubei prioritizes carbon finance innovation, allowing enterprises to secure low-interest loans (as low as 4%) using future carbon quota revenues; Hunan emphasizes gas consumption incentives; and Jiangxi focuses on supporting industrial clusters. 

In terms of fuel-switching costs, retrofitting a single ceramic production line in Jiangxi costs RMB 3–5 million, with policy subsidies covering 30–50%. Chemical enterprises in Hubei face upgrade costs exceeding RMB 10 million, while steel enterprises in Hunan see an 80% increase in gas-related costs due to high-temperature process constraints. Given its lower conversion costs, the ceramic industry has become the primary sector driving the “coal-to-gas” transition in the H-H-J region.

Table 1: Comparison of “Coal-to-Gas” Policies 

III. Challenges in Advancing the “Coal-to-Gas” Policy: Policy-Market Dilemmas

1. Economic Viability Conflicts in Non-Gas-Producing Regions 

China’s natural gas production is unevenly distributed. The H-H-J region, located in central China, relies heavily on pipeline transportation and truck deliveries from surrounding LNG plants. As non-gas-producing regions, gas prices in the H-H-J area are relatively high. For small and medium-sized enterprises (SMEs), rising gas prices have compressed profit margins to 3–5%, or even led to losses, forcing some to shut down. Additionally, subsidy policies are insufficient to support SMEs in undertaking retrofit investments. 

2. Low Pipeline Coverage Restrains Development 

Pipeline coverage in the H-H-J region is uneven, with complex terrain (mountains, hills) complicating pipeline construction. Regions far from gas sources and main pipelines have particularly low coverage. Furthermore, the three provinces have limited gas storage capacity, relying on high-priced LNG for winter supply, making them highly vulnerable to price fluctuations. 

IV. Pathways to Breakthrough: Differentiated Policies and Systemic Reform 

The “coal-to-gas” practices in Hunan, Hubei, and Jiangxi demonstrate phased achievements in energy transition but also reveal certain contradictions. Based on the current status, future policy improvements are expected to focus on the following aspects to provide sustainable energy support for the green development of Central China. 

1. Targeted Policy Measures 

Given the varying retrofit costs across industries, subsidies could be tailored based on enterprises’ investment and payback cycles. For example, industries like ceramics and chemicals, where retrofitting is more established, may receive gas price linkage subsidies. High-temperature industries such as metallurgy and glass could receive technical subsidies to support the development of hybrid technologies, such as oxygen-enriched combustion and electric auxiliary heating.

2. Regional Support Focus 

Increase special bond support for pipeline construction in underdeveloped areas like western Hunan and southern Jiangxi to enhance pipeline coverage. Pilot LNG vessel refilling subsidies at river ports in Hubei. 

3. Development of Regional Gas Storage Clusters 

Accelerate the construction of gas storage facilities by establishing LNG hubs in Yueyang, Jiujiang, and Huanggang, creating an integrated peak-shaving system across the three provinces to ensure a stable gas supply for enterprises transitioning to natural gas. 

4. Market Mechanism Innovation 

Drive financial innovation by linking carbon trading with gas prices. Allow enterprises to convert “coal-to-gas” emission reductions into tradable carbon quotas, a key initiative currently being advanced in Hubei Province.