While the Great Recession dragged down the economies of most of the world, Australia seemed to be immune. China's seemingly insatiable demand for raw materials, coal in particular, kept the economic engines of Australia humming.

Now, as China's cities are chronically choked in noxious air, China's government has vowed to finally get tough in its "war on pollution." And coal, which provides over 70% of China's electricity, is in the firing line.

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The new regulations, released a few days ago and reported by CT, place strict restrictions on the quality of coal that may be imported into China, effectively banning low-quality coal use in the country.

Australia, the source of much of China's low-grade coal, is now threatened by the double threat of a slowing Chinese economy and a renewed sense of environmental urgency by the government.

Nonetheless, new information reveals that China's new coal regulations may not be as tough as they first appeared.

Sources have since revealed that the new regulations do not apply to China's power plants and utility sources. As a result, more than half of China's coal consumption would not be affected by the new regulations.

The confusion arose through a mistranslation of the National Development and Reform Commission's (NDRC) policy document. The policy document stated that the new regulations applied only to "san mei" coal, the type of coal usually used for local heating. Originally, markets believed that "san mei" also included commercial coal used in power generation.

Australians, therefore, can breath a sigh of relief that coal exports, which account for about 25% of Australia's total exports, will not be falling off a cliff anytime soon.

Nonetheless, it has become clear that the "good old days" have come and gone. China's double digit growth has come to an end, and some researchers at Greenpeace believe that China has already reached its "peak coal" consumption.

It is only a matter of time before China expands its regulations and includes power plants as well. The day of reckoning hasn't yet come, but when it does, Australia ought to be prepared.

TagsAustralian mining, China's coal Australian