HEXIGTEN, CHINA — Amid the rolling grasslands of northern China, a gleaming new industrial complex offers a beguiling vision for the nation’s leaders. Here, on a sandy plain among scattered flocks of sheep, a flagship plant promises to use China’s surplus coal while simultaneously delivering cleaner skies over its crowded eastern cities.

Modeled on a similar and much older plant in North Dakota, the Hexigten complex in China’s Inner Mongolia transforms coal into methane by treating it with heat, steam and oxygen. It then pipes the supposedly cleaner gas to Beijing to heat and power the capital’s homes.

In the past two years, with anger over the country’s smoggy skies rising and demand for coal declining, China has enthusiastically embraced coal gasification. It has proposed to build more than 50 plants like this in its sparsely populated north and west and to create by far the largest synthetic natural gas (SNG) industry in the world.

Although the enthusiasm has since waned somewhat — mainly over questions about the industry’s economic viability — coal gasification still has powerful backers. But a visit to the semi-arid grasslands of the Asian steppe soon clouds the rosy vision they espouse.

Here, even before the factory’s twin smokestacks come into view, the stench of sulfur poisons the air, leaving humans and animals gasping for breath for miles around. Likewise, underground water supplies are receding, while wastewater pools threaten to leach dangerous heavy metals into the soil, according to Greenpeace research.

Protests by local herders have reportedly been suppressed, and a Washington Post reporting team was harassed by police and security officials on a recent trip.

Not only is this industry exporting pollution from the politically powerful capital city to the politically marginalized grasslands and deserts of Inner Mongolia and Xinjiang, but it also has a potentially powerful impact on the global climate.

The entire process of turning coal into gas, and then burning that gas somewhere else, produces significantly more greenhouse gases than just burning the coal in the first place. The industry is also extremely water-intensive, putting pressure on water supplies in some of China’s most arid regions.

"If they keep going with coal-to-gas, they are going to produce so much greenhouse gas that they won’t reach their targets," said Chi-Jen Yang, a research scientist at Duke University’s Center on Global Change, adding that this could lock China into a high-carbon path of development for decades to come.

In effect, he said, China has been trying to address short-term, local problems — smog and a recession in the coal industry — by exacerbating the long-term global problem of climate change.

Last November, in an agreement with President Obama, Chinese President Xi Jinping pledged that his country’s emissions of carbon dioxide would peak around 2030, or sooner if possible. But with China already producing twice the emissions of the United States, the prospect of the country adding more through a coal-to-gas industry has alarmed environmentalists.

Fortunately, Yang and others say, there has been a rethink, and the headlong rush into SNG has given way to a more sober assessment over the past year.

This reassessment has not come out of respect for local herders, and not even because of Xi’s climate-change commitments. It has come simply because the economic rationale for the industry appears to be evaporating.

The removal of subsidies has seen natural gas prices rise, depressing domestic demand, while Beijing has also been busy securing gas supplies from abroad. In addition, a slowing economy has cut energy demand more generally; there simply isn’t the need for synthetic natural gas that policymakers projected a few years ago.

"The coal-to-gas industry has shown signs of developing too fast," state media reported in July, citing China’s National Energy Administration and promising stricter controls. "The coal-to-gas and coal-to-oil industry should not stop, but it should not be developed too fast."

Imperfect model

The plant at Hexigten, run by a state-owned company, Datang, was supposed to demonstrate the industry’s feasibility when it began operations in December 2013. But it has struggled financially and technologically: Two people died and four were injured by a hydrogen-sulfide leak in January 2014.

Later that year, Datang restructured the project’s finances and tried to sell the plant, Yang said. "Nobody wanted to buy," he said. "I guess they scared all the other investment away." Datang declined to comment.

Chinese policymakers often point to a pioneering gasification plant in the coal fields of North Dakota as evidence of the industry’s viability. But they don’t mention that the project, the Great Plains Synfuels Plant, went bankrupt and was bailed out by the U.S. government in 1986.

The Great Plains plant also uses carbon-capture technology to limit its emissions, something no Chinese plant does at this stage.

As China ponders its next step, there is a huge amount at stake. In early 2014, China’s National Energy Administration said it wanted to see the country produce 50 billion cubic meters of synthetic natural gas a year by 2020, but it had approved projects that could see output climb more than four times higher. Greenpeace calculates that if China goes ahead with projects already in preparation or under construction, the coal-to-gas industry would cancel out all the emissions cuts the United States hopes to make by 2020.

But in signs of a further retreat last December, China Energy News, a state-run newspaper, quoted an unnamed policymaker as saying China would "probably" suspend projects that had not already begun construction and limit the production of synthetic gas to just 15 billion cubic meters by 2020.

Li Shuo, a senior climate and energy policy officer at Greenpeace East Asia, says project construction has slowed and there is greater understanding of the economic, technological and environmental limitations of coal gasification.

"But I would be a bit cautious to reach the conclusion that China is not going ahead with coal-to-gas, he said. "My impression is we are at a critical juncture now."

Old habits

There are powerful forces that still favor the industry, which some policymakers see as strategically important in securing China’s energy independence, a key national security goal. Coal-rich provinces also appear to be keen on the industry.

In the end, the decision on whether and how quickly to proceed will be a sign of whether the Chinese government really wants to push for a more environmentally friendly, economically sustainable growth model, or whether it will persist with old habits, through reliance on state-owned heavy industries that have already poisoned the nation’s air, water and soil.

China’s new energy minister, Nuer Baikeli, toured coal-to-chemicals plants in Inner Mongolia and elsewhere in March, and pushed for one plant, at Ordos, to begin a second phase of production. State media reported him as saying that the industry needed massive pilot projects to promote innovation; otherwise, he said, it would be merely "building castles in the air."

Until December, Baikeli was governor of Xinjiang, a province where the coal-to-gas industry had promised a big boost to the economy and a captive market for its coal.

"Provinces have strong economic incentives to push for these plants, to lock in a use for their coal for decades," said Rob Jackson, a professor in the School of Earth Sciences at Stanford University. "You can’t underestimate the importance of local economic development."

Nowhere is that more true than in Inner Mongolia and Xinjiang, where environmental considerations pale in comparison to the desire to maintain economic growth — and social stability — at almost any cost.

"Local governments have not changed their minds at all," said Ma Wen, another climate and energy expert at Greenpeace.

Not only are Inner Mongolia, Xinjiang and others still pushing for more investment in the coal-to-chemicals industry, but China is promoting similar projects in neighboring Kazakhstan and Mongolia under its Silk Road economic-development plan, he said.

Outside the Datang plant, herders complained of dizziness, headaches, nausea and sore throats because of the foul air, while some animals had died prematurely. At least three protests took place last year against the plant, each involving hundreds of local residents. Still, nothing had changed: Several arrests had been made, one villager said, and no compensation had been paid.

The plant uses water from a nearby lake for its industrial process, but water use by its employees, who live on the compound, is sucking up scarce underground supplies, Greenpeace says.

"No matter how deep you dig a well, you can’t get water now," said one man living near the plant, who said he had been told by security officials to stay indoors and not talk to reporters but did so anyway, by telephone.

"No matter how many times you protest, the government always stands on the side of the factory," he said.

Xu Jing contributed to this report.