July 1, 2010

China: A World Powerhouse

By Sonal Patel

How to Fuel China’s Growth?

China is the largest consumer and producer of coal in the world, holding an estimated 114.5 billion short tons of recoverable coal reserves—the third-largest in the world, after the U.S. and Russia. Deposits are spread out over small and large coal mines in 27 provinces, with northern China, especially Shanxi Province, holding most of the easily accessible coal. Coal in the southern provinces tends to be higher in sulfur and ash. In 2008, China consumed an estimated 3 billion short tons of coal, representing about 40% of the world’s total—and a 129% increase since 2000. According to the EIA, coal consumption—split between the non-electricity and power sectors—has been on the rise in China over the past eight years.

But plagued by transportation issues, typhoons, and widespread pit closures, the sector frequently has to deal with an unreliable coal supply. Shortages often strike provinces in the winter, resulting in blackouts or brownouts. In January 2010, for example, five provinces suffered rationing during cold weather—Shanxi, Shandong, Henan, Hubei, and Chongqing—forcing governments to move local populations to “safer” places.

To alleviate its predicament, the Chinese government promotes two remedies: encouraging energy conservation efforts and expanding energy supply capacity. China has primarily relied on domestic energy resources to develop its economy, and the rate of self-sufficiency has been above 90%—much higher than that in most developed countries. Increasingly keen to keep more of its coal at home, the government has also been considering importing to protect domestic supplies. In 2009, for example, coal imports (primarily from Vietnam and Australia) jumped to 130 million mt, 2.1 times the amount imported a year earlier, with the average price being $84 per mt.

Beijing takes a similar approach with uranium—a commodity whose importance has shot up in recent years. This January, China imported roughly 3,337 mt of uranium, with 57% coming from Kazakhstan and smaller volumes from Russia, Namibia, and Uzbekistan. In March it set its sights on Australian yellowcake stocks. Import volumes were up more than 10 times year-over-year. Yet, government officials suggest this may be the tip of the iceberg: State-run Guangdong Nuclear Power’s annual uranium needs will jump to 10,000 mt in 2020 from 2,000 mt in 2009, as Zhou Zhenxing, chairman of the company’s uranium-supply unit, told The Wall Street Journal in November.

The Emissions Spin

Two weeks before the Copenhagen climate summit last December, China unveiled its first firm goal for limiting greenhouse gas emissions. Beijing said it would aim to reduce its “carbon intensity”—or the amount of CO₂ emitted for each unit of GDP—by 40% to 45% by 2020, as compared to 2005 levels. Observers hailed the target as ambitious, though many pointed out that meant that China’s carbon emissions would not necessarily fall.

Many noted that the country could meet the target by either using energy more efficiently or increasing the proportion of energy derived from low-carbon sources such as wind and nuclear. It could also, however, produce goods of higher value without changing the nature of energy production and use—that is, it could raise GDP while leaving emissions unchanged.

But in China, the target—any target—is deemed costly. Organizations like the Chinese Academy of Social Sciences and Tsinghua University, after drawing up scenarios and evaluating what could happen if China set a goal of reducing carbon emissions by 33%, 40%, 45%, or 50% in 2020 compared to 2005 levels, said that the country would need to increase its investment by $30 billion in the next 10 years. In particular, they found that any target over 40% would cause costs to sharply increase.

Meanwhile, officials argue that economic development will continue to be a priority for the nation peopled by nearly 1.3 billion. As Su Wei, director of the NDRC’s climate change department, told attendees at the International Cooperative Conference on Green Economy and Climate Change this May, the “high carbon” characteristic rooted in China’s energy infrastructure would not be fundamentally changed in the short term, as the development and use of clean energy sources such as wind and solar power started late in China. An unreasonable industrial structure and relatively backward industry technology also made the nation’s carbon emissions reduction drive difficult, he said.

Nevertheless, besides setting up an accountability system for energy conservation and emissions reduction, and investing more in new energy industries, China has been improving policies related to low-carbon development, accelerating research on low-carbon and environmentally friendly technologies, and expanding international cooperation to contain emissions in some key sectors, he said.

“I personally think the emissions reduction goal China just released is a little high,” Pan Jiahua, director of the Urban Development and Environment Institute under the Chinese Academy of Social Sciences and member of the State Climate Change Expert Committee, told The People’s Daily this December. This official noted, as have many others, that China’s average carbon emissions per capita had reached the world’s average of about 5 tons—but was still about a fourth that of the U.S. level. “However, since China has made a commitment to the world, we must try our best to realize the goal,” he said.