opportunities and challenges
4. China’s continued reliance on coal
Though China's renewable energy sources are expand-ing, one cannot ignore the stark reality that China's en-ergy system will continue to rely on coal as its primary energy input for the foreseeable future. As discussed in Section II, the Chinese government’s top priorities are to maintain the economic growth engine and to im-prove living standards, both of which require a cheap and secure supply of abundant energy. Coal is not only relatively inexpensive compared to other energy sources, it is also plentiful in China. In countries that lack large domestic sources of fossil fuels (especially coal), such as Denmark and Korea, the need for energy security natu-rally overlaps with the need to develop non-fossil fuel en-ergy sources. However, in countries where fossil fuels like coal are abundant, such as the US and China, the need for energy security often means exploiting available do-mestic sources first.
As such, the government is not likely to reduce the use of coal, despite its contribution to atmospheric green-house gases. Indeed, it may not be possible to do so without creating major economic disruption.
According to several estimates, China has 114.5 bil-lion tons of proven coal reserves, or 14% of the world's total reserve (EIA 2008; Morse and He 2010).7 China is capable of satisfying most of its own coal demand, though some provinces do import coal when international coal prices are more competitive than domestic prices. Not only does China have domestic coal sources, it is also situated near a number of other large coal-rich coun-tries, including Mongolia, Russia, and Australia. From the Chinese government’s perspective, coal's abundance and relatively low costs make it the best option to satisfy China's rapidly expanding energy demand. As such, the government is not likely to reduce the use of coal, de-spite its contribution to atmospheric greenhouse gases.
Indeed, it may not be possible to do so without creating major economic disruption.
The government is actively seeking ways to mine and burn coal more efficiently, safely, and cleanly. These
measures address economic efficiency as well as energy efficiency and local pollution. As mentioned earlier, Chi-na is overhauling its fragmented coal mining industry via closure of small mines as well as merger and acquisition.8 The 12th FYG emphasizes consolidation in coal mining industry to create large, efficient mining conglomerates (NDRC 2011, chapter 11 section 1). More efficient mines can better enforce safety and environment standards for local pollution, but they also produce cheaper coal, which may lead to increased use of coalThe Chinese government is also actively closing down small coal-fired power plants and installing larger, 600MW and higher power plants that produce less pollution, including CO-2 emission, per unit of energy produced (Yang, Guo and Wang 2010).
Improving the efficiency of coal is also intimately tied to the UHV transmission grid mentioned earlier. The use of coal has been somewhat constrained by the trans-portation capacity between coal producing areas and eastern regions where energy demand is greatest. Cur-rently, coal is transported from mines in northwestern China to coal-fired power plants in the eastern seaboard via railroads, or first via rail to a northern seaport, then via boats to southern cities. In 2008, 49% of the freight cargo by weight traveling on national railroads and 21%
of China's total port throughput were coal, most of which was destined for power plants (NBS 2009, 15-20; State Grid 2010).9 Thus the transportation of coal is one of the greatest bottlenecks for meeting energy need in China.
The new UHV grid will allow more coal-fired power plants to be built where the coal is mined, and electricity can be sent to load centers on a new long-distance trans-mission network. This can also reduce the energy used and emissions resulting from the transport of coal. Pro-ducing electricity where coal is mined will also allow the exploitation of lignite. Nearly 55% of China’s coal deposit is lignite, but because lignite loses too much heat con-tent during long transportation, these resources have not been used in every coal-fired power plant. With the new ability to place power plants where the mines are, this low grade coal can be fully exploited (State Grid 2010, 34).
Vertical integration of mining, transport, power gen-eration and chemical industries is also being promoted to by the government to optimize China’s energy industry and other related industries. Such vertical integration will allow firms to operate more efficiently. Coal mines are en-couraged to own and operate railroads and ports to facili-tate the transportation of their products, as well as have on-site power plants. A policy document from the NDRC and approved by State Council calls for local governments to give priority approval to coal mines planning to build on-site power plants (State Council 2010). According to a newspaper published by the NDRC, there are fourteen coal production bases planned for the next five years, all of which will have on-site power plants (Diao 2010).
Alongside these measures to expand coal-fired power plants in coal-producing regions, China is also expand-ing transport capacity between coal producexpand-ing regions and southern and eastern China, where the demand is the greatest. Rail transport in eastern China will be
ex-7 Recent explorations show that China has 1,275 trillion cubic feet of shale gas reserve, 12 times the size of its natural gas reserve (EIA 2011, 4). As of 2009, only 3.9% of China’s primary energy consumption comes from natural gas (National Bureau of Statistics 2011, 7-2). If exploitation of shale gas can prove to be economical, then share of gas in China’s energy portfolio may increase given the abundance of the resource. While natural gas is still a fossil fuel and produces greenhouse gases, its car-bon content is 45% less than that of coal (EIA 2010, 7) and increased use of natural gas will help China lower its carbon intensity.
8 For example, in the major coal producing province of Shanxi, restructuring has slashed the number of operating mines from 2600 to 1053; all mines with an-nual production less than 300,000 tons were closed, and 70% of the remaining mines produced more than 900,000 tons every year (Nie 2010).
9 China’s highway systems are also overburdened by the transportati-on of coal, as well known episodes of monster traffic congestions can attest. The 60 miles long monster traffic jam on the Beijing-Tibet highway in the summer of 2010 was due mostly to trucks carrying coal from Inner Mongolia to the capital, and the truckers say they are used to such congestion (Ni and Chua 2010; Watts 2010).
panded (Diao 2010), and new railroads connecting Inner Mongolia, Shanxi and central China will also be devel-oped. In addition, coastal ports are being constructed to facilitate more north-south coal transport via sea lanes (Zhen and An 2011).
The wild card in China’s carbon story is carbon cap-ture and sequestration (CCS). In order to reduce the carbon intensity of coal, the government is actively ex-ploring CCS. In the mid-2000s, the government did not consider CCS a serious option. Yet by mid-2009, China’s first near-zero-emission coal plant had won state ap-proval. Other pilots are in the works, including one in Inner Mongolia that could be the largest sequestration project in the world (Friedman 2009). However, it is yet unclear how much CCS projects will cost to build and operate, what the environmental consequences might be of putting tons of CO2 into the ground, or what the ul-timate impact will be on China’s total carbon emissions.
These large infrastructure investments throughout the domestic coal supply chain indicate that the Chinese government considers coal a vital part of the country’s en-ergy future. Indeed, if the Chinese government continues to be compelled to supply the growing domestic economy with cheap energy inputs, coal appears the only viable op-tion. The continued reliance on coal has detrimental con-sequences for global greenhouse gas emissions.
5. Conclusion
China’s version of “green growth” is drastically different from much of the advanced industrialized world. The government’s prioritization of energy security over car-bon emissions is driven in part by China’s stage of de-velopment – it is still a developing country – and in part by the nature of its political system. China’s single-party government maintains its legitimacy and political power by improving living standards, which in turn requires sustaining high rates of economic growth, creating tens of millions of new jobs every year, and controlling inflation.
Coal, a relatively inexpensive and domestically abundant energy source, has been –and will continue to be—an im-portant enabler of China’s prosperity. The looming ques-tion for China is not how to reduce its consumpques-tion of coal but rather how to use it more efficiently and cleanly.
Because of the rapid pace at which China’s overall energy demand is growing, renewables are viewed as desirable supplements to – but not viable substitutes for—coal.
The magnitude of the energy and environmental chal-lenges facing China is unprecedented. On the one hand, the government is attacking the country’s mounting en-ergy problems on multiple fronts: enen-ergy efficiency, eco-nomic restructuring, investment in non-fossil fuels, and expansion of transmission capacity. All of these measures are designed to slow the growth rate of energy demand and increase the supply of energy. As a result, the growth rate of carbon emissions will also slow. To its credit, Chi-na appears to be on a path that will eChi-nable it to meet its target of reducing the carbon intensity of its economy by
40 to 45% by 2020 from 2005 levels.
On the other hand, significant obstacles remain, the most serious of which are distorted incentives at the lo-cal level, the difficulty of retail pricing reform, and the energy intensity of the manufacturing-driven economy.
Without a solution to these issues, the improvements in energy efficiency and carbon intensity resulting from the 12th FYG’s green initiatives alone can do little to prevent China’s overall carbon emissions from growing. Rather, China’s green initiatives will only slow the pace of emis-sion growth. We calculate that even if China meets its goal of reducing carbon intensity by 40% to 45% and eco-nomic growth slows down to an average rate of 7% per year for the next ten years, its total emissions would still increase 83.7% by 2020 from 2005 levels. If China meets its carbon intensity reduction targets but grows at an av-erage of 10% per year, which has been its avav-erage growth rate during the past two decades, then its total emissions would increase 142.2% by 2020 from 2005 levels. Despite its genuine efforts to curb the energy and carbon inten-sity of its economy, China’s carbon emissions are unlikely to plateau until 2030 (Zhou et al. 2011).
The fate of China’s greenhouse gas emissions may rest with a yet elusive technological solution to de-carbonize coal. There is ample opportunity for international coop-eration in the advancement of emerging technologies like carbon capture and sequestration. The European Union, for example, pledged up to €50 million (US$70 million) in mid-2009 to help China build the near-zero-emission coal plant mentioned earlier. Partnerships like this will be crucial in the global effort to combat climate change.
If China in collaboration with concerned members of the international community cannot figure out how to safely and cheaply de-carbonize coal, then the planet may have no choice but learn how to adapt to a warmer world.
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