Chapter 6
Declaration of Energy Independence
A black shroud enveloped the car. We had driven only a couple of kilometers down the country road when smoke blotted out the mid-winter sun. Suddenly we were driving blind. By the time my eyes had adjusted to the darkness, we had stopped. On the driver’s side of the car stood the great cement tower of a coal burning power plant, some 30-stories high, vomiting thick charcoal smoke. The dirty vapor swirled through the air, carefree, and fluttered across the hood of the government sedan that we were driving. The mist wafted across the cracked, uneven road and caressed a riot of crooked brick walls and corrugated plastic roofs that lay scattered along shattered lanes. People lived and worked in the ramshackle warren. They went about their lives without interruption. We stepped out of the car. A man in a worn sports coat riding past on a rusted bicycle squinted at us.
The Yangzhou government administrator said encouragingly, “We can build a single-floor facility for your client here.” Yangzhou is about an hour’s drive north of Nanjing, on the Yangtze River. My host pointed at the exact spot where residents were in thrall to their own survival in the brick maze. They must have witnessed this roadside scene countless times before, with other government officials ushering other businessmen from around the world. They knew though, they were safe from immediate encroachment. Only they would be foolish enough or poor enough to continue life in the murky shadow of a coal burning power plant. People who lived in the cities had more options than they did in the countryside. One day, though, they too would be forced to relocate to an urban center in the name of modernity. For now, they tried merely to make themselves invisible in the swirl of black haze.
China’s energy consumption needs will only grow as the country continues on its aggressive course to urbanize the population. Urbanites use 3.5 to 4 times more energy per capita than their country cousins.1 China’s central leadership set the goal in 2000 that by 2020 the country would quadruple its wealth, or Gross Domestic Product (GDP). The country’s supersonic economic development during the first decade of the 21st century saw it install the total electricity capacity of the United Kingdom every year.2 This equated to three or four 500-megawatt coal-burning power plants every week, a Massachusetts Institute of Technology Industrial Performance Center report cited.3 According to the U.S. Energy Information Administration, the country’s energy usage more than doubled between 2000 and 2010. In 2008 the Institute for Energy Research stated that America had the capacity to generate over one terawatt of electricity, or enough energy to power 100 billion homes. China surpassed the United States as the largest energy consumer in the world in 2009. The International Energy Agency estimated that China consumed 2,265 million tons of oil-equivalent energy that year.4 China’s growing appetite for cheap power is likely to rise to 53 percent by 2030.5 By 2035 it is set to exceed U.S. consumption by 68 percent.6
Joseph Tainter, in his book The Collapse of Complex Societies, surmised that energy is the fundamental currency of a complex society. A society will need to consume more energy if it wants to move from stage-to-stage in its development—agricultural to industrial, industrial to information age; or, put another way, from the countryside to the city. It will remain a relatively simple society if, however, it does not have access to sufficient quantities of energy with which to develop itself or to maintain its current state. Sustainable energy production in the face of continuing urbanization is one of the greatest technological challenges facing humankind in the 21st century.
Energy consumption in the modern world is bound up in a welter of utilities, institutions, and habits indicative of urbanization. By the end of 2011 Chinese cities supported nearly 700 million residents—more than twice the population of the United States. The Chinese leadership plans to bring nearly 100 million more country folk to settle in its cities by 2020. Urbanization has also forced transportation requirements to go far beyond the horse and buggy to include air, sea, automobile, and rail. Industry, agriculture, and the increasing use of electrical appliances are requiring China’s energy generation capability to grow larger every year.
The transition from an agrarian society to a post-industrial society means China will continue to build and renovate dozens of new cities. Urban development will bring with it new buildings, roads, and utility infrastructure construction projects. China has goals in the coming decade of connecting every town with more than 200,000 residents with roads to airports to which vehicles can get within two hours. All the construction implies continued and growing energy consumption by two of the most gluttonous industries in the world: steel and cement. In 2005 steel manufacturing alone accounted for more than 3 percent of China’s GDP.7 China accounted for nearly half of the global cement production in 2007, 35 percent of global steel production, and—nearly as energy intensive—nearly a third of global aluminum production.8 The proportions will not be changing over the coming decade, as China builds electrical generation capacity to keep up with the society’s transformation. Ensuring ample supplies of food and water get to an increasingly affluent population will also become problematic.
Food production is also a major energy sink. Planting, irrigation, and crop fertilization require more energy as citizens become richer and eat more. Further, an increasing amount of crops are going toward the farming of livestock, which requires greater amounts of energy to cultivate than grains.9 Food distribution, which includes packaging and transport, are major contributors as well to any modern society’s reliance on energy. The production of potable water requires huge amounts of processing by equipment completely reliant on electrical power. Finally, individual consumption is increasingly contributing to the load on energy requirements as we light our homes, play with our gadgets, cook, clean and dry our clothes, and generally manage our lives within the urban setting.
According to the International Energy Agency, China’s energy consumption mix in 2007 involved industry taking nearly half of energy production; residential, commercial, and agricultural activities absorbing almost 45 percent of energy output; and transportation involving a little more than 10 percent of energy consumption. Meanwhile, the United States in the same year invested 20 percent of its energy capacity in industry; 35 percent to the residential, commercial, and agricultural sectors; and a whopping 45 percent of energy output to transportation. The European Union with its 27 countries had the most balanced energy consumption mix with just over 30 percent of energy output devoted to industry; about 40 percent for residential, commercial, and agriculture; and about 15 percent invested in transportation, according to the same report.10 The sources of energy do not vary widely for modern and modernizing countries.
About three-quarters of the United States energy mix is from thermal sources—like coal, oil, and natural gas. Nuclear power makes up 10 percent of America’s electrical capability, while hydropower follows up with 8 percent of the pie. Wind, solar, and other sources of alternative power make up the rest of America’s source of power. China’s mix is quite different from America’s in that over 70 percent of China’s generating capacity comes from coal, while America depends on coal for half its power needs. In 2008, China relied on hydropower for nearly 20 percent of its energy generating requirements. In the same year nuclear and wind-power each took about 1 percent of the power generating capability, with solar contributing negligible amounts of power to China’s 800-gigawatts capability.11 China’s insatiable and growing appetite for electricity can only be met by resources that are relatively inexpensive to mine, plentiful, and readily converted to energy with a minimum amount of refinement. Only the fossil fuel sources coal, oil, and natural gas fit those criteria. Of the three, coal is king.
Coal in China’s Stocking
China missed the start of the Industrial Revolution 300 years ago. Actually, China blatantly refused to join the wave of technological and social transformations sweeping the West. In 1793 the British envoy of England, Earl Macartney, demonstrated a small steam powered engine to the Emperor of China, Qianlong, amongst other technological marvels. The Qing dynasty Emperor was said to have commented, “Strange objects do not interest me.” Less than 50 years later, in 1840, during the First Opium War, British gunboats driven by steam turbines ripped the Chinese navy to shreds in the harbor of Canton. The ships were fueled with coal, which the British had learned how to apply to ever more efficient furnaces that would generate energy in increasing amounts. The Watt, as a measure of power, is taken from the surname of James Watt, the inventor who contributed to making the steam engine commercially viable.
Today, the technology underlying James Watt’s invention still drives pistons and drive shafts much the way it did 200 years before. And coal remains the primary source of energy that powers the cities of the two largest economies in the world: America and China. Coal makes up the overwhelming majority of the source of energy that drives the huge turbines in the power plants of the two countries. Coal is also used in the great steel forges that made cities like Pittsburgh and Allentown the industrial centers they were for more than a century. China’s mobilization of coal, however, was long forestalled.
By the time Earl Macartney had arrived, during his first envoy to the Emperor Qianlong, the Chinese had deforested much of Guangdong province and Northern Vietnam.12 At the time, and for thousands of years before, wood was the primary source of energy in China. In the late 1600s the British discovered a way to economically convert coal into the most efficient source of energy the world had ever seen and to harness the power in the steam engine. By 1830 Britain was consuming coal with an equivalent output of 15 million acres of forest—or about 20,000 square kilometers, about the size of the state of New Jersey.13
China’s use of energy continued to be way below the average of other industrialized countries for the next 150 years after Earl Macartney’s visit to the Qing court. The disintegration of the Qing Dynasty in 1911 accelerated the descent of the country into chaos. Civil war over the next 25 years effectively brought economic activity in the country to a standstill. After the Communist takeover of China in 1949 the nation saw energy usage gradually increase until the Great Leap Forward, in 1958—a great experiment in manufacturing based on millions of backyard furnaces. China’s energy consumption expanded by more than 200 percent over the next two years, after which the greatest man-made famine in human history ground economic activity to a halt.14
Steel and concrete production, primarily powered by coal-burning furnaces, has been at the vanguard of China’s energy usage since the 1950s. Within 20 years coal-fired plants were ubiquitous throughout China, powering the country’s revitalized urban centers. One Chinese woman told me that when she was a school student in the 1970s she would come home each day with the collar and cuffs of her white shirt blackened by coal dust exhaled from factory smoke stacks.
By 2007 China produced half the world’s concrete production and more than a third of its steel manufacturing—operations powered by coal.15 China’s coal import volume leaped to 125 million tons in 2009, up 211.9 percent year-on-year.16 China made up 80 percent of the growth of world coal demand from 1990 to 2010. By 2010 China used half the world’s coal.17
China became a net importer of coal in 2010 when China’s monetary stimulus jolted the economy back to life after the nadir of global economic downturn in the spring of 2009. Demand was so great that the price of coal on international markets doubled between the years 2005 to 2010.18 China in 2010 imported about 150 million tons of coal.19 Much of domestically mined coal in China is high in impurities, making it inefficient to burn the mineral for electricity. So, China, to meet its exploding energy requirements, has been importing coal from America, Australia, and South America. It proved during the time to actually be cheaper to ship the coal to the energy-hungry operations on China’s east coast than to transport shipments from the country’s interior.20 The ill-kept and poorly integrated cargo railway system made coal transport prohibitively expensive. The plethora of private mines—many of which were illegal—made rationalizing coal supplies problematic.
The coal mining industry in 2009 began a massive consolidation as the State found the free-wheeling approach of mining bosses—many of whom ran illegal operations—inconvenient to China’s overall goal of increasing energy efficiency and reducing pollution; not to mention reducing the number of fatalities from mining accidents.
In 2002 the country registered a high of 7,000 deaths from coal mining operations. In 2009 the number had lowered to just over 2,600. The province with the worst safety record was Shanxi province, where subsidies, tax breaks, and particularly pliant local governments accepted pretty much any Chinese coal investor. The national government set about consolidating the mines in 2009. In 2010 the government took the tally down from more than 2,500 mines to nearly 1,000 through a process of merger and acquisition by State-owned Enterprises (SOEs).
In the long run, consolidation of the coal mines should be good for China. The country will be able to more easily and cost-effectively modernize mining operations. The government intended that modernization would save lives and increase the efficiency of production. Managing the coal mines under just a few nationalized umbrellas would make it easier to see that miners followed national directives and complied with national priorities.
China’s future is tied solidly to coal, despite the leadership’s recognition that coal is poisoning its air and contributing to climate change. China has no choice but to pursue its use of the stuff, whether domestically or imported. Xiao Yunhan, a member of the Chinese Academy of Sciences, sees China irreversibly dependent on coal for at least another two decades.21 By 2030 China is expected to account for nearly 80 percent of the growth in the world’s use of coal. Afterward, analysts expect the country’s use of coal to flatten, if not actually begin to decrease.22
Barclays Capital analyst Micheal Zenker believed that as long as gas prices stayed lower than coal prices, gas-powered electricity generation could eat into the market for the steam coal that runs many of China’s power plants. The United States Energy Department projected that new natural gas generation capacity would outstrip new coal generation capacity by more than 30 percent into 2020. Less expensive gas-run power plants could begin replacing coal plants over the next decade. The conversion might even force a reduction in the number of coal plants built by as much as one-third.23 Chinese and American researchers at the end of the first decade of the 21st century began working in earnest on ways to clean up coal’s act by “gasifying” it. Their aim was to see that countries were able to use coal sustainably, with a minimum amount of damage to the environment. Nationalization of many of China’s coal mines should also foster and facilitate implementation of innovative green technologies such as coal gasification. Visionaries even see coal gasification as helping China to some extent release its dependence on foreign oil imports.
Cleaning Up Coal’s Act
The head of the Clean Air Task Force in China, Ming Sung, cited in 2010, “There are ways to generate electricity from coal with pretty much zero emissions.” Sung helped design Shell Oil’s first coal gasification plant in the United States in the 1980s. He explained the key to cleaning coal was to turn it into a gas first. “Make coal into a gas, either above ground—which is a traditional coal gasification technology. Or you can go underground. It’s very efficient, and very low-cost. And that is the technology I feel will change the landscape,” Sung added.24 The United States was the leader in Coal to Liquid (CTL) research in the 1970s and 1980s until oil prices became so low as to make research efforts into alternative energy peripheral to the United States economic growth. At the turn of the century Made-in-America expertise migrated to China to carry forward research into and application of the technology.
China and the United States at national levels of government and in academic circles have realized the need to cooperate to reduce the dirty effects of coal. While not necessarily addressing the consumption and efficiency issues underlying the countries’ addiction to coal, efforts began as early as 2004 to find economical ways to “gasify” coal. Gasification—also known as coal liquefaction—produces jet fuel, diesel, oil and gasoline, as well as carbon dioxide (CO2). The CO2 can be used in a range of products from injecting soda pop with bubbles to the production of ceramic tiles. Joint venture projects between China and the United States have been exploring CO2 sequestration since 2005. Sequestration involves injecting the CO2 into the ground—perhaps even into retired coal mines. For every ton of coal processed nearly a ton of CO2 is produced, making sequestration a viable alternative to releasing the greenhouse gas into the atmosphere to contribute to climate change phenomena.
One such consortium between China and the United States involved West Virginia University (WVU). The institution worked with the Shenhua Direct Coal Liquefaction (DCL) facilities in Shanghai and Inner Mongolia.25 The joint venture was underwritten by China’s National Development and Reform Commission (NDRC) and the United States Department of Energy. WVU was also working with the Chinese on an environmental and economic analysis of the Shenhua DCL plant. The university was also investigating CO2 sequestration processes related to the Shenhua DCL plant. Integrated DCL and ICL (indirect coal liquefaction) processes, liquefaction fuel testing, and other activities also held the institution’s interest. The pilot projects demonstrated the feasibility of solid waste recycling, CO2 sequestration, and zero water discharge.
Another effort involved The Pacific Northwest National Laboratory (PNNL), a Department of Energy facility, based in Washington state. PNNL worked with scientists from the Chinese Academy of Sciences to assess the viability of carbon dioxide sequestration underground in China.26A PNNL study found that China has enough underground capacity to sequester CO2 for a century. Results also showed most of the potential repositories within 100 miles of major users of coal. Power generators, steel plants, cement factories, and other heavy industry typically accommodate large spaces that can receive excess CO2. The finding implied that transport of CO2 from domestically mined coal could go a long way to making sequestration viable economically, possibly without slowing the go-go pace at which China’s economy is growing.
Though China is far from ready to kick its coal habit, the R&D insights American teams applied to Chinese quick-time implementation of engineering projects should help to somewhat reduce the threat burning coal presents to individuals and to the environment. CTL technologies, however, will do little to curb the society’s growing appetite for coal, nor the consequences of a command-and-control economy striving to become a free market.
Economics Rules
The first time the economics of coal energy came to haunt the Chinese consumer was the winter of 2008, during a blizzard season the likes of which many parts of China had not seen in 50 years. Beijing suffered the coldest winter in 100 years. Entire provinces in central China were without electricity for several weeks. The reason, however, was not for lack of coal, but because of central government requirements that coal producers accept a rate for the sale of their coal to power plants as set by the National Development and Reform Commission (NDRC). During that frigid winter train cars laden with coal sat in depots without release from coal mine owners who chose to wait out the authorities, a negotiating tactic of the most aggressive sort. Eventually, the blizzards lifted, the weather moderated and demand eased, relaxing market pressures for higher priced coal.
The winter of 2010 in China’s north proved as challenging from an economic point of view as the blizzards of 2008. China reached an energy tipping point in 2010, the same year it surpassed the United States as the largest consumer of electricity in the world. Though snows were not as heavy in north and central China in 2010 as they were in 2008, more people living in cities with greater wealth turned on their central heating systems to thwart the cold. Also, in the two years since 2008, China had built and manned more stores, more malls, more office buildings, and more factories than ever before, all drawing on coal-powered energy subsidized by the state. Coal producers exacerbated the energy shortages by refusing to sign contracts for 2011 under central government diktat that forbade their raising prices to meet mushrooming demand. By the end of 2010 coal contracts signed by producers accounted for only 29 percent of the total railway transportation capacity allocated for coal cargo.27 Power companies hired intermediaries to find and bring to them the coal they needed to keep their furnaces glowing red. Intermediaries, though, typically inflated the cost of coal by as much as double the State’s price level, forcing power plants to cut back on purchases. The State Grid—one of the two electricity networks in the country—reported Shaanxi, Shanxi, Hubei, and other provinces were having coal power shortages. Some regions in Shaanxi Province, a region rich in coal reserves, began implementing “brown outs.” At one point, fourteen backbone power plants in the area had less than five days of coal power inventory left.
The central government expected coal producers to play their part in maintaining a harmonious society by keeping their prices from inflating in line with food and water costs. Coal producers, however, were not playing ball. The prices the National Development and Reform Commission (NDRC) insisted coal miners pay, 100 RMB to 200 RMB (US$15 to US$30), less than market rates per ton. Orders for the thermal coal that run power plants went unmet.
The standoff pointed directly at a major weakness in China’s long-term strategy to continue powering its economic ascent over the next ten to fifteen years. The CCP was learning that the laws of economics—specifically, that of supply and demand—would bend to Party rule for only so long. Ironically, as long as central government planners did not allow the market forces to function inside China with regard to coal, other, counter-productive forces would circumvent government energy policy.
Coal burning’s pollutants and the ill-effects on the health of the population, however, continued to pressure China to implement alternatives to coal-based power. China aggressively pushed ahead with investments in hydropower, wind power, and solar power. Battery technology to store energy for smart grids that distribute power throughout the country and power cars was also of primary importance. As long as China was the Workshop of the World the country would be hungry for energy.
In other words, a great deal of the energy China was using was because of the manufacturing of the sort of cheap goods Americans and Europeans clamor for. A serious refitting of China’s energy signature required the three trading blocks to reconfigure—or re-balance, as economists like to say—their economies: the Americans away from consumption of goods and toward saving, high-end manufacturing, and R&D; the Europeans in liberalizing their labor markets and tax regimes to permit the growth of smaller, nimbler entrepreneurial enterprises; and the Chinese away from heavy industry—steel and concrete production and leather processing—toward services and higher quality production activities. Greater consumption for all the economies needed to be rolled back to ecologically sustainable levels.
Oily Risers
Urbanization is the primary driver behind China’s increasing imports of oil and gas. By 2030 China will have become the largest consumer and importer of oil in the world, using nearly 18 million barrels of oil each day, almost double what it used in 2010. China will have to import three times more oil than it did in 2010 to sustain its thirst. Growing vehicle usage has been a major contributor to growing oil consumption in the country.
After decades of riding bicycles in every kind of weather to work, home, on family outings, and on nights out with friends, Chinese began junking their bikes in the mid-2000s. They began favoring Henry Ford’s vision of the thoroughly modern family; that is, an automobile for every middle-class family. In America, the vision realized a penetration rate of 700 out of every 1,000 people owning a car in 2010. In 2010, China had a mere 30 car owners per 1,000 people. By 2035, 240 out of 1,000 people in China will own a car—only two-thirds of America’s 2010 penetration rate.28 In 2010 China had an estimated 40 million cars on its roadways. Most of those cars were bought after 2005. Fully 10 percent of the number of cars were in Beijing alone, a quarter of which—one million—had entered Beijing’s famed ring roads after 2008.29 By 2035 China will see 135 million cars on the roads.
Local governments are already seeing a downside to massive car ownership. Skies in many cities are perpetually polluted from car exhaust. Traffic has become gridlocked in a fashion that makes some drivers pine for the good old days of pedaling bicycles to work. During 2009, Beijing was adding 1,000 cars a day to its roadways. In the last two weeks of 2010 the Beijing municipal government announced that in 2011 only 250,000 cars would be permitted to be purchased in the city. Beijing residents responded to the pronouncement by swamping car dealerships in the few days left in the old year to grab their piece of the four-wheeled dream.
And though Beijing may have limited the purchase of the number of vehicles within its city limits for 2011, residents throughout the rest of the country were still on a mission to one day own a car for the family. The International Energy Agency estimated in early 2010 that China’s rate of growth in oil consumption would run at about 2 percent per annum. The reality was that by the end of 2010 oil consumption had grown by more than 8 percent year-on-year, to more than 8.5 million barrels per day.
China’s increasing thirst for oil and gas has pushed the central government into dramatically increasing its research and development budget for exploration of new sources. China discovered 38 oil basins in the South China Sea and the southern portion of the Yellow Sea from 2000 to 2010. Accelerated exploration programs yielded in 2010 a geological stratum of ‘super-thick’ oil and gas in the South China Sea.30 Researchers also found natural gas hydrate in the northern region of the South China Sea, and at Qilian Mountain, at the intersection of northeastern Tibet and southwestern Gansu province. Policy makers announced at the end of 2010 the country would spend about US$75 million on oil and natural gas exploration over the next 20 years, a ten-fold increase over the previous decade. The excavation of domestic sources of natural gas is critical to China’s efforts to achieve energy security. Natural gas deposits within the country’s borders may offset annual increases in the importation of coal and oil, which expose the country to capricious changes in international markets. The relative cleanliness of natural gas exhaust may also help the nation realize clearer skies over many of its smoke-choked cities.
What a Gas
China’s use of natural gas is a relatively thin slice of its energy pie, according to the International Energy Agency. In 2008 natural gas use represented only 4 percent of overall consumption. Still, the central government intended in 2010 to promote infrastructure development for natural gas to reduce its overall carbon footprint. Total consumption of natural gas in China in 2010 was 106 billion cubic meters—with growth of nearly 20 percent over 2009. Natural gas demand in China was growing in leaps and bounds entering the second decade of the 21st century. According to China’s National Development and Reform Commission (NDRC), demand jumped 21 percent in the first quarter of 2011, from a year before, to 33.3 billion cubic meters.31
Manufacturing in primary and secondary industries used the overwhelming proportion of natural gas in China from 2008 through 2010. Primary industries include mining, ore processing, and steel and cement production; while product manufacturing dominates secondary industries. Commercial and residential consumption of natural gas vied for second place. China Sign Post reported that cooking dominated 70 percent of total use of natural gas in residences, followed by 18 percent for use by water heaters and 12 percent by space heating.32
China National Petroleum Corporation (CNPC) predicted that natural gas consumption would grow to 230 billion cubic meters by 2015. In 2010 Thomas King, president of BP (China) Holdings Ltd. in Shanghai, believed China’s natural gas market would double from 2011 levels by 2015 to 260 billion cubic meters. Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, projected the growth rate to average 20 percent per year through 2020. “The consumption growth rate will be more than 20 percent in the next 10 years because this is now the peak period for China’s urbanization and industrialization,” he told China Daily.33
Industry analysts expected China to consume 300 billion cubic meters of natural gas by 2020, accounting for 8 percent of China’s total energy portfolio at that time. The Chinese leadership, though, wants to triple the use of natural gas to about 10 percent of its energy consumption by 2020 as it cuts reliance on more polluting coal. The segments of society believed to see the greatest growth in the use of natural gas from 2010 through 2020 are industry (400 percent), residential (500 percent), and power production (700 percent). The chemical sector stands out on its own as an industry sector that relies heavily on natural gas, with 250 percent growth expected from 2010 to 2020.
China’s National Energy Agency (NEA) calculated that domestic natural gas consumption was 110 billion cubic meters in 2010, of which domestic production was able to address 94.5 billion cubic meters, a 12 percent increase from 2009.34 By 2015 analysts expect domestic production of natural gas to reach 150 billion cubic meters,35 still leaving a shortfall of 80 billion cubic meters of consumer demand that imports will have to meet. Fracking has come under serious consideration by China’s energy industry as a means to accelerate access to domestic supplies of natural gas. Fracking involves forcing great volumes of water and chemicals into layers of rock and seams of coal to liberate natural gas. New extraction approaches, however, still may not be enough to counter growing consumption requirements for natural gas.
The NDRC reported that imports met about 20 percent of the nation’s natural gas demand of 106 billion cubic meters in 2010, up nearly 8 percent from a year earlier.36 However, Bloomberg reported that in the first quarter of 2011 China’s imports of natural gas actually doubled over the same period a year earlier.37 By 2020 imports could make up about 25 percent of the total intake of natural gas; while 2030 estimates see imports reduced to about 20 percent of the natural gas portfolio as domestic supplies increase and urbanization slows.38
Urbanization will continue to drive China’s demand for natural gas into the 2020s. Though coal will play a dominant role as the country’s primary energy source, natural gas fits nicely into an energy portfolio intended to reduce carbon emissions and increase energy efficiency.
Breaking the Addiction
It matters to the world how much energy China uses and the source of the energy. Issues such as pollution and natural resource depletion affect everyone on the planet. The rapid urbanization of 20 percent of the world’s population has created a tipping point in the awareness of the degree to which fossil fuels are bad for the environment. China’s accelerated use of coal and oil has also made many governments and non-governmental organizations wonder out loud about the degree to which supplies are limited for the world at large.
Domestically, China has all but run out of oil, and the central government in late 2010 began to become concerned miners were running down its deposits of coal. The deficit of both implies China will have to exploit the deposits of other countries with little regard for maintaining the balance of their ecosystems. Meanwhile, air pollution from coal burning power plants is circulating along China’s seaboard northward, into Japan and Korea. The pollution circulates eastward into Canada and then southward into Seattle. Automobile exhaust from Chinese roadways is mixing with that of the stalled traffic of Los Angeles’ own choked arteries, compounding health hazards for residents. By unwittingly taking on the energy liabilities of other countries, China also assumed the mantle as the greatest polluter on the planet.
China’s export manufacturing sector absorbed supply chains that used to reside within the borders of other countries scattered throughout the world. The Americans, Germans, British, and countless other countries are also complicit in the concentration of energy consumption and pollution production in China. For example, automobiles that used to be made in Japan saw their components and assembly moved to southern China. Energy requirements bound up in managing the supply chain also moved to mainland China. Or consider the effect Walmart has had on Chinese manufacturing. Much of the stuff Walmart buys now in China was once Made in America in the mid-1990s. If Walmart were a country it would have the 25th largest economy in the world. Its purchasing power gave it the heft to push margins so low that American companies were unable to compete with Chinese exporters hungry for any business. The transfer of orders that would have otherwise gone to American factories took with it a sizable chunk of America’s energy profile. Unfortunately, Chinese operations are only about one-quarter as efficient as American businesses in converting energy into wealth.39 China’s energy requirements, then, became more expansive than the country had prepared for in planning its energy infrastructure.
In 2005 China set about making itself more efficient in its use of energy to reduce its dependence on fossil fuels and the expense of building additional energy infrastructure. In its 11th 5-year plan it laid out a goal of saving 20 percent of the energy it used per unit of economic activity. In 2006 and 2007 the country’s energy use in relation to its GDP growth was stubbornly high. Factories were working all out to meet rising demand from the West for consumer goods, while domestic construction projects continued to sprout throughout the country. It looked uncertain whether the nation would be able to meet its ambitious target. The global economic downturn of 2008–2009 proved a gift for China’s energy statisticians. The downturn was the most dramatic contraction of economic activity in the world since the Great Depression of the 1920s.
The effect of the Great Recession in China was to shutter thousands of factories that could no longer manufacture and export stuff to the rest of the world. The downturn also forced thousands of other factories to drastically curtail production schedules to just two or three days a week. The change was traumatic for a sector that had seen a go-go manufacturing frenzy the year before in which most factories had three shifts working round-the-clock, seven days a week. GDP growth in 2008 slowed to its lowest rate in seven years, growing at only 9 percent. The net effect was to see China’s energy use come into closer congruence with its GDP growth. The nation’s electricity consumption in 2008 rose by only about 5 percent year-on-year, the lowest annual growth rate since 1998.40 With wasteful, low-margin factories and heavy construction projects unable to continue operation during 2008, China actually saw energy efficiency as an achievable goal. The government claimed it slid into 2010 just .9 percent shy of its target.
China’s and the West’s addiction to fossil fuels is so deep and so historically abiding that humans would have to rip apart the very fabric of their societies to completely replace the energy sources. Trillions of dollars in infrastructure development, modes of transportation, power generation construction, even the way we eat and store and process food stuffs would have to change irrevocably. The worst case scenario of simply running down stocks of fossil fuels without sufficient replacements already developed would be a Mad Max world. Mad Max was the trilogy of films made in the 1980s in which the Australian actor Mel Gibson fights for survival in a world that most highly values the oil and gas that power their ancient cars and dilapidated shanty towns. Civil society has broken down and brute force rules a world that can no longer sustain the level of complexity to which it had become accustomed. The forebears of the dystopia seem not to have invested heavily at national levels in alternative energy sources like wind power, solar power, and nuclear energy, as China began doing in 2008.
Though coal and oil will clearly continue to reign over China’s modernization efforts, the country has developed national policies of energy independence. China’s plan is not only to become as self-sufficient as possible from the potential tyrannies of unstable fuel providers outside its borders, but from the caprice of international markets, as well. The nation’s leaders also see a pressing need to seek independence from fossil fuels themselves, the low-hanging fruit that within a few short decades may all be picked.
Notes
1. Lin Boqiang, “Powering Future Development,” China Daily, January 20, 2012. Available online at www.chinadaily.com.cn/usa/business/2012–01/20/content_14480632.htm.
2. Richard Lester and Edward Cunningham, “Greener Plants, Grayer Skies: A Report from the Front Lines of China’s Energy Sector,” MIT Industrial Performance Center, August 2008.
3. Ibid.
4. Leslie Hook, “China Denies IEA Claim on Energy Use,” The Financial Times, July 20, 2010.
5. British Petroleum’s Energy Outlook 2030.
6. Michelle Price, “A Consumption Conundrum,” Wall Street Journal, December 6, 2011. Available online at http://online.wsj.com/article/SB10001424052970204346104576638561340925004.html.
7. Daniel H. Rosen and Trevor Houser, “China Energy: A Guide for the Perplexed,” 9. A part of the China Balance Sheet, a joint project by the Center for Strategic and International Studies and the Peterson Institute for International Economics, 9.
8. Ibid, 9.
9. “Crisis Prevention,” The Economist, February 24, 2011.
10. Deborah Seligsohn, Robert Heilmayr, Xioamei Tan, and Lutz Weischer. “China, the United States, and the Climate Change Challenge (Washington, DC: World Resources Institute, 2009). Available online at www.wri.org/publication/china-united-states-climate-change-challenge.
11. Institute for Energy Research Testimony Before the Select Committee on Energy Independence and Global Warming Hearing on the Global Clean Energy Race, September 22, 2010. Available online at www.instituteforenergyresearch.org/2010/09/22/ier-testimony-on-the-hearing-on-the-global-clean-energy-race/.
12. James Kynge, China Shakes the World: A Titan’s Rise and Troubled Future—and the Challenge for America (New York: Houghton Mifflin Company, 2007).
13. “Engine Trouble,” The Economist, October 23, 2010, 81.
14. Daniel Rosen and Trevor Houser, China Energy: A Guide for the Perplexed (Washington, DC: Center for Strategic International Studies and the Peterson Institute for International Economics, May 2007), 6.
15. Ibid.
16. British Petroleum’s Energy Outlook 2030.
17. Jonathan Watts, “China’s Coal Addiction,” Foreign Policy, December 2, 2010. Available online at www.foreignpolicy.com/articles/2010/12/02/china_s_addiction_to_coal?page=0,2.
18. Elisabeth Rosenthal, “Nations That Debate Coal Use Export It to Feed China’s Need,” New York Times, November 21, 2010. Available online at www.nytimes.com/2010/11/22/science/earth/22fossil.html?_r=1&ref=todayspaper.
19. Ibid.
20. Ibid.
21. Jonathan Watts, “China’s Coal Addiction,” Foreign Policy, December 2, 2010. Available online at www.foreignpolicy.com/articles/2010/12/02/china_s_addiction_to_coal?page=0,2.
22. British Petroleum’s Energy Outlook 2030.
23. Clifford Kraus, “Breaking Away from Coal,” New York Times, November 29, 2010.
24. Mary Kay Magistad, “China’s Search for Cleaner Coal,” The World, December 1, 2010. Available online at www.theworld.org/2010/12/01/china-clean-coal-greenhouse-climate/.
25. U.S.–China Energy Center website. Available online at www.nrac.wvu.edu/projects/sheia/index.html.
26. Annette Cary, “Researchers Look to China for Help with Projects,” News Tribune, December 12, 2010. Available online at www.thenewstribune.com/2010/12/12/1462000/richland-researchers-look-to-china.html.
27. “Chinese Power Plants Have Been Staging Brown Outs, with Some Functioning Only Days of Coal Inventory,” MyChinaViews, December 31, 2010. Available online at http://mychinaviews.com/2010/12/pricing-fracas-leads-to-coal-shortage/.
28. Sephen Kurczy, “China to Mold Future World Energy Use: IEA,” Christian Science Monitor, November 10, 2010. Available online at www.csmonitor.com/World/Global-Issues/2010/1110/China-to-mold-future-world-energy-use-IEA.
29. Wang Guanqun, “Driving Mad! 4 Million Cars Clog Beijing Roads,” Global Times, December 21, 2009. Available online at news.xinhuanet.com/english/2009–12/21/content_12681158.htm.
30. “Huge Source of Oil, Gas Found in South China Sea,” India Talkies, January 17, 2011. Available online at www.indiatalkies.com/2011/01/huge-source-oil-gas-south-china-sea.html.
31. “Natural Gas Demand to Soar.” Available online at http://europe.chinadaily.com.cn/business/2011–01/29/content_11940148.htm.
32. “China’s Natural Gas Approach: Pipelines are Best Way to Resolve Shortages.” Available online at www.chinasignpost.com/2010/12/china%E2%80%99s-natural-gas-approach-pipelines-are-best-way-to-resolve-shortages/.
33. “Natural Gas Demand to Soar.” Available online at http://europe.chinadaily.com.cn/business/2011–01/29/content_11940148.htm.
34. Ibid.
35. “National Gas Consumption to Increase.” Available online at www.chinadaily.com.cn/usa/business/2011–01/21/content_11898239.htm.
36. “China First-Quarter Gas Imports More Than Double, NDRC Says.” Available online at www.bloomberg.com/news/2011–04–15/china-first-quarter-gas-imports-more-than-double-ndrc-says-1-.html.
37. Ibid.
38. “National Gas Consumption to Increase.” Available online at www.chinadaily.com.cn/usa/business/2011–01/21/content_11898239.htm.
39. Gordon Feller, “China’s Energy Demand—Improving Energy Intensity is Proving a Daunting Task in the World’s Most Populous Nation,” EcoWorld, May 20, 2007. Available online at www.ecoworld.com/energy-fuels/chinas-energy-demand.html.
40. “China 2008 Power Consumption Up 5.23 pct, Lowest Rise in 10 Years,” Reuters, January 5, 2009. Available online at www.forbes.com/feeds/afx/2009/01/05/afx5882229.html.