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Chinas coal policy is breathtakingly self-destructive

By Climate Guest Contributor  

"Chinas coal policy is breathtakingly self-destructive"

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China EIA

Back in 2007, I wrote that “the immorality of China’s coal policy is breathtaking (literally).”  Sadly, even as it has become the world leader in clean energy, China’s self-destructive coal policy continues unabated.  China’s CO2 emissions now surpass ours by some 40%!

Our cumulative emissions greatly exceed theirs, of course, so I’m not diminishing America’s culpability in the coming climate catastrophe at all. But their CO2 growth rate is staggering whereas ours is mostly stagnating.

Moreover, the impacts of unrestricted CO2 emissions will surely be much harder on their country than ours, and not just because they are poorer with vastly more people.  They are very reliant on inland glaciers that will likely all but vanish this century.

They are vastly more vulnerable to food insecurity. We’re the breadbasket for the world, with vast surplus agricultural production, whereas they might have to import wheat this year if their current extreme drought continues.  They already import staggering amounts of soybeans.

Why have China’s emissions risen so rapidly?  That question is examined in a fascinating analysis from CO2ScoreCard, that I excerpt at length, below.

by Shakeb Afsah and Kendyl Salcito

… An analysis of the latest data on CO2 emissions from the Energy Information Agency (EIA), released in Jan 2011, shows definitively what some policy analysts have long suspected: that China’s macro-economic policies have made its micro-economy a magnet for energy intensive and greenhouse-unfriendly industries (Hofman and Kuijs 2008; Bergsten et al. 2009).

Exhibit_1China’s CO2 emissions increased by 906 million tons in 2009 – the second largest annual increase for any country in recorded history. This emissions explosion is partly attributable to standard economic growth, but there is more going on. In national rankings, six of the ten largest single year increases in CO2 emissions are attributed to China (Exhibit-1). All these record-breaking CO2 spews occurred in the past decade””the period when China’s exchange rate was most closely regulated to boost exports. The export industries and their extensive supply chains are energy intensive and powered by coal, and their growth has surged during the last decade (Kahrl and Roland-Holst 2008).

Through the global recession, China’s depressed exchange rate protected its energy intensive industries, serving as a subsidy for export-oriented manufacturing industries (Wolf 2009). Other countries that would have grown their industrial sectors couldn’t compete against China’s deflated prices. So China has ended up with a lion’s share of industrial production within its economic pie, subjecting itself to a sub-optimally large share of CO2 emissions and other industrial pollution.

China’s Contribution to Global CO2 Emissions

Exhibit_2_and_3

The Chinese themselves are the most immediate victims of this economic-environmental policy, as air pollution levels soar. But the impacts are global, pitting China against the rest of the world in the battle over CO2 reduction. Almost singlehandedly, China negated global emissions reductions last year. Data shows that global CO2 emissions from energy use stabilized during 2008 and 2009 (in fact, it declined by 97 million tons, or 0.3%), but the six top emitters (US, Russia, Japan, Germany, Canada and UK) and the rest of the world together reduced their CO2 emissions by 1.15 billion tons. China’s 906 million tons, combined with increases from India, Iran and South Korea, totaled a 1.06 billion ton increase in emissions. On net, the world made no gains (Exhibit-2).

Whence the Change?

The source of China’s current economic-environmental woes is easy to pinpoint. China joined the World Trade Organization (WTO) in 2001, signaling a new interest in export-oriented growth. That same year, emissions began a steady rise (Exhibit-3). Only four years later, the already devalued Yuan dipped even lower, dropping from just over 8 RMB per USD to under 7 by 2008. China’s currency control played a major role in boosting exports, but it also correlates with an increasing concentration of global CO2 emissions in China. This concentration can be calculated on what economists call the Herfindahl Index[1] (Exhibit-4), which shows spikes when monopolistic conditions arise and sinks when a larger number of countries (or firms, when calculated for an individual country) contributes to emissions. China is the emitter causing the spike beginning in 2001, just as the US (along with a few OECD countries) represented the high Index ratings in the 1980s.

Exhibit_4_and_5The distorting effects of exchange rate policies become clearer when China’s energy intensity is contrasted with other countries. As shown in Exhibit-5, China consumes on average close to two times as much BTU per person than India for a similar level of GDP per capita. In 2007 China consumed around 30 million BTU extra per person above the global average to produce the same per capita GDP. In fact, China’s per capita energy intensity is among the highest in the world, while its per capita GDP rates rise in line with other industrializing nations.

During the last decade, on four occasions China’s CO2 emissions grew faster than its GDP (see supplementary exhibit). The problem isn’t just that China’s pollution is outpacing its growth; it’s that the country is actually reversing the gains it made in energy and emissions efficiency in previous years. After four years of continual improvement between 2004 and 2008, China regressed to 1999 levels of CO2 intensity in 2009 (Soucre: EIA). This kind of reversal casts doubts about the reliability and robustness of improvements in energy and CO2 intensities, and indicates that environmental management alone may not be enough to generate lasting continual improvements in energy use at the economy-wide level.

China’s Inadequate Actions

Given the challenge of reducing energy use and CO2 intensity, China’s efforts need to be more ambitious and policy oriented. China’s CO2 emissions trend in the past decade is unprecedented, adding 4.8 billion tons of CO2 to the atmosphere (source: EIA). In comparison, during the 14 years of a continuous spell of CO2 emissions increases in the US, between 1959 and 1973, Americans added around 2 billion tons (source: CDIAC).

To address its rapidly rising emissions, in Nov 2009, China announced its intention to reduce CO2 intensity from 2005 levels by 40-45% by 2020. This target, though impressive on paper, represents the status quo. Between 2005 and 2008 China’s average annual CO2 intensity reduction rate was 4.35%. At that rate, emissions would shrink by 45% in around 13 years – by 2018. Maintaining the 4.35% reduction rate would not require any additional effort on China’s part. But the 2020 goal only requires a 3.9% annual reduction. China is not just setting itself up for a business-as-usual carbon intensity reduction plan; it has committed to a lazier plan, allowing its emissions to continue increasing for an extended period of time (Exhibit-6).

… While China gains accolades for its targets and results (Seligsohn and Levin 2010; Houser 2010), data analysis clearly demonstrates that a 45% reduction in carbon intensity by 2020 will be insufficient to tackle the rate at which total CO2 emissions is currently increasing in China.

Exhibit_6If the discrepancy between China’s Government projections[2] and actual data are any indication, the country has long been aware that its development policy contributed to the problem, and its proposed solutions cannot solve it. Excessive CO2 emissions are driven by the increasing rate of output from energy Exhibit_7intensive industries tied directly and indirectly to exports (it is important to bear in mind that while laptops, electronics, toys and plastics are not inherently polluting, the supply chains associated with each industry in China is hugely energy intensive, a point emphasized in Kahrl and Roland-Holst 2008). As shown in Exhibit-7, downstream industries like iron and steel, cement and synthetic ammonia had already exceeded the Government growth projections for 2020 by 2005 – 15 years ahead of schedule (Sheehan and Sun 2006).

Policy Implications

This note attempts to show that at the margin, China’s weak currency policy is creating sub-optimally high levels of CO2 emissions. The emerging broad lesson from this pattern of currency devaluation and emissions increases is that China cannot separate the macro from the micro – major changes must be made in both arenas. China is conducting energy audits (Shen, Price and Lu 2010), setting targets and shutting down old factories. Local governments are even forcing blackouts to meet energy intensity targets. But that doesn’t solve the larger issues caused by its current economic strategy. China’s coal consumption has soared to a total of 10.5 billion tonnes of oil equivalent since 2000 (source: BP)””more than the amount it consumed in the 20 years prior (from 1980-1999). That won’t stop until the monetary policy changes and Chinese companies compete with other industrializing nations on an even playing field.

Shakeb Afsah and Kendyl Salcito from CO2ScoreCard.

References

Bergsten C.F, Freeman C., Lardy N.R. and Mitchell D.J (2009), “Energy Implications of China’s Growth”, Chapter 7, China’s Rise: Challenges and Opportunities, Peterson Institute for International Economics, October 2009, Washington DC.

Hofman B. and Kuijs L. (2008), “Rebalancing China’s Growth“, Chapter 3, Debating China’s Exchange Rate Policy, edited by Goldstein and Lardy, Peterson Institute for International Economics, Washington DC.

Houser T. (2010), “Economic Drivers of Energy Use and Carbon Emissions in China“, ChinaFAQs, World Resources Institute, Washington DC.

Kahrl F., and Roland-Holst R. (2008), “Energy and exports in China”, China Economic Review 2008; 19(4):649-58.

Seligsohn D. and Levin K. (2010), “China’s Carbon Intensity Goal: A Guide for the Perplexed“, ChinaFAQs, World Resources Institute, Washington DC

Sheehan P., and Sun F. (2006), “Energy Use and CO2 Emissions in China: Retrospect and Prospect“, Center for Strategic Studies, Victoria University, Melbourne, Australia.

Shen B., Price L., and Lu H. (2010), “Energy Audit Practices in China: National and Local Experiences and Issues“, Lawrence  Berkeley National Laboratory, Berkeley, California, December 2010.

Wolf M. (2009), “Why China’s exchange rate policy concerns us“, Financial Times, 8-December-2009

Data Sources

BP: British Petroleum Statistical Review of Energy

CDIAC: Carbon Dioxide Information Analysis Center-Oak Ridge National Laboratory (US)

EIA: Energy Information Agency (US)

IEA: International Energy Agency

WDI-2010: World Development Indicators 2010-World Bank

Download pdf

Supplementary Exhibit

Supplementary Exhibit


[1] Herfindahl Index is used for analyzing the level of competition in a market using market share of each firm. It is calculated as the sum of the square of each company’s market share. We apply the same index using each countries CO2 emissions share for the top 50 emitters for the period 1980-2009. We are most interested in the trend, and as shown in Exhibit-3, the increasing trend from 2001 implies that the share of CO2 emissions from a large country like China has become a dominant contributor, and is large enough to shift the direction of the index.

[2] The primary source for the information cited in (Sheehan and Sun 2006): National Development Research Centre (NDRC) (2004), China National Energy Strategy and Policy to 2020: Subtitle 2: Scenario Analysis on Energy Demand, Beijing.

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31 Responses to Chinas coal policy is breathtakingly self-destructive

  1. Bill says:

    The post is very interesting, but the takeaway seems more mixed to me. If China had not manipulated its currency, more of these dirty industries might be dispersed in other countries, but it’s not clear that the total global GHG emissions would be any lower. Indeed, the high concentration of GHG emissions in a few countries could facilitate progress over time. As the post notes, China will suffer significantly from climate change. The fact that they produce a huge portion of the problem and suffer a big adverse consequence implies that, in econ jargon, they have partly internalized the externality. This should increase their incentive to do better. Concentration could also make it easier to achieve international agreements, since there would be fewer parties to negotiate.

  2. Richard Brenne says:

    I wonder how much of China’s CO2 increase comes from their making the stuff that we (the U.S.) consume since we decided to outsource both our manufacturing and pollution.

    If China and the U.S. could both agree to reduce emissions, the rest of the world would follow. Conversely if we stay on the paths we’re on, the rest of the world will follow at full speed on a bullet train (Maglev in China) off an El Cap-sized cliff into an ocean of molten lava. . .

  3. mike roddy says:

    Govarnments in both China and the US are dominated by special interests. Making real change impossible. EU and Japan should set carbon surcharges on imports. That will change everything.

  4. Lou Grinzo says:

    Richard brings up the nastiest detail of this: Emissions created in manufacturing exports.

    I don’t have the numbers at my fingertips, but my recollection is that a sizable portion of China’s emissions are from exports to the US and the EU. Sorry I can’t be more specific than that at the moment.

    But the big question is: Who’s responsible for those emissions? The US for buying all that stuff? China because of how they choose to manufacture it? If the US didn’t buy it, the emissions would be much lower, so it’s our fault, some claim. Well, if it’s our fault, then we should have complete control over how China powers their industries, right? Oh, wait — that won’t fly because China’s a separate nation and all that. So we’re stuck with US (and EU and …) consuming Chinese exports and China deciding how to power their industries and cities in often a very shortsighted and CO2 intensive way.

    Plus, as China’s citizens rise up the economic ladder, their emissions are likely to shift significantly to domestic consumption. Their electricity supply will get cleaner (less CO2 from exports), and they’re buying many more motor oil-powered vehicles (more CO2 from domestic consumption), plus buying more of the consumer goods that they would normally ship to the US.

    Anyone who thinks that the science part of the climate mess is the tough part hasn’t begun to look at public policy and international relations pieces.

  5. Mulga Mumblebrain says:

    The Chinese are quite aware of the problem, which is why they are taking action, not just to increase renewable energy, reduce energy intensity, move to a more organic style of agricultural production, turn to an economic model more directed towards internal consumption and services (Chinese wages are being rapidly increased while US, Irish, Latvian, Greek, Portuguese, UK workers etc are being impoverished)etc. Turning around a giant ship takes some time, but at least they are heading in the correct direction, but whether quickly enough is the big question. Meanwhile the USA and Australia are heading back to a Dark Age before the Enlightenment, where society is run along neo-feudal lines, with a tiny hyper-rich and insatiably avaricious elite rules over a mass of disempowered serfs whose wages, conditions and life prospects are being increasingly eroded, with no end point in sight, and where science, rationality and truth are simply dismissed if they interfere with business privileges and deracinated Rightwing ideology.Moreover, the Chinese are appreciating their currency, but they are doing it slowly, and carefully. A huge appreciation, as was forced on the puppet Japanese regime by their US overlords in the 1985 Plaza Accord, would not only cause even more damage to China than Japan suffered, but would be another huge global shock, with unknown but almost certainly detrimental effects worldwide.

  6. James Newberry says:

    Yes Joe, fascinating work here.

    China seems to have taken the gold and lost their soul.

    Apparently, they believed the advocates of western development when they enshrined the concept of coal as an energy resource, rather than a rock, a mountain, and nature’s storage of previously atmospheric carbon – that if oxidized (thereby reentering the ecosphere from the lithosphere) will provide multiple calamities which will decimate this five thousand year old culture.

    You could say the numbers are off the charts. It feels like we handed off an ecologic bomb to them after pulling the safety pin (in 2001).

    They should have spoken with their distant cousins, the North American Native Peoples, about respect for nature, and what disrespect will bring: short lived satisfaction, then long lived hardship.

    We seem to be a world filled with multiple Titanics. “Ice berg dead ahead.” All coast lines going down.

    Thanks to the researchers.

  7. Mike#22 says:

    I purchased/installed a heat pump hot water heater last fall. This is a 50 gallon domestic hot water heater that is in the basement. It is set to heat pump only mode and metered separately. Working well, the small basement is cooler by a few degrees.

    High build quality, very heavy, lots of nice features, and made in China. So is the nifty meter.

    So now our household is using 2 to 3 kwh a day for dhw. But what about the emissions from the product manufacturing, shipping, raw materials?

  8. Barry says:

    Mulga (#5) I’m not sure you have seen the income distribution stats for China. According to UN stats for how much more a nation’s wealthiest 10% own compared to the poorest 10%:

    China: 22 times richer
    USA: 15
    Germany: 7
    Japan: 4

    Pacala (of the “wedges” fame) looked at wealth and CO2 linkages across national boundaries. Here is what he said about China: “China is a gigantic nation of rich people surrounded in a titanic nation of poor people”

    China has the 4th greatest number of millionaires after USA, Japan and Germany.

    Hardly the egalitarian model they portray themselves as.

  9. Joan Savage says:

    The coal use is also a pressure on China’s water supply, and therefore food supply.

    In the balance, while exporting US pollution by buying Chinese manufactured goods, we might note we are also exporting US water to China via food.

  10. Barry says:

    I love reports like this with good data. Thanks Joe.

    I also have found that people glaze over when CO2 intensity stats are talked about. That is too bad because they are central to understanding our energy/climate challenge and options.

    What I have found works well to communicate this info to people is to reverse the CO2/$ into $/CO2. Here is US EIA intensity data converted to dollars produced per tonne of CO2:

    $450 China
    $550 Russia
    $710 India
    $2,400 USA
    $2,400 Brazil
    $3,700 Germany
    $4,000 Japan
    $5,500 France
    $7,900 Norway

    You can quickly see how dirty China’s economy is. If they cleaned up as much as India they would cut their CO2 by 32%. If they got as clean as Brazil they would cut their CO2 by 80%. They are the dirtiest of the BRIC and BASIC blocs by a good chunk.

    China has zero excuse for this dirty record. They control huge amounts of global capital. They have some of the brightest and most capable people. They have thousands of years of history. And yet they are destroying the climate through a pathetically dirty economy.

    There are only 10 nations in the world dirtier than China in terms of dollars per tonne of CO2…like North Korea ($330), Trinidad and Tobago ($405) and Zimbabwe ($363).

    If you put these stats in an excel column chart and make them look like a stack of coins it has instant “aha” factor. Recommended in your communications on this stuff.

  11. Barry says:

    China’s dirty economy is also a honey pot for the world’s coal companies to unload their climate killing product with no muss or fuss. This is distorting the politics of many nations like Australia, USA, Canada and others. In BC for example, the government has a carbon tax for domestic emissions…but allows coal exports of the same CO2 total to be dug up and shipped to china with zero carbon tax on it.

    The fact that China refuses to put a carbon price on their coal…and have no cap anywhere in sight means Big Coal is doing everything it can to dig it out everywhere else in the world and ship it over there. The tar sands in Alberta now have this as their primary new mission.

    Just like the manufacturing jobs and industry all went there…now too all the carbon merchants are shovelling their carbon there too. Since China refuses to clean their economy the dirtiest of the dirty fuels are heading their way by the supertanker full.

  12. Barry says:

    Here’s an idea: boycott Chinese goods.

    Every $450 in Chinese goods you buy comes with a “free” tonne of CO2 tossed in.

    Going to need a bigger shopping cart to carry all that with you for the next few centuries, eh?

  13. Tony O'Brien says:

    Point finger at China, then dig up the rest of the world’s coal ship it to them and then buy back stuff that breaks.

    Australia cannot escape responsibility for coal it exports the US cannot escape responsibility for the junk it buys and China cannot escape for the CO2 it produces. Carbon export levies, and carbon tariffs, not just an at home tax on CO2 emmissions. That is unless the other countries actually do someting about it.

    It is in China’s interest to act on CO2 emmissions, as it is in everybodies interest. But if a single country refuses to act there are alternatives that could be applied and not just to China. The future may rest with the WTO more than any other organisation.

  14. Charles Hart says:

    Well China got the memo. This nuclear technology is far less expensive, even cheaper than coal. China is on a path to replace coal with these green nukes.

    http://www.wired.com/wiredscience/2011/02/china-thorium-power/

    “China Takes Lead in Race for Clean Nuclear Power”

    “China has officially announced it will launch a program to develop a thorium-fueled molten-salt nuclear reactor, taking a crucial step towards shifting to nuclear power as a primary energy source.

    The project was unveiled at the annual Chinese Academy of Sciences conference in Shanghai last week, and reported in the Wen Hui Bao newspaper (Google English translation here).

    If the reactor works as planned, China may fulfill a long-delayed dream of clean nuclear energy. The United States could conceivably become dependent on China for next-generation nuclear technology. At the least, the United States could fall dramatically behind in developing green energy.”

    [JR: Probably not cheaper, no. Not "clean" either.]

  15. Windsong says:

    I don’t think Chinese wages are getting much higher, according to my Chinese friends, Mulga. Chinese people have a saying: the reason there are no census takers in China is because they are not needed– the Chinese rulers decide what the statistics are. In other words, don’t believe everything the government says about how hunky dory everything is– the chinese people are suffering like us from higher costs, no jobs and EXTREMELY low pay compared to what we in the U.S. receive. Only the rich can afford apartments anymore. Everything has sky-rocketed in cost.

  16. Windsong says:

    Why is it that if I spend too much time writing something, it disappears?

    [JR: Gremlins.]

  17. Mulga Mumblebrain says:

    Barry and Windsong, I can see that you regard China as some sort of pariah and menace. Of course, in a gigantic state, rapidly industrialising and growing, many nasty side-effects will occur. Just look to the history of Western industrialisation, the growth of capitalism facilitated by the mining of vast resources of silver in Bolivia (six millions slaves died extracting it), the slave trade, the colonial epoch, the destruction of indigenous cultures, the vast famines in India under British rule, the hecatomb in Belgian Congo and the World Wars that grew out of European imperial contest, to see how much ill the process can cause. China has, inevitably, done wrong things, but they can see where they are going awry, and they are acting to fix it. I’m afraid that I am very cynical about the great wave of Sinophobia inundating the West at the moment. Where China ought to receive constructive criticism for its failings and admiration for its successes, all I see in the MSM is increasing vitriolic condemnation. There was a perfect example the other day in the Fairfax press here. Using Wikileaks cables, ie the opinions of US diplomats, quoting unnamed Japanese Rightwing politicians, it was a frenetic effort to foment fear and loathing of China’s ‘military surge’. Only at the end, after paragraphs of assertions and innuendo, did one fact emerge. China, that deadly threat, still only possesses 90 ICBMs, and the US 1550, with thousands more plutonium cores in storage. I think it is pretty obvious that China has been designated the latest ‘enemy’ and is being demonised relentlessly to prepare Western publics for a coming confrontation, just what the world needs at this juncture.

  18. Sarah says:

    Barry @10

    The inversion to $/CO2 is excellent.

    I’ve been thinking recently that people seem to be conditioned to think bigger numbers are better and lines on graphs should go up. So whenever possible arguments should be framed so that increasing “whatever” is the direction we need to go, particularly on a graph. That may especially be important when dollars are involved.
    With that approach, using identical data it’s better to show increasing efficiency than decreasing waste; increasing clean energy is better than decreasing dirty; a plot of increasing dollars saved is better than decreasing costs.

    Of course, some things are really hard to spin positively in an upward direction: increasing the amount of carbon left in the ground?? Hypothetical storms averted? Those won’t fly.

  19. john atcheson says:

    In essence, we own much of their GHG emissions. We exported our emissions there, with our jobs.

    I wonder if the IPCC estimates of emissions anticipated this explosion of CO2?

  20. Jeandetaca says:

    We people in the west and everywhere on earth want to buy goods at the lowest price and Chinese factories are producing in this purpose; with the lowest wages and the cheapest energy: coal!
    As long as we refuse to pay for the externality of the carbon cost to our climate, there will be no solution in sight.
    Of course, the carbon owns to the buyer of the goods, not to the producer.
    According to economical studies, roughly 40% of the CO2 numbers of China concern goods for exportation.
    China is no1 in green energy and no1 in dirty energy: the reckon is a recipe for disaster.
    This shows that the key effort must be to cut our CO2 emissions, and this implies a carbon price, a strong one, on a world wide basis, with equal redistribution, to protect and associate the poor people to the project because they obviously are the lowest carbon emitters.
    This obvious reasonning is shared by a lot of sensible people in the world.
    Are we so stupid that we cannot make it fly?

  21. John B. Hodges says:

    Re. comment #14, about Thorium molten-salt reactors; Can you give us a link to a critique, and/or write something to give us your basic misgivings? I have been leery of nuclear-electric power since the 1970′s, but always with the proviso that better technology would have to be evaluated on its own merits.

  22. Tim says:

    Mulga,

    Depressing as it is to accept, your characterization of the US direction is accurate – the concentration of wealth and power in a small hyper-elite is indeed what is going on. However, while I do not regard China as our “new enemy”, neither do I think their direction should be misrepresented. While the Chinese are to be admired for their resistance of international bankers, wages’ share of national income in China has been shrinking for twenty years – and that’s openly acknowledged by David Harvey in his excellent Marxist analysis! (http://kasamaproject.org/2010/07/07/the-crisis-of-capitalism-animated%C2%A0wdavid%C2%A0harvey/).

  23. S. Majumder says:

    ‘Hey butcher give me some vegetarian meat.’

  24. Barry says:

    Mulga (#17), I do not think it is fair that you assign opinions to me as you do here: “Barry and Windsong, I can see that you regard China as some sort of pariah and menace. ”

    What I’m saying is that China has the ability and thus the responsibility to do much better than they are doing. Just like USA, Australia, Canada and others do.

    China is spinning it’s “need” for dirty economy like every other major nation. And like many other nations, much of it’s “climate” PR messages are bunk.

    China is intentionally choosing rampant GDP growth built on hyper-pollution…rather than slow GDP growth built on climate pollution levels similar to other BRIC and BASIC nations. China could still grow GDP without trashing the climate. But they are choosing not to.

    And China is shovelling the cash into the upper 10% at a higher percentage than USA even.

    China, like USA, have intentionally chosen to favour extra GDP growth rates over climate sanity. Neither have a good excuse.

  25. Flash says:

    Spanish law boosts coal-fired output over gas

    European Daily Electricity Markets
    February 28, 2011

    Coal on Monday supplanted gas as the most important form of hydrocarbon in the Spanish electricity generation mix for the first time this year, as new legislation favouring coal generation entered into force on Saturday.

    Data from grid operator REE showed coal-fired generation accounting for 97GWh and combined-cycle gas turbines (CCGTs) 75GWh.

    Net Spanish generation was put at 782GWh (see graph), with strong input from the so-called Special Regime of renewables and small-scale hydro generation, as well as larger hydroelectric generation and nuclear.

    The generation mix was similar on Sunday, with coal- and gas-fired generation accounting for around 76GWh apiece on Saturday, the first day on which the legislation compelling generators to burn more Spanish coal came into effect.

    This is the first time since the year began that coal has generated more power in Spain than gas, and appears to prove that there will be a negative impact for gas as a generation fuel.

    ICIS Heren reported last week that the new coal law was to be implemented from Saturday 26 February, after much confusion on the market as to the starting date (see EDEM 25 February 2011). The coal law allows Spain to favour Spanish domestic coal for generation purposes, under legislation designed to safeguard EU member states’ security of energy supply.

    CCGT share to shrink

    Endesa calculates that the coal support measures were likely to shrink the amount of gas burned in Spanish CCGTs by around 7-8TWh/year, although imported coal was likely to be the biggest loser, the Spanish power incumbent’s executive vice chairman Andrea Brentan said in a conference call with financial analysts on Friday.

    “22-23TWh of domestic coal [generation] will be forced into the system. We expect 7-8TWh less [generation from] combined cycles and the rest [around 15TWh less] from imported coal,” he said.

    In 2010, Spanish power demand was 260TWh, with 10% (26TWh) generated by coal and 29% (69TWh) by gas, according to annual figures from REE. So a drop of 8TWh would equate to a 12% reduction from CCGT generation.

    A Spanish energy ministry spokesman on Monday confirmed to ICIS Heren that the extra costs involved will be paid for by consumers through their electricity bills, but declined to comment further. These costs are around ?30.00/MWh, since power generators burning domestic coal at the ten plants now forced to do so will receive an average of ?80.00/MWh, while the Spanish electricity pool price stands at around ?50.00/MWh.

    The idea of even a small decline for gas-fired generation in Spain implies further marginalisation for a fuel which, in both 2009 and 2010, was the biggest single source of generation, with 30.4% of the mix – coal accounted for just 8.6%. In 2010, owing mainly to improved hydro, nuclear and wind availability, gas’ share shrank to 23%, but still remained the largest generation sector, with nuclear at 22% and coal at 8%.

    Market impact

    Traders now appear to be contemplating two scenarios: firstly, that gas generators will seek to earn the same profit from a reduced share of the pie by asking a higher-price for the gas-fired generation; or secondly, that gas generators will take a hit as they chase market share.

    One theory among Spanish traders polled by ICIS Heren last week was that the coal law would have a greater impact on generation in summer than winter, as this is usually a time of reduced hydro and wind generation. In other words, gas generators are probably now praying that a long, hot, windless summer will soon be blowing across the country.

    The closure for planned maintenance of five of Spain’s eight nuclear plants – the 1GW Asc� I unit, the 500MW Santa Maria de Garo�a and 1.1GW Trillo facilities, the 1.1GW Almaraz I unit, and the 1.1GW Cofrentes plants – between March and September this year should also help. RS

    Copyright 2011 Heren Energy Ltd.All Rights Reserved
    European Daily Electricity Markets

    Wire News provided by

    Lexis Nexis

  26. Richard Brenne says:

    Barry, well said.

  27. Emeth says:

    @Mulga Mumblebrain –
    I rarely comment on other blogs because for the most part nobody listens to me anyways, but wow; reading some of your comments at CP you definitely come off as heavily anti-American, but your bias is taken to a new level in this tread. If your conjecture that China ‘gets it and is taking action’ were accurate then its year-to-year emission totals would not be generally increasing, but instead would be decreasing or at least holding steady. Also if China ‘got it’ it would have put heavy pressure on the United States at Copenhagen to establish a global carbon price instead of resisting any type of carbon price and at the tail end of the conference offering a rather meaningless ‘promise’ to reduce carbon intensity by 40-45% by 2020 which is a complete joke when it is anticipated that their economy is going to continue to grow that the pace most economists predict. If China ‘got it’ they would not still be constructing a coal power plant every 8-14 days (the range is dependent on who you believe). China’s investment in sources of cleaner energy is being done not out of ‘getting it’, but out of necessity to continue to foster economic growth because of future increases in the price of coal and oil.

    All CP commenters on this thread seem to miss the big point regarding China and its economic growth. China currently finds itself in a scenario where it has to execute one of the following three strategies:

    1. Drive large scale economic growth;
    2. Grant a wider breadth of personal and economic freedoms to its populous;
    3. Deal with a civil disobedience movement so large it would make what happened in Egypt look like nothing;

    From the perspective of the ruling party obviously option 3 is not an option. Option 2 is not attractive either because more freedoms increases the probability that the ruling party will not be able to keep as much power as they have become accustomed to, so that option is out. Thus to avoid a popular civil revolt while still maintaining a repressive regime to control power China’s ruling party has selected option 1, playing the same deceitful game Reagan played in the 80s, ‘keep us in power and one day you can be rich because some of the radical wealth being created for the upper crust could trickle down to you.’ Until you get the ruling party to accept option 2 or create a fourth option like ‘Put a strong steadily increasing price on carbon or the rest of the world will tariff your economy back to the stone age’ China’s ‘getting it’, just like those in the U.S. that ‘get it’, will continue to be a failure. Remember dealing with global warming is a pass/fail situation; it does not matter if China scores a 10/100 or a 34/100 both still fail. Side note: talking about a price on carbon is not a price on carbon; the U.S. talked about a price on carbon and look at all the ‘progress’ that we have made.

    Overall almost every energy expert admits that even at the current rate of cleaner energy deployment China’s emissions will probably not peak until at least 2025 (and that is the optimistic scenario). Anyone that thinks that China cannot do better must forget the measures they took during the 2008 Olympics to ‘prove’ to the world its environment was not as poor as most experts claimed. So if China, the largest current emitter in the world, is a country that ‘gets it’ I would hate to see a point where China did not ‘get it’. Instead of complaining about how you believe the world views China, as some ‘next great threat’, how about supporting your argument by addressing what actions China actually is taking both good and bad. Clearly at this moment China is doing more bad than good with respects to its environment and that is bad for everyone in the global community. It is sad when someone allows his/her bias to undercut his/her credibility.

    PS: To those that believe the Western World is largely responsible for China’s emissions, that is only part of the story. A steadily increasing portion of China’s economic growth and emission profile is coming from infrastructure construction and destruction both related and unrelated to exporting. If China simply stopped building and destroying so much infrastructure (especially in the extremely inefficient manner in which it occurs) emissions would drop by a meaningful number, but so would their reported economic growth which may stimulate the populous towards option 3.

  28. Jack Deb says:

    The US reduced emissions by 400?
    Why isn’t this a headline?
    Or that the rest of the world reduced as well?

  29. Circle of Blue has a great set of features on water use in China which discusses coal

    http://www.circleofblue.org/waternews/category/cob/choke-point-china-2/choke-point-china-features/

    “Production and consumption of coal has tripled since 2000 to 3.15 billion metric tons a year. Government analysts project that China’s energy companies will need to produce an additional billion metric tons of coal annually by 2020, representing a 30 percent increase. Fresh water needed for mining, processing, and consuming coal accounts for the largest share of industrial water use in China, or roughly 120 billion cubic meters a year, a fifth of all the water consumed nationally.

    Though national conservation policies have helped to limit increases, water consumption nevertheless has climbed to a record 591 billion cubic meters annually, which is 42 billion cubic meters (11 trillion gallons) more than in 2000. Over the next decade, according to government projections, China’s water consumption, driven in large part by increasing coal-fired power production, will reach 620 billion to 630 billion cubic meters annually—40 billion cubic meters a year more than today.

    China’s total water resource, according to the National Bureau of Statistics, has dropped 13 percent since the start of the century. In other words China’s water supply is 350 billion cubic meters (93 trillion gallons) less than it was at the start of the century. That’s as much water lost to China each year as flows through the mouth of the Mississippi River in nine months. Chinese climatologists and hydrologists attribute much of the drop to climate change, which is disrupting patterns of rain and snowfall.”

    Awesome blog, Joe. Great work!

    Michael Turton

  30. China, that deadly threat, still only possesses 90 ICBMs, and the US 1550, with thousands more plutonium cores in storage. I think it is pretty obvious that China has been designated the latest ‘enemy’ and is being demonised relentlessly to prepare Western publics for a coming confrontation, just what the world needs at this juncture.

    I think you need to start reading up on what’s going on East Asia. All East Asian and SE Asian nations are currently beefing up their air and naval forces in response to growing Chinese aggression and expansion in the region. China now has territorial claims on nearly every single neighboring nation, with more claims on the way. For those of us who live in Taiwan under 1500 Chinese missiles and the constant threat of Chinese to kill and maim Taiwanese and annex their island, the threat isn’t something trumped up by the US to justify its defense expenditures, but is something quite real.

    Short version: the US was not responsible for China’s decision to invade and annex Tibet. Ditto for invading and annexing East Turkestan. It was not responsible for China’s post-WWII drive to annex Taiwan. Washington is not responsible for China inventing a claim to the Senkaku Islands in the late 1960s. It is not responsible for China inventing a claim to the South China Sea. it is not responsible for China’s current claim to the entire Indian state of Arunachal Pradesh. It was not responsible for China’s recent aggrandizement of territory from Tajikstan. Washington has nothing to do with China’s on-and-off claims to Korean border regions. These and numerous other territorial claims that are causing tension in East Asia are entirely an internal decision of the CCP leadership in Beijing. As is China’s totally unnecessary military buildup.

    Really, the fact that US foreign policy is pernicious and militarized does not mean that other nations are not also bad. The fact that the US military is wildly oversized does not mean the other nations are correctly sized. Even the fact that the neo-cons and other right-wingers want a more confrontationalist China policy does not mean that such a policy is wrong. More striking to me as a lifelong progressive living in Taiwan is the way that East Asia has totally dropped off the progressive radar.

    Michael Turton
    The View from Taiwan

  31. Sou says:

    It’s when confronted with numbers like this that it seems a forlorn hope that people will survive the next 100 years.

    The world is beholden to China. It is one of the bigger risks in the coming decade or two. China is being wooed by countries like Australia, buying up resource companies (and more?) and keeping the economy afloat. China owns a lot of the US debt.

    Not sure what happens when/if China decides to call more of the shots on the world scene.

    I don’t know if you can say China is worse than any other nation in regard to carbon emissions – it’s still in a high growth phase whereas Europe and the USA are stable or in decline. How does China’s total contribution to atmospheric carbon (ie cumulative total to date) compare with that from other countries?

    Australia is shipping coal to China at a great rate and saying coal exporting companies will be ‘compensated’ under Australia’s proposed carbon price scheme. Makes the carbon price scheme a meaningless joke.