Energy and Environment in China

1
Energy and Environment in China

• Kenneth B Medlock III
• Senior Research Fellow in Energy Studies, James A
  Baker III Institute for Public Policy
• Visiting Professor, Economics Department
• Rice University

2
Framing the discussion

• The following appeared in a recent article in the
  Washington Post,
• the water in five of Chinas largest rivers is
  so polluted it is dangerous to touch because it
  causes skin diseases the Huai River, in the
  fertile province of Anhui, is filled with
  garbage, yellow foam and piles of dead fish.
  Several of the countrys main waterways,
  including the Yellow River, a vital artery, run
  dry before reaching the sea. More than 600
  million Chinese, roughly half the countrys
  population, now drink water contaminated with
  animal and human waste
• While these statements may contain an element of
  shock value, they should nonetheless raise
  awareness that China has challenges to face if it
  is to continue its torrid pace of economic
  development.

3
Framing the discussion

• The attainment of higher standards of living for
  all citizens is a prime factor in motivating
  economic progress.
• Energy is crucial to economic progress.
• Most energy services are facilitated by the
  combustion of fossil fuels (petroleum, natural
  gas, and coal) about 86 globally in 2002.
• The combustion of fossil fuels releases sulfur
  and nitrogen compounds, and soot and particulate
  matter, and carbon monoxide. These present
  immediate health risks.
• The combustion of fossil fuels also releases
  carbon dioxide. (However, it is unlikely this
  ranks high on the list of priorities.)

4
Energy, Environment, and Economic Development

• Energy use per person increases with GDP per
  person

5
Energy, Environment, and Economic Development

• Emissions are a function of total energy
  consumption
• Emissions rise with energy use, absent the
  introduction of technologies aimed at reducing
  emissions per unit energy consumed
• Emissions are a function of primary fuel
  composition
• Coal combustion results in greater emissions of
  SOx, NOx, particulate matter, and CO2 per BTU of
  energy output than either petroleum or natural
  gas
• Natural gas is the cleanest of the fossil fuels
• Hydro and Nuclear are zero emissions energy
  sources, but each comes with its own costs
• Emissions are a function of the technology
  employed in energy-using capital equipment

6
China Energy Today

• Per capita energy use in China is only one-tenth
  of that in the US

7
China Energy Today

• but an enormous population means that total
  energy use is just under one-half of that in the
  US.

8
China Energy Today

• Coal dominates Chinas energy mix
• Coal use in China is about 65 of total primary
  energy requirement.
• While coals share is down from 10 years ago,
  total coal use is still on the rise.

9
China Environment Today

• Environment pollution from coal combustion is
  damaging human health, air and water quality,
  agriculture, and ultimately the economy.
  excerpt from China Environmental Issues in the
  EIAs Country Analysis Briefs
• A 1998 report by the World Health Organization
  placed 7 of the 10 most polluted cities in the
  world in China. As of 2003, this was still true.
• Carbon emissions in China rank second in the
  World behind the US, accounting for about 14 of
  the worlds total.

10
China In Context

• China is at the base of the energy-development
  curve.

11
A Challenge Ahead

• Current pollution problems must be addressed
• Per capita energy use in China will increase as
  economic growth progresses (Per capita is
  crucial as China is home to 1.3 billion people)
• Much of the projected increase in energy demand
  will come from the transportation sector as
  private motor vehicle stocks increase

12
A Challenge Ahead

• However, there is no reason that energy use
  patterns in China must follow those of the
  industrialized world, particularly in
  transportation and electricity generation
• Energy-capital relationship dictates that energy
  use will rise as energy-using capital stocks
  grow, holding utilization rates and efficiency
  constant. Most projections allow very little
  change in this respect.
• Efficiency gains can more than offset increases
  in stocks and utilization. (Case study US motor
  vehicle stocks and fuel use from 1978 to 1991.)
• Similar arguments hold for installed MW of
  generation capacity

13
A Challenge Ahead

• The potential for emissions of SOx, NOx,
  particulates, and CO2 will rise
• The realization of this potential is subject to
  many factors
• Coal consumption
• Technology
• Government policy
• International pressures/assistance
• An important point We consume energy for the
  service it provides.

14
Meeting the Challenge

• Pollution imposes a cost to society, which, when
  large enough, can slow economic growth
• Rising health care costs, rising water treatment
  costs, rising land costs as scarcity rents for
  arable/habitable land increase
• These external costs of industrial activities can
  become large enough to divert resources from
  other activities that promote economic growth
• the problem of pollution must be addressed if
  long term progress is to be sustainable.

15
Key Aspects of Meeting the Challenge

• Coal
• Ample domestic supply about 11.7 of the Worlds
  estimated recoverable coal reserves
• Its use provides energy security benefits
• It is the most polluting of the fossil fuels
• Technology
• Electricity generation
• clean coal technologies (IGCC, coal gasification,
  coal liquefaction)
• alternatives (Hydro, nuclear, wind)
• natural gas
• Transportation
• hybrid engine motor vehicles
• hydrogen powered vehicles
• mass transportation
• Policy action
• tradable allowances with strictly enforced
  realistic limits
• installation of scrubbing equipment
• encouragement of shift to alternative fuel
  sources

16
Key Aspects of Meeting the Challenge

• Policy
• Improved pollution controls on power plants to
  reduce SOx and NOx
• Encourage high efficiency standards in
  transportation
• Encourage growth in natural gas-fired generation
• Domestic resources adequate for the near term
• Imports an eventual necessity (LNG versus pipe)
• Encourage the development of hydroelectric
  capacity
• Three Gorges Dam planned for 18.2 GW of capacity
• Yellow River Hydroelectric Development plans an
  eventual 15.8 GW of capacity
• Encourage wind power development
• Largest potential on east coast
• Second highest in Inner Mongolia and northern
  Gansu Province
• Development of large-scale electricity
  transmission and natural gas distribution grids
• Enable production of electricity near fuel
  sources
• Eliminate need for residential coal and/or waste
  combustion