chinas history background

China’s Energy Challenge

Energy strategy for the 21st century...

Matthias Rubin Réda Rebib

SHS - Economics

Reda Rebib & Matthias Rubin 2006-2007 EPFL

China’s Energy Challenge : Index

Abstract...................................................................................................2

1. Introduction ......................................................................................3

2. China’s history background............................................................4

3. Present situation and challenges ...................................................6

4. Solutions on the production side ...................................................9

Coal ............................................................................................................... 10

Oil .................................................................................................................. 11

Gas ................................................................................................................ 13

Nuclear Power ............................................................................................... 14

Hydroelectric Power....................................................................................... 15

Other renewable energies.............................................................................. 16

5. Solutions on the consumption side .............................................17

Changing of a historic trend ........................................................................... 18

Present Policies ............................................................................................. 19

6. Effects on environment of these solutions..................................22

Coal ............................................................................................................... 22

Oil and gas..................................................................................................... 24

Nuclear Power ............................................................................................... 25

Hydroelectric power and other renewable energies....................................... 26

7. Effects on society caused by environmental problems .............29

Water pollution............................................................................................... 30

Land pollution ................................................................................................ 31

Air pollution .................................................................................................... 32

8. Effects on economy caused by energy restrictions ...................33

Reasons......................................................................................................... 33

Impacts .......................................................................................................... 34

9. Discussion ......................................................................................35

10. Conclusion......................................................................................36

11. Facts about China ..........................................................................37

China’s Energy Challenge – Energy strategy for the 21st century... 1


Abstract China is living a spectacular economic growth. Satisfying energy needs of this growth is a huge challenge, as energy production has strong impacts on environment. An environment that for sustainable development is as important as having access to energy. China’s economy is based on energy intensive heavy industry and the raising living standard means that more and more people have access to energy consuming ap-pliances, copying the western way of life. These are the reasons that create China’s huge energy growth. The change from communism to capitalism dropped out some policies that helped successfully temper energy demand. Actually China reached during the years 1980 to 2000 to have an energy increase that was 60 percent below GDP growth rate. Chinese central government is working hard to implement new market based incen-tives, but is struggling with its implementation, because it has often no full control over regional governments. China is the most coal depending country in the world. But coal is the worst one of the fossil fuel, creating greenhouse gases, acid rain and polluting water. This pollu-tion has an enormous cost on economy and society. Impacts can be felt all over the world. To lower dependence on coal China is starting to make massive use of nu-clear and hydroelectric energy. China is aware of the situation and tries to improve it with new policies, which often are more stringent than western ones. If China reaches the full implementation of these policies it could even become a model for the developed world.



1. Introduction With 1.3 Billion inhabitants China represents one fifth of the world’s population! But this is not the only impressive data. China has also:

- a double digit economy growth per annum with already a huge base economy, - 69% of the energy consumption is made up by coal, - 16 of the 20 most polluted cities in the world, …

Today this country is entering in a new era led by capitalism and consumption. All these needs have to be fed with energy, a product that becomes strategic at the be-ginning of the 21st century. All these changes bring their challenges. For 10 years now, westerns countries seem to be more and more interested in China’s development and problems. The world discovers a new actor who completely changes the balance of power between countries. China has to find its own place. This work addresses the “energy aspects” of China’s de-velopment and studies how new energy needs are man-aged by Chinese government. What are the impacts of all these changes on environment as well as economy and human being? Have economic growth and environmental destruction to go hand in hand.

“…all these changes bring

their challenges”

In fact we see that for China, energy growth is a big challenge. The country has to find solutions to feed its growth and avoid energy shortages. It has to deal with its huge coal-based economy which destroys environment, produces acid rain and pol-lutes air at a worldwide level. It has to find new solutions of producing and consuming energy; like oil imports from Africa, Nuclear energy and renewable options. It has to find how to keep prosperity without harming its natural and social environments. All these aspects will be introduced and discussed in this work.



2. China’s history background China’s history begins with its first dynasty around 2000BC. This civilisation was one of the few to invent writing and this script is still used today by a part of Asia (China, Japan, Korea, and Vietnam). From 2000BC to now, various dynasties were in power. We saw some periods of chaos (usually between two different dynasties) and some very bights one. The probably most famous dynasty was the Han which is today the most represented one in term of population. This dynasty lasted between 206BC to 220CE and made first contact with the Roman Empire, creating the Silk Road. Tong and Sang dynasties are also very important, from 7th to 14th century Chinese technology, art and literature reach their zenith. At this period, China was probably one of the most advanced civi-lisations, developing innovation like paper, compass, gunpowder, etc. This belief in innovation last till today and China is the second largest spender in R&D (research and development) behind the USA. During the 19th century, China slowly opened itself to the world. However Chinese adopted a defensive posture toward Occident imperialism. As the country opened up to foreign trade and missionary activity, opium produced by British India was forced onto Qing China, the prevailing dynasty at that time. Two Opium Wars with Britain weakened the Emperor's control. These wars were followed by a dark period and continuous conflicts. After being humiliated by Japan and loosing Korea and Taiwan territories, the emperor decided to reform the government to form a constitutional monarchy but in vain. By the early 20th century, mass civil disorder had begun, and calls for reform and revolution were heard across the country. The last emperor signed his abdication in 1912. In 1912 the Republic of China (ROC) was established with its first president. This president actually a former Qing general who had defected to the revolutionary cause, tried to establish a new dynasty and died of natural cause before fully taking power. At this moment the country was very fragmented and governed by Warlord instead of a global leader. At the end of the Second World War, China was surrendered by Japanese. This forced both parties (communists and nationalists) to cooperate. The end of the war brought China victorious but financially drained. In 1947 began a civil war between communists and nationalists which brought communist party, led by Mao Zedong, victorious. He established the People’s Republic of China (PRC) over most of the territories, nowadays called mainland. The ancient government (ROC) has to retreat to Taiwan Island. Technically both sides are still in war, despite the cease fire after 1950. From 1947 to 1978 mainland was governed by the PRC leading a strict communist policy. In 1978 reforms led to some relaxation of control over many areas of society. However the communist party has still an absolute control and seeks to eradicate every sign of instability. To achieve this goal they jail opponents, control press, suppress movements of independence/secessionist, etc.In 1989 the student protests at Tiananmen Square were violently ended by the Chinese military after 15 days of martial law.



Today 56 recognized ethnic groups are present all over a large territory, with mostly plateaus and mountains in the west and lower lands in the east. Various climates are presents; desert in the north-west, continental in the north east and the sub-tropical in south. This brief history shows that as Napoleon Bonaparte said in his time “When China will wake up, the world will be shaken”. During the communist era, the situation was not reflecting the real place of such a heavy-weight country in term of population, one of every five people in the world is Chinese. Since 1978 when China started opening up to the “free world” the consumption of all kinds of goods increased, most of them consuming energy. The world balance of energy consumption and production was totally changed1.

“When China will wake up, the world will be

shaken”

1 Wikipedia



3. Present situation and challenges China is the world’s most populous country and has a very fast growing economy. China’s real gross domestic product (GDP) has grown at rates of over nine percent a year for a quarter century resulting in multiplying China’s economy by five. By 2020 China’s leaders aim to quadru-ple economy again. This incomparable economic growth obviously implicates an increasing demand of energy. China yet is the world’s second largest energy consumer behind the United States. Still China’s per capita energy consumption is one-eight that of the U.S., but some ana-lysts predict that China will reach U.S. level in the next few decades. If this scenario turns out to be true, China’s carbon emissions would exceed today’s global emissions by 22 percent!

“So for generat-ing one U.S. dol-

lar of GPD, China uses three times

more energy than the global aver-

age…”

Moreover, China’s economy is vastly based on energy intensive heavy industries. This involves huge energy consumption. So for generating one U.S. dollar of GPD, China uses three times more energy than the global average, 4.5 more than the U.S., 7.7 more than Germany, and 11.5 times more than Japan2. As the country develops, private energy consumption raises too, due to more energy-using products in households such as air-conditioners, heaters etc. And the number of cars, private and commercial ones is rapidly increasing. In 2004 China had total installed electricity generating capacity of 391.4 GW, 74 per-cent of it came from conventional thermal sources, mainly coal-fired power plants. Since 2000 electricity consumption and generation have increased by 60 percent.

Even so in 2003 wide parts of China, including economically important regions such as the Shanghai delta were visited by large-scale outages. This un-derlines the seriousness of the supply shortage with its impli-cations on economy. As China has huge coal re-serves, coal plays an important part to face these problems in energy production. China is the most coal dependent economy on earth. The consumption reached nearly 2 billion metric tons in 2004, an increase of 75 percent in just five years. 69

percent of the total primary energy consumption is made up by coal3. Therefore most of China’s global warming emissions, acid rain and airborne toxic heavy metals are

2 China’s Quest for Energy Security - September 2004 - Jiang Wenran Edmonton Journal 3 China National Bureau of Statistics



caused by coal. Although China is taking steps to reduce the overall share of coal in its energy mix, coal use will at least double or even quadruple over the next two

decades4. Another important energy source, espe-cially for the increas-ing number of vehi-cles on China’s roads is oil. Until 1993 China was a net oil exporter, now it’s consuming 7.4 million barrels per day almost half of it from imports5. Since 1995 China’s fleet of vehicles has more than tripled to over 28.3 million vehicles. After coal, oil is one of

the most important air pollutants in China. This also due to ill-equipped refineries which churn out gasoline with sulphur content in excess of 800 parts per million (ppm), and diesel with sulphur exceeding 2000 ppm. To compare OECD countries are reaching 15 ppm sulphur in both gasoline and diesel. Environmental pollution from fossil fuel combustion is a serious problem in China. It’s damaging human health, air and water quality, agriculture, and ultimately the economy, so the World Bank estimated in 1997 that pollution costs the Chinese economy 5 to 8 percent of GDP each year. Many of China’s cities are among the most polluted in the world. Simply breathing in one of the major cities is a two-pack-a-day habit.

“Simply breathing in one of the ma-

jor cities is a two-pack-a-day habit”

We can clearly see that China is in front of a giant challenge. On one side having to satisfy the in-creasing demand of energy due to economic growth and higher life standards and on the other side tak-ing care of the environment to guarantee development and raising life standards also for future generations. China’s leaders grasp the seriousness of this chal-

4 China’s National Energy Strategy and Policy - November 2003 - State Council Development Research Center 5 Country Analysis Briefs, China - August 2006 - EIA U.S. Energy Information Administration



lenge and even if they make not part of the Kyoto protocol they have undertaken several steps to improve environmental conditions in the country. In 2004 China was the second largest producer of hydroelectric power behind Can-ada. 15.8 percent of its total generation comes from hydro power. And there are sev-eral large-scale projects planned or under construction, so the Three Gorges Dam. Nuclear power is also promoted as a clean and efficient source of electricity generation. But even with the planned expansion nuclear power will only represent between 2.5 and 4.5 percent of total installed generating capacity.

“…even with these measures China’s govern-ment struggles facing its own

goal to quadruple GDP before 2020

while only dou-bling energy use”

Several laws are trying to drive investment into energy efficient technologies and so to temper the demand. Re-structuring of the energy production and distribution sec-tors should bring more efficiency and savings of money which could be invested in better and cleaner technolo-gies. To temper the demand of oil China has implemented strong fuel economy standards for vehicles and has in-stalled a mass transit system to provide urban residents an alternative to the use of the car. But even with these measures China’s government struggles facing its own goal to quadruple GDP before 2020 while only doubling energy use. By doing that, energy safety, social welfare and environment protection should be guaranteed. Current trends nevertheless run opposite to these ambitions. Energy use has grown faster than GDP over the past three years, and over two thirds of increment in primary en-ergy supply has been coal.6

6 China’s Energy Challenge – 2004 – The Energy Foundation, 2004 Annual Report

Present Situation of Power Supply and Demand in China - March 2004 – The Institute of Energy Economics

Evaluation of China’s Energy Strategy Options - May 2005 – Lawrence Berkeley National Laboratory



4. Solutions on the production side China with its 1.3 billion inhabitants is a huge country to feed, nowadays it’s the third-greatest energy producer in the world behind the USA and Russia7. Till the 90s China produced enough energy for its own consumption. But after 1997 the country became a net energy importer.8

Following charts show how the energy consumption is shared and the increase from 1965 to now. We see that coal is a major energy provider. But other sources are be-coming more and more important during the time. In this section we are going to analyse where energy comes from; the national pro-duction as well as importations.

China's energy consumption in 2005

Nuclear energy 0,8%

Hydroelectricity 5,8%

Renewable energy 0,3%

Oil 21,0%

Gas 2,7%

Coal 69,4%

Source: BP Statistical Review of World Energy 2006

China energy consumption evolution

0,0

200,0

400,0

600,0

800,0

1 000,0

1 200,0

1 400,0

1 600,0

1 800,0

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

MTE

O

Renewableenergyconsumption

Nuclearenergyconsumption

Hydroelectricity consumption

Gasconsumption

Oilconsumption

Coalconsumption

Source: BP Statistical Review of World Energy 2006 7 An energy summary of China - Carbon sequestration leadership forum 8 China’s environment and the challenge of sustainable development – 2005 – Kristen A. Day – P176



Coal Historically coal has always been the main source of en-ergy for Chinese as we see on the following chart. Today it’s the world’s largest consumer and producer of coal with about 36%9 of world’s total annual coal production, 12% of world’s proven reserves and an impressive 69% of the national energy consumption (90% in 1965). That’s why the government tries to reduce this dependence by introducing new taxes and pro-moting other energy solutions.

“…the efficiency of this source is

very low”

Furthermore, production of energy from coal cre-ates a lot of pollution and causes numerous prob-lems. The main emis-sions from coal combus-tion are carbon dioxide CO2, sulphur dioxide SO2, nitrogen oxides NOx, particulates and mercury. All these com-ponents are responsible of acid rains (which falls on 30% of China’s land-mass), air pollution and other environment dete-riorations as well as hu-

man health damages. This is especially true in China where coal is used everywhere (factories, power plants, home heating, cooking, etc) and traditionally all these emis-sions have not been subject to clean air standards. In addition, the coal mining kills nearly 10’000 people10 a year and the efficiency of this source is very low.

Energy consumption repartition 1965 - 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1965 2005Source: BP Statistical Review of World Energy 2006

Renewableenergy consumption

Nuclear energyconsumption

Hydroelectricityconsumption

Gas consumption

Oil consumption

Coal consumption

But now things are starting to change, China wants to control more this pollution. The government has introduced a tax on high-sulphur coals and tries to develop clean coal production. Coal can be transformed in liquid (the first project was created in 2001 in Shanxi province) or gas (Shell signed an agreement in 2001 for a coal gasifi-cation project in Hunan Province). Carbon dioxide can be captured during the burn-ing process like it’s made in several power plants in the USA and Europe. Neverthe-less all these technologies are expensive and still have to develop. For the moment Coal comes mainly from northwestern China and the Shanxi province. It’s obvious that coal as source of energy presents a lot of problems at all steps from extractions to consumption. Nevertheless reserves are huge (from 100 to 200 years at the actual consumption rate11) and a lot of people do not have a real choice and have to use it although it’s very dangerous for them.

“Nevertheless reserves are

huge…”

9 BP statistical review of world energy – 2005 10 Blast Hits China Mine – May 2003 – BBC News 11 China’s environment and the challenge of sustainable development – 2005 – Kristen A. Day – P175



Oil Since 2001 China is the world’s second largest consumer of oil just before Japan12. Demand is continuously growing because everybody wants a car (13 cars per 1000 people in China compared to 779 per 1000 in the USA13 in 2001). Of course oil is one of the few energy sources useable in transportation sector which is booming in China. To cover this consump-tion China has only 3% of the world crude oil reserve for 22% of the world population. This explains why since 1990 China became a net oil importer and has substantial importation increases every year, for instance 7.25% in 200514. Now nearly 40% of oil importations come from Middle East.

“Demand is con-tinuously growing

because every-body wants a car”

China's oil supplier

Middle East37,3%

Other Asia Pacific26,3%

Former USSR11%

East & Southern Africa3,4%

West Africa16,3%

S & Cent. America2,4% Unidentified

0,3%

USA0,4%

North Africa1,2%

Europe1,5%

Saudi Arabia with 17% of China’s oil importation is usually its biggest oil supplier. Total trade between the two countries is always growing and reached in 2005 14 bil-lion dollars, an increase of 59% comparing to 200415. Since 2001 Saudi Arabia seeks more independence versus the USA and wants to nurture China as a customer. Various Chinese oil companies have signed long-term contract with Iran. These con-tracts are valued to $200 billion, making China Iran’s biggest customer. These in-vestments are badly needed by Iran because of the U.S. boycott. This makes Iran and China interdependent for oil and gas. It may become even more obvious in the future given the nuclear dispute between Iran and Western countries.

12 BP statistical review of world energy – 2005 13 China’s environment and the challenge of sustainable development – 2005 – Kristen A. Day – P180 14 China Energy Cooperation - Frost & Sullivan , Russia 15 The Stanley Foundation – September 2006



Russia which is geographically closer and enjoys a huge part of world energy re-serves especially in gas. It’s the world’s second largest supplier of energy. The en-ergy cooperation between Russia and China is expected to mutually benefit both countries. China is investing heavily in Russian energy sector (investment of $500 million in Rosneft, Russia’s leading Oil Company) and in construction of two pipe-lines. One construction is expected to begin in 2010, go-ing from Siberia to Xinjiang Uygur and the other one in 2015 from Siberia to Heilongjiang Province for an amount of $11.5 billion. For these two pipelines Japan is also a main actor who doesn’t want to put his energy security in China’s hand. The competition is hard between Japan and China concerning Siberia’s oil and gas and Russia is playing with it choosing the one which pays and invests more in Russian economy. At this point we see how im-portant strategic energy security imports are.

“China’s govern-ment regards oil imports as a vul-

nerability that could be ex-

ploited by foreign powers …”

Another solution is the energy silk route pipeline, but there constraints are huge; sev-eral thousands kilometres and dangerous roads crossing countries like Afghanistan, Tajikistan and Kirghizstan. The more feasible one is the West China-West Kazakh-stan Oil Pipeline of 6000km, which yet partially exists and has to be modernized16.

We see that China tries to find new partners to ensure its oil and gas importations. Often all these potential partners are controlled by the USA, except few like Sudan, Angola and Venezuela. The last one is a very interesting one which doesn’t want to be

limited by the USA where 60% of its exportations go17. It ex-plains why when China started to deal with Venezuela they were

welcomed warmly. In 2005 19 agreements were signed between the two countries allowing China to invest in Venezuelan energy sector like prospection and produc-tion18. China has about 25% of its total oil imports from Africa19, largely from Angola, Chad, Nigeria and Sudan. China and Niger signed deals offering China 4 exploration li-cences in return for a commitment to invest $4 billion in Nigerian infrastructure. In 2006 Chinese imports of Angolan crude oil went up 42% making Angola China’s big-gest oil supplier for few months20. China is investing heavily in Angolan oil economy, it extended an oil-backed $2 billion credit line to the country which is emerging from a brutal 27-year civil war. China is becoming the biggest player in its reconstruction process. How will this situation develop? We see that for China national oil reserves are con-trary to coal not sufficient. Here, the importations are strategic and politic become more important than technology. China’s government regards oil imports as a vulner-ability that could be exploited by foreign powers seeking to influence China, therefore China’s leaders are reluctant to further increases of China’s dependence on foreign oil. However China is wooing African major oil-suppliers which are not yet totally con-trolled by the USA.

16 Revue de L’énergie n°563 17 Venezeula and China sign oil deal – December 2004 – BBC 18 Venezuelanalysis.com – January 2005 19 The Stanley Foundation – September 2006 20 Asianews.it



Gas

“From 3% of total energy consump-

tion in 2006, China wants to

pass to 8% in 2010”

Beijing with 1630 vehicles in 2002 already had the world’s largest fleet of natural gas buses21. Among fossil fuels, natural gas is the least polluting one. It explains why the government tries to expand its uses which now only rep-resent 3% of the total energy consumption. With 1.5%22 of world’s annual gas production in 2004, China was still a net exporter of gas but not for long. Most of the reserves are like coal in west and north China. It has to be transported to the east cost to feed main ur-ban and industrial centres.

But gas is rather more difficult to transport than oil or coal, therefore a 4184km long pipeline is under construction from Tarim Basin in Xinjiang Province to Shanghai. Gas can be transformed into liquid gas (LNG) too. Today most of the gas consumed in China is for industrial purpose. Only 13% is for residential use and 10% for electricity and district heating23, but several gas plants are under construction and planned to be built, up to increase this number. From 3% of total energy consumption in 2006, China wants to pass to 8% in 201024. This in-crease of consumption

should be feed by imports mainly coming from former Soviet Union by pipelines as said in the oil section.

21 China’s environment and the challenge of sustainable development – 2005 – Kristen A. Day – P22 22 BP statistical review of world energy - 2005 23 An energy summary of China - Carbon sequestration leadership forum 24 The Stanley Foundation – September 2006



Nuclear Power From 8.7MW to about 40000MW in 2020, China has the largest projected increase in nuclear sector for an amount of around 50 billions of USD25. In 2005 11 power plants were already working, which is 8 more than in 2001 but two dozens less than in 2020 projections26! These power plants are very useful for the industrializing coastal prov-inces, which are remote from China’s coalfields. Analysts said that this solution is one of the most benign energy sources in environmental impacts although wastes are very radioactive and very long lasting.

In this domain western countries are fighting hard to win contracts allowing them to build these plants. The next four reactors will be constructed by Westinghouse, an American company which won against Areva a French brand. Few other countries like Canada, Japan and Russia are offering their technology, all of them trying to develop new and more efficient reactors like water pres-sure solutions, etc. But what is asked by China is to transfer the know-how from west to China to become independent and being able to build plants on its own.

“…what is asked by China is to

transfer the know-how from west to

China to be able to build plants on its

own”

Since the Chernobyl disaster, nuclear energy has become a disliked solution by western population. However in recent years warming and CO2 problems have put nuclear power back in the spotlight. That’s why the government has to be very care-ful with the public opinion (which is now limited but may increase) and environmental-ists movements which can create instability in social order.

25 Reactors? We’ll Take Thirty, please – October 2005 - BusinessWeek 26 China picks Westinghouse for 4 nuclear plants – December 2006 - Pittsburgh Post-Gazette



Hydroelectric Power The southwest China, which is a tropical region, has huge potential for producing hydroelectric power. The govern-ment planned to increase the current 115000MW27 of hy-droelectric capacity. To do so, many projects are planned and under construction, twelve major projects within seven in southwest28. The actual major one is the Three Gorges Dam project which should by 2009 produce 18200MW from twenty-six generators for an official cost of $25billion29. The Dam is already build and has started to fill in 2003. In addi-tion to produce energy, the Three Gorges Dam prevents flood on the Yangtze River.

“However, this Dam is very ques-

tioned by the in-ternational com-

munity…”

However, this Dam is very questioned by the international community for several reasons ; to fill in the reservoir one million people have been displaced and im-portant archaeological sites have been sub-merged. Furthermore the river’s ecosystem is cut into two and a lot of polluting substances stay in the reservoir blocked by the Dam, and last but not least, such projects require sizable investments.

27 National Development and Reform Commission (NDRC) - 2005 28 The Stanley Foundation – September 2006 29 China’s environment and the challenge of sustainable development – 2005 – Kristen A. Day – P187



Other renewable energies China has introduced several laws to promote this kind of energy, mainly wind power, solar power and geo-thermal power. On February 28, 2005, the Standing Committee of the National People's Congress (NPC) of China passed a comprehensive renewable energy law which advances a number of policy measures to promote renewable energy development in China. Although such renewable energies are still not-representatives of China’s energy production and have to be developed. Wind power seems to be the most interesting one, and several wind farms have been developed, producing 567MW30 in 2005. Even offshore wind farm projects, like Danish ones, are underway.

“… the technology is not sufficiently advanced to meet an important part of China’s energy

consumption”

The government wants to reach by 2020, 20GW power coming from wind31. To reach this goal by 2005 twelve big enterprises in Shanghai had voluntary purchased wind electricity at a price 0.53 Yuan (0.053€) higher than conventional power. It’s the first step for wider initiatives across China. Solar power is used in remote place to feed small villages’ electricity and water heating. But the technology is not sufficiently advanced to meet an important part of China’s energy consumption. Geothermal energy is another possibility, using heat-pump in residential sector like in some occidentals’ buildings. Some small projects have been built in Beijing showing their ecological and economical efficiencies. Now these projects have to be extended to the rest of China, which is not the case for the time being.

30 Woodraw Wilson interational center for Scholar 31 Woodraw Wilson interational center for Scholar



5. Solutions on the consumption side In the previous chapters we have seen that China with its economic growth is facing increasing energy demand which yet caused supply shortages from the year 2002 on. To counter this problem in 2004 China has added the entire generating capacity of California or Spain in just a single year. Also demand for oil is rising at big steps. But increasing the supply capacity is not the only and for environment surely not the best solution.

“…energy intensity of Chinese econ-

omy was reduced by two-third in 20

years.”It’s also possible to act on the consumption side, to promote more energy efficiency and so to decelerate the increase of demand. Actually China showed the world during the years 1980 to 2000 that the belief that in the early stage of industrialization energy growth always outpaces economic growth is false. During this period China achieved to have an energy growth that was only about 40 percent of the GDP growth rate. As a consequence energy intensity of Chi-nese economy was reduced by two-third in 20 years32.

But nowadays this historic trend has turned over; energy demand is now running away at over 1.5 times the rate of economic growth. To achieve the objective of quadrupling economy while only doubling the energy demand by 2020, a major pro-gress in energy efficiency on the consumption side must be done. We will study the policies the Government had implemented during the 20 years of success, why this trend changed recently and how they want to come back on the “old way”.

32 China Energy Databook – 2003 – Lawrence Berkeley National Laboratory



Changing of a historic trend Such a decoupling of energy and economic growth was possible thanks to policies that encouraged adaptation of energy efficient technologies and practices. Investments in energy conservation projects gradually augmented despite a considerable drop from 1995 to 1996. Nevertheless, becau-se of a remarkable total investment increase in the energy sector the percentage of invest-ment in energy conservation projects in relati-on to the total investment went down from a-bout 13 percent in 1983 to 4 percent in 200333. This weakening in energy efficiency investment played an important role in chan-ging the trend of energy consumption growing below economic growth

China’s transition from plan to market economy leaved out some important policies and practices which stimulated energy efficiency.

Source: Trends in Energy Efficiency Investments in China and the US, Jiang Lin, June 2005

So an energy quota system was used to be known. The government simply set limits of the quantity of supplied energy to enterprises. If an enterprise’s energy consump-tion exceeded this limit, the energy supply was just cut off. There were two major financing programs to promote investment in energy conserva-tion. One of these programs offered loans with interest rates that were about 30 per-cent lower than comparable commercial loans. The other offered interest subsidies of 50 percent through the national Treasury bond offerings and local government budg-ets. The first of these programs lost on importance, as on account of economic changes the interest discrepancy was nearly eliminated and in 1996 the program was

33 National bureau of Statistics



phased out because of government restructuring. The second one still exists but has been weakened due to the absence of clear rules on application process. Beside the low-interest loan programs, state-owned enterprises could claim an in-vestment tax credit for investing in energy conservation projects. To make use of this tax credit the project has to be approved, finished and verified as having achieved its energy conservation purpose. Once successfully went through this process the en-terprise could count 40 percent of investment against incremental income tax. So this tax credit could be worth up to 40 percent of the project value. But tax reform in the late 1990s eliminated this tax benefit for energy conservation projects in most locali-ties. The dropping out of these important policies during economical and political reforms and the delegation of energy administration to state-owned energy companies caused a supply-side focused energy sector development, instead of continued ef-forts to remain focused on moderating growth in energy demand. These reasons can explain the change of the historic trend and achievement of China’s decoupling of energy consumption and GDP growth.34

Present Policies Chinese Government recognized that energy efficiency again has to become a prior-ity issue in economy. In 2004 the Development and Research Center gave out a study called “China National Energy Strategy and Policy 2020” (NESP) which ex-plores options to adopt for a national energy strategy. So China wants to come back to the trend of 1980 - 2000, but as political and eco-nomic environment have changed, has to adapt the measures taken at this time. For instance an energy quota system in today’s China would be unimaginable. But gov-ernment can lead by example, for instance by cutting energy use in its own facilities, this especially true as government uses 5 percent of national energy. One of the most important targets for energy efficiency and conservation still remains industry. The industrial sector consumes 70 percent of energy and the consumption is raising faster then the overall growth rate. In the industrial sector voluntary energy-efficiency agreements play a key role. These agreements are contracts between the government and industry that set negotiated targets with obligations to meet claims and time schedules. Normally a time frame of five to ten years is set to give partici-pants time to plan and implement changes. Evidently the government has to use incentives, such as tax re-ductions or low-interest loans, as described above, to encourage enterprises to participate. Successful pro-grams have showed that voluntary agreements can significantly improve energy effi-ciency rates in industry. There is also the intent to sensitize managers to see the economical long-term advantages of energy efficiency. In Chinese industry energy use still is viewed as a fixed cost rather than a manageable expense.35

“In the industrial sector voluntary

energy-efficiency agreements play a

key role”

China’s construction boom has no comparison in human history. For fifteen years 400 million square meters of commercial and residential building space have been built every year. Most of them do not answer to a modern energy code. Buildings 34 Trends in Energy Efficiency Investments in China and the US – June 2005 – Jiang Lin, 35 Evaluation of China’s Energy Strategy Options – May 2005 – Lawrence Berkeley National Laboratory




consume about a quarter of total energy. New and severer codes require buildings to use modern materials, isolation and windows to reduce energy leakage. The ministry of Construction adopted commercial and residential codes for Central and South China that if well implemented are estimated to possibly reduce carbon emissions by 49 million tons in 2020. Since living-standard is rising, there is an important potential

of energy saving inside the houses. For instance the instal-lation of new air-conditioners in China in 2004 exceeded the entire capacity of the Three Gorges Dam.36 Therefore go-vernment has adopted efficien-cy standards for refrigerators, air-conditioners, washing ma-chines, and televisions which will by 2020 cut down 30 million tons of carbon emissions.

New car sales are exploding in China; this evolves an increasing oil demand. To se-cure supply for the future, government took two key strategies to temper consump-tion. On one side in 2004 China’s Standardization Administration gave out fuel econ-omy standards for light-duty vehicles (cars and light trucks, including SUV), that are up to 20 percent more stringent than U.S. CAFE standards. Till 2030 these standards will be equivalent to the removing of 35 million cars from the road. And Chinese leaders remain serious about even enforce the standards and expand them also to 36 Lawrence Berkeley National Laboratory

“…fuel economy standards for light-duty vehicles are up to 20 percent more stringent than U.S. standards.”



heavy duty trucks. On the other side larger cities are installing a bus rapid transit sys-tem to offer urban residents a real alternative to the use of their own car.

And last but not least, with campaigns government tries to awake public conscious-ness of the importance of energy saving.37 In the purpose to promote

these solutions well coordinated and efficient the re-establishing of the Ministry of Energy, as it was used to be known until 1993, is highly recommended by NESP.38 All these solutions, as they are not forcing restrictions, but energy efficiency, will not penalise China’s development. Investment in new energy technologies can even help economic development by stimulating more advanced manufacturing approaches.

37 China’s Energy Challenge – 2004 - The Energy Foundation 38 China Daily – June 2006 - Fu Jing

“All these solu-tions … will not

penalise China’s development”


6. Effects on environment of these solutions Energy production in whatever way it’s done has implications on environment. In this chapter we will study the effects China’s adopted solutions have without judging them yet.

Coal As we have discussed in the previous chapters most of China’s energy comes from coal fired power plants. We analyze the impacts coal has on environment during the different steps from mining until being converted to useful energy.

Source: Clean Air Task Force

There are two types of mines; surface mines and underground mines. Both have strong impacts on the local area. Surface mines make land completely useless during the mining process and are once the mine has moved away only in a very few cases restored. But even by restoring ecosystems risk to remain destroyed or they are being replaced by a completely dif-ferent one. Underground mining often takes with it the risk of surface subsidence damages. This occurs when the roof of the mine either shifts or collapses. Subsidence puts in serious danger everything constructed above this area. Also changes the mining process the perme-ability of overlying soil altering the rate of groundwater discharges and so the flooding potential increases.

Mining impacts both surface and ground water. Waste material is being piled up at the surface polluting and altering the flow of local streams. When rainwater filters through these piles, soluble components are dissolved elevating the natural presence of dissolved solids (sul-fate, calcium, carbonates and bicarbonates) in local wa-ter bodies. This is not a direct threat to human health, but makes water by altering the taste undrinkable and sometimes even useless for industry and agriculture.

“The resulting acidity and pres-ence of metals renders water un-usable”

Far more serious is the problem of acid mine drainage. When exposing pyrite, which is contained in coal in abundant quantities, to air and water, sulfuric acid and iron is formed. The acidity itself being a problem it also dissolves metals. The resulting acid-ity and presence of metals is toxic to aquatic life and renders water unusable.



Is a mine located below the water table, into the mine seeping water has to bee pumped out. This lowers the water table and can even dry up nearby wells. The mining waste material is being produced in huge amounts, and has to be dumped somewhere, making this land useless. Besides to this and the water pollu-tion problems, waste piles are flammable and at risk of spontaneous burning.

Coal is being combusted to be converted in energy. Dur-ing the combustion process air emissions are polluting the environment. As we can see on the graphic on page 6 coal is responsible for most of China’s carbon dioxide emissions, which is one of the most important greenhouse gases, causing global warming. Emissions also contain a variety of toxic metals, organic compounds, acid gases, sulfur, nitrogen and particulate matter. Nitrogen oxide con-

tributes to ground-level ozone which not only damages human health but also harms vegetation by interfering with plants ability to store and produce food and therefore makes them more vulner-able to impacts of disease or insect attacks. Sulfur and nitrogen cause acid rain which acidifies lakes, rivers and soil, destroying water and land life and vegetation. This reduces significantly yields of agriculture crops. Coal combustion contributes also to mercury contamination of fresh and saltwater fisheries.

Source: Chang W. Lee, NYT

“…coal is respon-sible for most of

China’s carbon di-oxide emis-

sions…”

After being burned coal leaves once more enormous amounts of waste back, mostly ash and other unburned materials containing concentrated levels of arsenic, mercury, lead, chromium, cadmium and radioactive elements. If these contaminant elements enter environment through dust, leaching into groundwater or directly into surface



water the same environmental problems are caused as described above for the min-ing waste.39

As we can see energy production from coal has impacts on local and global envi-ronment. Land destruction due to surface mining, subsidence and higher flooding risk due to underground mining are local and well restricted, but even so consuming hec-tares of acre and other land, as mines steadily have to move around. Impacts on wa-ter quality reach further as the water moves and pollutants which go into the air reach their worst impact within several hundred kilometers of the power plant. In some Chi-nese cities, as for example Datong, people drive even during day time with lights on, because the city is going dark due to the pollution clouds. But even worse, wind brings China’s emissions to South Korea, Japan and even across the Pacific to America’s west coast having an appreciable effect on acid rain. This is due to the huge amount of emissions China is causing; in 2004 China released 22.5 million tons of sulfur, which is more than twice the amount of the U.S. and acid rain falls on 30 percent of China’s territory. There is only one ‘positive’ impact of sulfur contamina-tion; the particles deflect sun rays back to space slowing down global warming. But this is only a temporary benefit, as it is not reducing the accumulation of carbon diox-ide in the atmosphere which will remain there with a cumulative warming effect. All these problems can with modern technology be reduced, but never solved. Mod-ern power plants can be 20 to 50 percent more efficient than older Chinese ones. As described on page 8 China’s government is trying to control this pollution, but has to deal with several problems. The high-tech technology is very expensive and has for the time being to be imported from other countries. The equipment also uses a lot of energy that instead could be sold and regulated electricity tariffs to keep rising the living standard of consumers offer little margins for power companies to run the equipment. Trying to help government limited coal prices, what made mines shipping only the lowest-quality and most contaminating coal to power plants. That these very serious problems have to be controlled and that their impacts are not only in Chinese territory shows why the World Bank, the Asia Development Bank and even Japanese government, as they are directly affected, are providing loans or grants to help Chinese government to improve the situation.40

Oil and gas Oil and gas are like coal a fossil fuel and therefore have similar impacts on environment. The local environment at land or at sea around the place where petroleum or gas is searched or produced is be-ing disturbed. New technologies help to improve the im-pact as fewer wells have to be drilled. But like discussed above for coal, as China is a developing country it has its difficulties to meet the newest technologies. During the whole process from production till use there are losses of petroleum due to leaks in storage tanks, pipelines, accidents during the transport. This lost petrol goes either directly into the water or is washed into the gut-

“The local envi-ronment … where

petroleum or gas is searched or pro-

duced is being dis-turbed”

39 The environmental Impacts from - June 2001 - Coal Clean Air Task Force 40 Pollution From Chinese Coal Casts a Global Shadow - June 2006 - The New York Times, World Business



ter and soil with rain. This destroys both flora and fauna. Bigger accidents, like spills off the coast from shipping accidents can devastate entire fragile ecosystems. Gas is made up mostly by methane, a greenhouse gas, which during production, transportation and storage can escape to the atmosphere due to leaks. Burning oil or gas produces like any fossil fuel carbon dioxide, the most important greenhouse gas in the world. For China oil is the second largest and natural gas the third largest source of carbon dioxide emissions (see graphic above). Gas burns more cleanly than other fossil fuels, it has less sulfur, carbon, and nitrogen emissions than oil, which still has less than coal. These pollutants and particulates are especially of very big concern in cities, where car density is exploding, as they cause smog and serious health problems. Therefore China promotes small and efficient cars and yet has fuel economy standards that are more stringent than U.S. ones.41

Nuclear Power To produce electricity in nuclear power plants uranium is needed, which is obtained by mining producing the envi-ronmental disturbances from mining processes in gen-eral. After that nearly everything is different in comparison with energy from fossil fuels. In a nuclear power plant there is nothing burnt and this means that nuclear power does not contribute to carbon dioxide, sulfur, nitrogen and par-ticulates emissions. There are only indirect emissions, as to build the plant and for extracting and processing the mineral ores energy is needed, energy which mostly comes from fossil fuels. Analysts say that over a life-time of a nuclear power plant there are emissions per kilowatt-hour similar to renewable energy production such as wind power. A study by Leeuwen and Smith states that carbon dioxide emis-sion per kilowatt-hour could range between 20 and 120 per-cent of those of natural gas-fired power plants, depending on the facilities to obtain high grade ores. The World Nuclear Association instead published the graphic beside based on three country’s studies. The reactor of a nuclear power plants needs to be cooled, what is mostly done with river water. This water will go back to the river with a higher temperature, which has to be regulated to avoid the long term destruction of the rivers ecosystem and fish killing due to the hotter than natural water. Most environmental unease of nuclear power plants is due to the waste of spent fuel which is highly radioactive. A large nuclear reactor produces 25 to 30 tones of high-

Source: The World Nuclear Association

“…nuclear power does not contrib-

ute to carbon diox-ide, sulfur, nitro-

gen and particulates emis-

sions”

41 U.S. Energy Information Administration



level waste.42 Coming directly from the reactor this material is so radioactive that be-ing exposed to it during one minute can cause death. After 40 years the radiation is 99.9 percent lower than after being removed from the reactor but still has it to be separated from environment during a several hundred years.43 The storage of this waste is a serious, not yet entirely solved, challenge. The short term storage is made with shielded water basins and dry storage containers, while the best solutions for long term storage are still being discussed. Generally underground storage in well selected places contributing the best shield against radiation is considered being a solution for permanent storage. There is also low-level radioactive waste being pro-duced in form of clothing, hand tools and the material the reactor is build with. These wastes are of lesser concern, as the U.S. Nuclear Regulatory Commission affirms that natural radiation from coffee reaches the same levels as low-level nuclear waste. Nuclear energy opposition argues that the disposal of waste is not solved and therefore a serious risk to human health and environment for several generations, the World Nuclear Association counters that in countries with nuclear power, radioactive wastes make up less than one percent of total industrial toxic wastes, which often do not decompose and therefore remain dangerous indefi-nitely.

“The storage of this waste is a serious,

not yet entirely solved, chal-

lenge.”

Opponents point out the danger of a nuclear power plant or a waste deposal being subject of an accident or terrorist attack and the resulting exposure of the environ-ment to radiation. Nuclear material could also be subject to robbery and fall into ter-rorist hands. As examples we have the fact that in the nineties twice Russian workers were caught selling nuclear material; once radioactive waste and once enriched ura-nium. There have been several accidents yet; the best known is Chernobyl in 1986, which had radiation impacts over whole Europe and soil and water in the direct envi-ronment of the plant still remains contaminated. Proponents oppose that today’s security standards are so well that risk is minim. So even with the Three Mile Island accident, the most severe accident in the non-Soviet world, despite a core meltdown the reactor vessel did not breach and the released radiation was lower than natural background radiation. Several studies show that the plant and storage should be able to sustain a terrorist attack and that transportation of material is well secured. They say that even considering these accidents the nu-clear industry has much better statistics concerning human’s deaths than coal or hy-dropower. A fact that is subject to discussions as it is very difficult to determine if a person’s death caused by cancer is due to the elevated exposure to radioactive ra-diation or not.44

Hydroelectric power and other renewable energies Hydroelectric power was until recently regarded as clean source of energy. In fact there are several advantages compared to the above discussed ways to produce energy. It’s a renewable source of energy, so the fuel does not have to be extracted by mining and imported. The actual production of energy does not emit any green- 42 Uranium & Nuclear Power Information Centre - 2002 43 World Nuclear Association - 2006 44 Wikipedia



house gases, nor contribute to acid rain and has no radioactive wastes. Also have hydroelectric power plants very long life terms compared to fuel-fired generation. In spite of these advantages several new studies show the dark side of this way of production. The water reservoir is in fact a considerable source of greenhouse gases. This is due to the decomposition of trees and other plants after the flooding of the reservoir. Because this under water decomposition is done without oxygen, carbon contained in the plants is being converted to methane. How much methane gas is being produced depends on local conditions and can vary considerably. In some cases there hydroelectric power generation can create more greenhouse gases than fossil fuel power plant, but typically emissions from reservoirs in colder regions are about 5 percent those of conventional power plants and 25 percent in tropical ar-eas.45

The famous Three Gorges Dam serves as an example to show other environmental implications due to hydroe-lectric power generation. Because of the water hold back by the dam more than one million people had to be resettled, leaving back historically important sites and farmland which was of the most fertile in China. Indus-trial places and waste disposals being inundated intoxi-cate the water of the reservoir and the river and as the dam slows down the flow of water toxic water will rather be concentrated than being flushed out to the sea.46 Every year when the water table will be lowered to accommodate the summer floods marshland containing industrial pollutants and rubbish will appear creating perfect breeding ground for flies, mosquitoes, bacteria and parasites, which threaten the health of surrounding population.47 The dam cuts the rivers ecosystem into two, put-ting in danger some inhabitants as the Chinese paddlefish, which is in danger of ex-tinction, the Chinese river dolphin hasn’t any more be seen since December 2006, a fact which is partly due to the dam and the increased ship traffic permitted by the construction of the dam. On the downstream of the dam there is a positive impact for the population, especially for farmers; the regulation of the water flow should lessen the flood frequency from once every ten years to once every hundred years. On the other hand the dam avoids silt to go farther down the river which can increase the risk of erosion and the sinking of coastal areas. The East Chinese Sea is one of the world’s largest fisheries, but scientists estimate that annual catches could be reduced by one million tons as a cause of the decline of fresh water and sediment reaching the sea.48

“The dam cuts the rivers eco-

system into two…”

Like for nuclear power plants accidents and terrorist attacks have to be considered. Failures of dams are rare but potentially very serious. In 1975 the Banqiao Dam in China collapsed after record rainfalls causing immediate death to 26’000 people and some other 145’000 died because of subsequent epidemics and famine.49

45 Tremblay, Varfalvy, Roehm and Garneau, Greenhouse Gas Emissions – Fluxes and Processes, 2005 46 CNN, Visions of China 47 International River Network 48 Wikipedia 49 Dai Qing, The River Dragon has Come – 1997 - M.E. Sharpe



We can see that even the renewable energy sources can have dramatic impacts on environment which have to be analyzed in every particular case carefully to im-plement the best possible solution. Wind farms for ex-ample disrupt local low-level winds, and make noise, both creates problems for bird populations. The produc-tion of solar cells releases many pollutants and needs a lot of energy.50

“We can see that even the renewable

energy sources can have dramatic

impacts on envi-ronment”

50 Wikipedia



7. Effects on society caused by environmental problems All these pollution problems have a strong impact on human health. Pollution in-crease goes hand in hand with disease increase like cancer, infections, lung and heart-related problems. In 2001 China’s cost for public health was $63 billion, 80% more compared to 7 years earlier!51 Pollution impact on human health can be split in three topics. The major one is water problems. The second one is soil pollution and linked problems like; desertifica-tion, massive agriculture, deforestation, chaos urbanism. The last one is air pollution. As said in the introduction 16 amongst the 20 most polluted cities of the world are in China, but these cities are not ones like Shanghai or Guangzhou. They are usually inland coal-cities as shown on the map below.

“All these pollution problems have a strong impact on

human health”

51 China Statistical Yearbook 2000 – 2001 - National Bureau of Statistics of China



Water pollution Water is one of the biggest challenges China has to face. Urban and rural areas are both facing equally serious water pollution problems. In urban areas 70% of drinking water is taken from groundwa-ter sources. But 50% to 90% of this urban groundwater is contaminated by agricultural runoff, industrial and municipal wastewater and sometimes even toxic mine tailings mainly coming from coal mines52. Today China’s per capita quan-tity of fresh water is only a quarter of the world average53. In r ra

“In rural areas, 700 million citizens

have difficulties to access to safe

water”

u l areas, 700 million citizens have difficulties to ac-

o main water basins. The one crossing Shanghai is the Yangtze

depend in one way or another on the Yangtze River. Before the

an Nile, Amazon and Mis-

droelectric dams and accumu-

cess to safe water. Beside industrial pollution, in these areas, water pollution mainly comes from confined animal factories which produce in China annually 3.4 times more solid waste than industrial production54. China is split in twRiver, the third longest river in the world, where the Three Gorge Dam can be found. The second one is the Yellow river in the north. Both have serious problems although quite different ones. 400 millions ChineseThree Gorges Dam was built the river has known a lot of vast floods which killed hundreds of thousands people. In 1931 145’000 people died when the Yangtze swelled55. But the Dam who controls the river has nuisances too: to create the artifi-cial lake 1.3 million people were moved and a lot of agricultural lands were lost. Many resettled people have trouble finding work and building new lives in their new towns.

On the other hand there is the Yellow river who contains excessive sediments (more thsissippi rivers combined). This sand comes from soils which are no more hold by vegetation, due to an inten-sive deforestation. All these sediments raise the river bed level and government has to build dike and levees to prevent flood. Moreover the Yellow river water is ex-cessively and wrongly used for irrigation. A lot of water is wasted upriver for not very productive land and then there is less water for more fertile areas downstream.

But there is one major problem that both rivers have in common. They often no longer reach the sea due to excessive use of water, hy

“…the Yellow river contains excessive sediments more than Nile, Amazon and Mississippi rivers combined”

lation of sediments. This fact exacerbates pollution problems in city downriver. Fur-thermore due to the lack of water sometimes the sea enters the land and contami-nates freshwater reservoir and land with salt.

52 The Jamestown foundation – December 2006 - New ripples and responses to china’s water woes 53 Nature – June 2005 – China’s place in the world 54 The Jamestown foundation – December 2006 - New ripples and responses to china’s water woes 55 Chine from the inside – March 2007 – Chins’s environmental future



In addition of their rivers Chinese have a sea area of 3 million km2 and they strongly like seafood, China accounts for 15% of the world’s fish catch and 33% of global fish

Soil erosion affects 19% of China’s land area, mainly along the yellow river in the to, as said before, massive agriculture and surface mines. The

are dis-

A quarter of China’s area is af-

rnment

u

re and more in cities and

and seafood consumption56. However due to pollution and overfishing, the seafood production declines as well as river fishing production. The catch of wild fish in the Yangtze River has declined by 75%, and the river had to be closed to fishing for the first time in 2003 to protect fishery resources from collapse57. The vast Chinese fish-ing industry will be deeply affected by the resources collapse.

Land pollution

north58. This is dueresult is desertification and dust storms all over the north part of China and even neighbouring countries. Just behind Australia, China is the second largest coun-try in terms of grassland area. But these areasappearing at a pace of 15’000 km2 a year since the 1980s letting place to sand desert. The government tries to overcome the problem by massive tree-planting cam-paign; they call it the “Great Green Walls”. If the problem is not limited, the capital could be covered with sand in a few years!

fected by acid rains making it one of the most severely af-fected countries. This acid rain affects agriculture, forest and rivers. These rains mainly come from SO2 and NHx, gas coming from fossil-fuel combustion and especially from coal combustion. The most affected zone is South China. In North China the rains acidity is neutralized by dust coming from sand. Hopefully the goveseems to take care of the prob-t the problem is huge and a lot

has to be made if they want to stop the degrading situation. Last but not least is the urbanism problem. Chinese live mo

“A quarter of China’s area is af-

fected by acid rains…”

lem and takes measures to control this pollution b

the average household size decreases to reach occidental standard. That’s why de-spite that Chinese population growth is low, 0.7% in 2003 the fourth lowest of major countries, the number of households steeply increases. By 2030, reduction in house-hold size alone will create 250 million new households, more than the total number of households in all the countries of the Western Hemisphere in 2000. This new way of life consumes a lot of energy and covers wider areas with buildings and concrete.

56 Nature – June 2005 – China’s place in the world 57 China’s place in the World – June 2005 - Nature 58 Report onChina’s Ecological Issues – 1999 - Department of Nature Conservancy (SEPA)



Air pollution About 300,000 deaths per year are attributed to air pol-lution59. Air quality is generally low and three out of four

ive below China’s air quality standard. mainly caused by fossil fuels burning.

by east

will be low

city inhabitants lThis pollution is These air pollution problems also affect global atmos-phere. Combined particles from pollution and dust storms are usually affecting neighbouring countries like Japan and sometimes even reaching the United-States. Beijing has a lot of problems with sand storms. Every year 2’300 km2 of farmland in

northern China (twice the area of Hong-Kong) is blown away

“The capital … is seeking ways to

ensure that pollu-tion will be low

during the 2008 Beijing Olympics”

Beijing during blue sky day and dusty day

wind60. In April 2006 Beijing lived its worst period in six years in terms of air pollution. During few days people and especially children were asked to stay inside and close windows. The capital has been monitoring its air quality for several years and is seeking ways to ensure that pollutionduring the 2008 Beijing Olympics. However the situation appears to be worsening.

59 Clear Water, Blue Skies: China’s Environment in the New Century – 1997 - World Bank Washington DC 60 China’s Dust Storms Raise fears of impending Catastrophe – June 2001 – National Geographic



8. Effects on economy caused by energy restrictions

Reasons

“For several years now … China

struggles with en-ergy outages”

For several years now, and especially in 2004, China struggling with energy outages. These outages happen mainly in coastal provinces and big cities, which are poor in energy resources. Rolling blackouts, which are intentionally-engineered electrical power outages, hap-pen for the following reasons: Overheated economy and energy use growth. In 2004 the China’s electricity-generating capacity was 11% less than it needs61 and more than half of China’s provinces have been hit by shortages62. This situation gradually improved but elec-tricity output remains insufficient till today. Analysts said that the situation will ease up during 2007 in regions like Shanghai. To solve the problem the government primarily decided to develop its energy production as shown in the previous chapters. In 2004 the energy output was up 15%63 which was the world’s record. Low electrical connections between provinces. A city like Guangzhou (one of the most important economic centres located on south-east) has a power-reserve margin of less than 5%, western regions like Inner Mongolia have reserve margins about 30%64. This is due to an underdeveloped system of electrical connections in the country. The government is trying to improve it but the task is huge. It shows that when an outage comes in a part of China, usually in the eastern devel-oped provinces, the system cannot manage to feed the demand. Peak consumption during winter and summer. In winter temperature reaches 0°C in Beijing and heaters have to be turned on. The government asks people to save energy by lowering the temperature. For example one Shanghai shopping mall could save 0.4 kW only by lowering temperatures. In summer the situation is the same with air-conditioners. These devices use a lot of energy and worsen a delicate situation. This is true not only in China; in April 2006 the same problem happened in Texas which experienced rolling blackouts due to excessive air conditioner use. Furthermore hot summers reduce hydropower effi-ciency due to lack of water. And these lacks of energy are worsened by: Industry and moreover heavy industry. China’s economy is based on industry and heavy industry which are the biggest energy consumers. Moreover these industries are old and waste a lot of energy. In some places the shortages are so severe that some factories have been forced to shut down completely65.

61 China runs low on power - December 9/2003 - Asian Wall Street Journal 62 The Guardian - December 5/2003 - Shanghai on nights to avoid blackout 63 China's Energy: Continuous Struggle with Shortage- 29/09/2005 – China’s embassy in UK 64 China runs low on power - December 9/2003 - Asian Wall Street Journal 65 Energy shortage hits Chinese firms – 09/2004 - BBC



Low efficiency in energy use. As discussed in the “Solutions on consumption side” chapter. Rising living standard and equipment. With economy growth people consume al-ways more. They want to live in a well-equipped home with all electric devices like air-conditioners, fridges, etc. All this living improvements have a strong impact on energy consumption and increase the “peak consumption” problem.

Impacts All these points bottle-necks Chinese economy. To avoid shortage the government asks factories to work during the night and have day off. This policy reduces factories production and damages relationship with customers. In long term this situation could reduce orders from cus-tomers, especially foreign customers, and harm econ-omy. This situation injures particularly small businesses which are sometimes asked to switch off for a whole week. In a way we can say that small businesses, which have built China's booming economy, are now victims of its very success66.

“All these points bottle-necks Chi-

nese economy”

In big cities like Shanghai black-outs embarrass local officials trying to attract foreign investors. During peak times, escalators in commercial centres are turned off, half the streetlights are switched off, hotels and shops are asked to stop their air-conditioner. Investors like Sony or VW wanted to change their Chinese business plans due to serious electricity shortage67. To improve the situation, in Beijing the municipal government plans to adopt different electricity rates depending on the hour of the day. Electricity prices are expected to be 20% cheaper during night than day.

66 Energy shortage hits Chinese firms – 09/2004 - BBC 67 China’s Energy Shortage Brings Heavy Toll to Economy – 09/2004 – The EpochTimes



9. Discussion Out of the different chapters we can clearly see that China is living a very special situation. The differences compared to many other countries are made by China’s size, history and geography. China is the most populous country in the world which means that decisions made by Chinese government and consumers about energy have huge impacts on a global scale. This can be seen as China was in 2004 re-sponsible for 17 percent of global carbon dioxide emissions from energy activities. Geographically China’s territory is rich in coal and there-fore coal is the main source of energy, but we have seen that in terms of environmental pollution coal is the worst one amongst fossil fuels and China yet perceives the strong negative impacts coal has on their citizens’ health, environment and economy. Chinese cities are amongst the most polluted ones in the world. Even re-newable solutions like hydroelectricity are adapted to the giant dimensions of China and have therefore as explained for the Three Gorges Dam considerable im-pacts.

“These changes are happening as

quick that feeding the needs for en-

ergy alone is a challenge, not to talk about having

to protect envi-ronment.”

Historically China is living a spectacular economic growth after a somehow abrupt rupture of economic isolation during communism. This economic growth has to be supplied with energy as industry is growing and an enormous amount of people have sudden access to electricity consuming appliances and cars. These changes are happening as quick that feeding the needs for energy alone is a challenge, not to talk about having to protect environment. We have seen that the political changes have dropped out some important policies to lower energy consumption. This and the fact that changes are happening very fast means that economy growth and energy con-suming private appliances are increasing faster than technological progress, which implicates that energy production in China doesn’t reach modern environmental pro-tection standards. Government is fully aware of the situation and tries to improve it. Nuclear and renewable energy should help reducing the environmental pollution. But these are solutions that need time to be implemented and have therefore a serious disadvantage against conventional power plants which are quickly installed and have a favorable price. There is also the consumption side and government is now acting to bring under con-trol some aspects of energy consumption after suddenly having given a lot of liberties to economy. New market based incentives and severe appliances standards help lowering the effect of their increase. To come back to the trend from 1980 to 2000 when energy intensity dropped down by two-third, a fact that showed the world that a decoupling of economic growth and energy need is possible. Nevertheless energy efficiency and environmental protection measures have their price, a price which is for developing countries like China often a very expensive one and as we have seen in chapter 8, infrastructure is often insufficient and it is costly enough just to provide minimally running energy services. Services which are necessary to ensure continu-ous rise of living standard and growing economy. On the other side environmental pollution has its cost and can itself reduce considerably economic growth and living standard. So China has to make a difficult compromise to satisfy short and long term needs.



10. Conclusion Data show that China is struggling to face its own goal to quadruple economy by 2020 while only doubling energy consumption. Even if China will not reach this ambi-tious objective it can be remarked as very positive as it shows governments’ concern about the environment. The direction indicated by the NESP (see chapter 5) is the right one, but politicians have to be aware that while they are making plans on paper environmental pollution continues outside, so the implementation of measures has to be monitored better and with more severity. Ac-tually the central government doesn’t have under control local governments, which often care more about short-term economic growth and do not respect new policies. After the communist era, government now has to learn how to control a market based economy with different tools than those who had good results before.

“…as long as western way of liv-

ing remains the goal of develop-

ment, energy con-sumption will in-

crease at high rates …”

Clean energy production solutions can help to stimulate development of the country, as it creates new high-tech sectors and knowledge in the country. Environmental pro-tection is a global issue and western countries importing Chinese goods are also re-sponsible for Chinese environmental problems. Therefore developed countries should not only sell technology to China, but also the know-how to give China access to new less polluting technologies at a reasonable cost-profit relation. Even if implementing environmental protection standards may be expensive and slowing down immediate living standard growth on the long term it will be much higher if environment is still intact. Also economically health problems and polluted land has a considerable cost and effect on growth. So reducing the dependence on fossil fuels by the construction of well designed nuclear plants and carefully chosen renewable energy projects could be favorable for China in the long term. Western countries have clearly to recognize that even if increasing, China’s per cap-ita energy consumption is still lower than ours, so it’s one eight that of the U.S. But if there’s not a change of mind and as long as western way of living remains the goal of development, energy consumption will increase at high rates and the “Chinese mira-cle” from the years 1980 to 2000, when energy increased at a rate of only 40 percent that of economic growth, will not be seen again. So without a change of mind, envi-ronmental destruction from energy production will go hand in hand with economic growth. For a future extension of this work it would be very interesting to consider the political aspect of oil and gas importation to understand better China’s dependence on coal which is nearly the only fossil fuel that has not to be imported. We can state that Chinese environment is suffering under the growing energy needs, but central government is fully aware of the situation. If strategic plans on paper are being put in practice over the whole country, then, in some decades, China may even turn out to be a model for other countries on environmental protection issues, as it is now a model for economic growth.


Zhōnghuá Rénmín GònghéguóPeople's Republic of China

Flag National Emblem

Capital Beijing - 15mio (municipality)Largest city Shanghai - 19mio (municipality)Official languages Standard Mandarin ChineseGovernment Socialist republicPresident Hu Jintao (since March 2003)Premier Wen Jibao (since March 2003)

Languages

Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue (Cantonese), Wu (Shanghaiese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, minority languages (see Ethnic groups entry)

ReligionDaoist (Taoist), Buddhist, Muslim 1%-2%, Christian 3%-4% note: officially atheist (2002 est.)

Ethnic Group(s)Han Chinese 91.9%, Zhuang, Uygur, Hui, Yi, Tibetan, Miao, Manchu, Mongol, Buyi, Korean, and other nationalities 8.1%

Area - Total 9,596,960 km² (World Rank : 3rd)

- Water (%) 2.8

Population - 2006 estimate 1,315,844,000 (World Rank : 1st) - 2000 census 1,242,612,226Density 140/km² (World Rank : 72nd)

HDI (human development index) 0.768 (medium) (World Rank : 81st)

Economic OverviewExchange Rate (August 8, 2006) 1 Chinese Yuan Renmimbi = 0.125 USDInflation Rate (2004E, 2005E, 2006F) 3.9%, 1.8%, 2.2%Gross Domestic Product (2005E) $2.23 trillionReal GDP Growth Rate (2004E, 2005E, 2006F) 10.1%, 9.9%, 9.9%Unemployment Rate (2005E) 4%External Debt (2005E) $252.8 billionExports (2005E) $779.7 billion

Exports - Commodities machinery and equipment, plastics, optical and medical equipment, iron and steel

Exports - Partners (2004E) US 22.8%, Hong Kong 16.2%, Japan 12.4%, South Korea 4.4%, Germany 4%

Imports (2005E) $649.7 billion

Imports - Commodities machinery and equipment, oil and mineral fuels, plastics, optical and medical equipment, organic chemicals, iron and steel

Imports - Partners (2004E) Japan 16.1%, Taiwan 10.9%, South Korea 10.4%, US 7.7%, Hong Kong 7.4%, Germany 5.4%

Current Account Balance (2005E) $160.8 billion

Energy OverviewProven Oil Reserves (January 1, 2006E) 18.3 billion barrelsOil Production (2006E) 3,806.2 thousand barrels per day, of which 96% was crude oil.Oil Consumption (2005E) 6,899.6 thousand barrels per dayCrude Oil Distillation Capacity (2006E) 6,246 thousand barrels per day

Proven Natural Gas Reserves (January 1, 2006E) 53.3 trillion cubic feet

Natural Gas Production (2004E) 1.4 trillion cubic feetNatural Gas Consumption (2004E) 1,350.5 billion cubic feetRecoverable Coal Reserves (2003E) 126,214.7 million short tonsCoal Production (2004E) 2,156.4 million short tonsCoal Consumption (2004E) 2,062.4 million short tonsElectricity Installed Capacity (2004E) 391.4 gigawattsElectricity Production (2004E) 2,079.7 billion kilowatt hoursElectricity Consumption (2004E) 1,927 billion kilowatt hours

Total Energy Consumption (2004E) 59.6 quadrillion Btus*, of which Coal (69%), Oil (22%), Hydroelectricity (6%), Natural Gas (3%), Nuclear (1%), Other Renewables (0%)

Total Per Capita Energy Consumption (2003E) 34.9 million BtusEnergy Intensity (2004E) 9,080.4 Btu per $2000-PPP**

Environmental OverviewEnergy-Related Carbon Dioxide Emissions (2003E)

3,541 million metric tons, of which Coal (81%), Oil (17%), Natural Gas (2%)

Per-Capita, Energy-Related Carbon Dioxide Emissions (2003E) 2.7 metric tons

Carbon Dioxide Intensity (2004E) 0.7 Metric tons per thousand $2000-PPP**

Environmental Issues

air pollution (sulfur dioxide particulates) from reliance on coal produces acid rain; water shortages, particularly in the north; water pollution from untreated wastes; deforestation; estimated loss of one-fifth of agricultural land since 1949 to soil erosion and economic development; desertification; trade in endangered species

Major Environmental Agreements

party to: Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands, Whaling signed, but not ratified: none of the selected agreements

Source: EIA, U.S. Energy Information Administration

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and waste electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.

**GDP figures from OECD estimates based on purchasing power parity (PPP) exchange rates.

chinas history background

Documents