Source: www.asiaecon.org |

China's Energy Crunch

It is well documented that China's energy demand has been increasingly rapidly and at a pace that some say is unsustainable. A study released by the Netherlands Environmental Assessment Agency said that in 2006 China had already taken over the United States as the largest emitter of carbon dioxide: the…

It is well documented that China’s energy demand has been increasingly rapidly and at a pace that some say is unsustainable. A study released by the Netherlands Environmental Assessment Agency said that in 2006 China had already taken over the United States as the largest emitter of carbon dioxide: the byproduct of fossil fuel combustion and the greenhouse gas best known for its significant effect on global warming.

China is much less efficient too. For every U.S. dollar of GDP, China uses three times more energy than the global average and 4.7 times that in the United States.1 In the near future, energy demand will only continue to grow alongside standards of living, as per capita energy consumption is still only one-eighth that of the United States. The alarming fact of all this is that China would exceed total worldwide carbon emissions by 22 percent if it reached the per-capita energy consumption levels of the United States.2

Energy Demand
The energy problem derives largely from the fact that much of China’s output comes from energy intensive industries. Known as the “factory to the world,” China has the largest coal consumption of any country in the world by an extensive margin, consuming 40 percent of the world’s coal and nearly twice that of U.S. consumption. Coal generates 80 percent of China’s electricity and 65 percent of all energy consumption, supplying nearly all of China’s heavy industries.

As the growing middle class buys more cars, demand for oil has also seen a sharp rise. Indeed, China has become the third largest market for automobiles. This rapid expansion will only continue, as forecasts expect this number to increase six-fold by 2020.3 An oil exporter fifteen years ago, China now ranks as the world’s third largest importer.4 The number of automobiles in the country has tripled since 1995, making car purchases a very large portion of economic activity.

The Problem
China’s large appetite for energy can have detrimental effects to consumers and the global environment. On the consumer side, air pollution made respiratory and heart disease the number one cause of mortality in China at 400,000 resulting deaths in 2004.5 Anecdotal reports liken inhaling China’s air near industrial epicenters is equivalent to smoking two and a half packs of cigarettes per day. This can be largely attributed to rapidly increasing use of automobiles that run on dirty fuels brimming with high sulfur content.

China’s environmental spillovers also affect the global community. Already, China’s emission pollutants such as sulfur are floating to neighboring countries. The global problem, of which China is in the spotlight, is that the environment will not be able to continue absorbing greenhouse gases resulting in an increase in global temperatures. While it is difficult to determine the magnitude of the effect of global warming on extreme weather changes, rising global temperatures do lead to glacial retreat and a worldwide rise in sea-level. Being the largest emitter of greenhouse gases, China has an environmental obligation to use energy more efficiently.

What is Being Done
China is fully aware of the climate change problem and is taking steps to mitigate its effects. Outlined in their most recent 5 year plan, China hopes to improve its environmental situation through improvements in energy intensity. China’s first national strategy on climate change, introduced June 4, 2007, set out to further develop energy efficiency through reforestation, public education and improving regulatory enforcement. While making no formal reduction guarantee, China hopes to improve energy efficiency by 20 percent by 2010.

Air quality is one of the main objectives. China is making efforts to increase the efficiency of automobiles through higher fuel economy standards and a new 20 percent tax on automobiles with low gas mileage and emissions standards. China’s fuel economy standards are higher than those of the United States. China has improved mass transit, making it more effective and efficient in order to provide consumers a feasible alternative to automobiles. These steps will certainly reduce emissions and may even reduce oil demand in the transportation sector. China has also been making the transition to natural gas and has put pollution control devices on coal power plants to control SOx and NOx, the main causes of smog and acid rain. Fuel Tech, an international leader in air pollution control and boiler fireside and fuel treatment, has worked extensively with China in improving energy efficiency through emissions reduction. As China’s Vice Premier noted at an energy conference in Beijing, “Energy efficiency is not just one of our core strategies; it has to be the core energy strategy.”


What Needs To Be Done
Despite China’s efforts, investment in energy efficiency as a percentage of total energy sector investment has dropped considerably over the past two decades to one-third of the level it spent at its peak in 1983. China needs to continue promoting renewable energy and adopt carbon sequestration methods.

Furthermore, China needs to continue discussions with the international community on how they can work together to combat climate change. An international market-based approach, akin to the European Union’s Emissions Trading Scheme (ETS), could be one solution. While price volatility in ETS has caused some concern over its viability, the addition of China and other countries into the fold will increase the number of market players and thus reduce volatility.

In the absence of an international agreement, China should pursue a carbon tax. Most estimates find that a USD 20 to 25 price per ton of carbon dioxide would reduce climate change to sustainable levels. Through what is called the revenue recycling effect, China could use the funds generated from a carbon tax to improve health care, the pension system, or to re-invest the money into clean energy technologies.

Source: www.asiaecon.org |