18. China’s Crude Oil Imports Middle East 45% Europe and Western Hemisphere 14% Asia-Pacific 12% Africa 29% Source: Calculated from data in China OGP, February 1, 2005.
19. China’s Oil Use Catching Up With U.S. Source: Feng An, Consultant
30. Renewable Energy Law Source: National Development and Reform Commission, Medium and Long-term RE Targets Renewables to be 15% of all electricity in 2020
41. Clean Energy Solutions Gigatons coal equivalent Business as Usual Low-Carbon Path Buildings Efficiency Industrial Efficiency Vehicle Efficiency Renewables & Gas Source: LBNL
Notes de l'éditeur
This is how China’s energy mix compared to the rest of the world. China has the dirtiest energy mix on earth. Coal and oil overwhelmingly dominate China’s energy mix China has a long way to go if to diversify into cleaner resources. Natural gas, which is the main resource the US has tapped in reducing criteria air pollutants, is only 3% of China’s energy mix China has aggressive expansion plans for NG, to 8% by 2010. --- China’s gov’t is accelerating a nat’l network of gas pipelines; 2500-milie west-to-east pipeline from Xinjiang to Shanghai opened last year. China is preparing to import more LNG, and anticipates imports will be 40% of China’s gas demand in 2025. Developing LNG terminals along the Guangdong coast. Nuclear: plans to add 24-32 plants by 2020 (4X current capacity). Mostly Russian equipment, although the Ex-Im Bank is developing a $5 billion loan package for nuclear. (The public interest would be far better served if that loan would go into energy efficiency and renewable energy technologies.)
China is but the first developing country having adopted a market economy that is surging out of the gates. Yet China is the most coal-dependent economy on earth. And is the world’s second largest energy consumer, behind the US. Two-thirds of its energy comes from coal; China is by far the world’s largest coal consumer, surpassing 2.1 billion metric tons in 2005, more coal than the U.S., Russia, and India combined. Eighty percent of China’s electricity comes from coal. The carbon dioxide emissions from coal are slated to at least double over the next 15 years, and could triple.
Oil demand is surging; i n only 10 years, China has become the second largest oil consumer in the world after the United States China is now burning 6.3 million barrels of oil a day (2.3 billion barrels per year). Ten years ago, China was a net oil exporter; it now imports 45%. Oil demand is climbing because China's oil consuming heavy industries are growing at breakneck speed And second, consumers are rapidly buying cars. Year-on-year vehicle sales increased 20% last year in China's larger eastern cities (down from 80% in 2003 due to tighter consumer credit).
China’s energy growth has been explosive. (80,000 sky-rise buildings built per year for 15 years!). GDP has averaged 9.6% per year for 25 years! Energy is growing at over 10%; electricity at over 15%; Coal is up 20% year-on-year, to over 2 billion tons/year, 95% more than the US; Oil consumption has hit 6.3 million barrels a day, about one-third of US oil consumption (which is 20 MMBD) Current growth is significantly faster than the high growth scenario adopted by the State Council three years ago and incorporated in China’s National Energy Plan for 2020 (an effort CSEP supported). Electricity shortages are still rampant in 24 provinces. Local governments are adding one 1,000-MW power plant every week in 2005; nearly all are coal . There is a sense that energy growth is out of control, with local provinces building unauthorized power plants as rapidly as possible to keep up with demand. ERI now foresees that electricity supply will come into balance with demand in 2007, a “boom-bust” investment cycle, which is why we see mostly capital flight currently from China’s electricity sector.
The main downside of the heavy-industry development path is the human and environmental costs. Coal and cars are the main drivers of China’s rapid air quality deterioration. The World Bank estimates that China’s annual pollution costs amount to around 8% of GDP. According to the World Health Organization, 16 of the world’s 20 most air polluted cities are in China. Respiratory and heart diseases from polluted air kill half a million people per year, and cause over 75 million asthma attacks. Under any definition, this is a severe health crisis wrought by dependence on fossil fuels and burning those fuels in antiquated technologies.
Another reason why we should care about China’s fossil emissions is that those emissions are landing on the US. The map at top center shows the prevailing atmospheric conveyor transporting Chinese pollutants to the U.S. where they’re deposited in soils and water supplies. Mercury, a major pollutant that results from burning coal, is an under-recognized neurotoxin that accumulates in the food chain and is particularly toxic to fetuses and children, damaging IQ. 40% of US Hg originates abroad, and a quarter of all Hg emissions globally come from China. Note of course that 60%, the majority of Hg in the U.S., originates right here, much from coal-fired power plants that were grandfathered under the 1970 Clean Air Act and are to this day allowed to operate without any pollution control equipment.
China and the US are the world's top two carbon dioxide emitters. And are the world’s two Kyoto non-participants China is likely to surpass the U.S. as the world’s number one carbon emitter by about 2025. We cannot solve global warming without addressing US and Chinese carbon emissions. At the same time, China consumes 1/8 the energy per capita as the US, and historically, has emitted less than 1/3 of the carbon as the US. 75% of greenhouse gas emissions originate in industrialized countries, 80% of the cumulative emissions to date originate in industrialized countries. These countries must take the lead in adopting policy measures against climate change. Still, if the average Chinese consumed as much energy as the average American, China alone would be emitting the entire world’s current CO2 emissions plus 22% (I.e., today’s global emissions would be 122% greater).
The likelihood is growth will continue. Here you see the scale of the US economy in blue, and China in red China’s economy today is 1/7th the size of the US, and 1/3 the size of Japan (in green). China’s GDP will likely grow 7-fold by mid-century. This century will be a story of three economies, China, likely to reach parity with the scale of the US economy by 2050, and India, which is rapidly emerging alongside China. As a relative share of global GDP, other economies will be less influential. The greatest challenge of this century will be how the US handles the emergence of China and India. And we would acknowledge that China is harder due to the language barrier, lack of transparency, and the undercapacity of government institutions.
Putting China into perspective, China’s population is nearly 5x that of the US. China’s workforce, as urbanization advances, will likely be 5-6X larger by 2030. Already, in the last decade, China has expanded the global workforce by half. The US with 4% of the world’s population consumes 25% of the oil; China, with 20% of the world’s population, consumes 8% of the oil (1/3 of the oil as the US, but twice the coal).
China’s GDP is 1/8th that of the US. (US $40,100; China $5000) In per capita terms, China’s economy is ranked 100th in the world.
And China’s per capita energy consumption is also 1/8 that of the US. Current growth trends foresee China catching up to U.S. energy levels in the next four decades. I f everyone of China’s 1.3 billion people were to use 8 times more energy everyday (the same per capita consumption as in the U.S.), China’s carbon emissions—the main pollutant implicated in global warming—would equal the entire world’s current CO2 emissions plus 22% (i.e., China would double the entire world’s current carbon emissions plus 22 percent). That’s where we’re headed unless we help China with the “3 Transcendences” and become supportive in its quest for (1) sustainable development, (2) a peaceful rise, and (3) the rule of law.
Energy is growing so quickly because China is becoming the “factory of the world”. The bulk of its economic output comes from highly energy-intensive industries. With less than four percent of global GDP, China consumes 40 percent of the world's coal, half the cement, a third of the iron, a quarter of the steel. Accompanying this heavy industrial structure is a tremendous waste of energy. Whereas the US is about 2/3 service industries, China is about 2/3 heavy industry. There is some controversy underway in China within policy circles regarding whether China is choosing the wrong development path. China’s emphasis on heavy-industry development is due in part to a desire to maintain energy independence. China is also building its infrastructure very quickly; for example, China has built 80,000 sky-rise buildings per year for twenty years, the largest and fastest construction boom in the history of the world.
China has now flipped the historic trend. Energy is now growing 1.5 times faster than the overall economy. Last year, China surpassed 2 billion metric tons of coal consumption, twice the level of the US. China added over 50 GW of new electricity plants, nearly all of which were coal-fired. Installed capacity exceeded 420 GW at the end of 2004, and China intends to add another 50-60 GW of electricity plants this year; I have heard that some 200 GW are under construction. As a result, China’s energy growth now exceeds GDP, and economic dislocations are mounting.
I’ll at least mention more broadly the expected oil demand scenario for Asia; this is EIA data. By 2025, oil demand from “emerging Asia” which includes China and India could exceed all other regions of the world; Global oil demand is slated to grow 35% over the next two decades; Oil demand from China & India is to double, such that emerging Asia could comprise 30% of global oil demand. Current trend is certainly daunting; World oil demand in 2004 was increasing faster than at any other point in the past 16 years -especially demand from China and India. --------- Supply: Several oil-producing countries have undergone turmoil affecting their ability to produce at full-capacity - Iraq and Venezuela Speculation: In August 2004, OPEC Secretary General Maizar Rahman estimated speculation was adding $10-15 to the oil price.
The relative size of China’s fleet is small, only about 30 million vehicles total; US has an order of magnitude more. Based on experiences in other countries, we can expect substantial growth in the years ahead. Major studied have concluded that Chinese vehicle population will grow exponentially in the next 20-30 years. By 2030, the Chinese vehicle population could reach the U.S. level. China’s energy security, especially oil security, will much depend on the ability to conserve as much transportation fuel as possible through fuel economy standards, price fuels according to social costs, diversify fuels to other alternatives, and Reduction in vehicle usage while satisfying people’s desire of owning cars
In 1993, China became a net oil importing country It is estimated that Chinese oil reserve can only supply Chinese demand for less that 15 years In 2004, China imported nearly 40% of its oil demand It is predicted that by 2010, China will import more than 60% of its oil The share of imports from the Middle East will expand About half the total oil consumed per day is traded by tanker 80% of this travels through various sea lane choke points. 75% of Japan and China’s oil travels through the Straits of Malacca. Let’s consider 4 implications of China’s increasing oil demand: Global oil security; 2. Ambient air quality impacts on public health in China; 3. Ambient air impacts here in the U.S.; and 4. the wild card, global warming. Regarding oil security, China has been focused less on saving energy and more on securing supply. China’s leaders are desperately trying to to prevent energy from becoming a bottleneck, undermining economic growth and social stability. Coal, already at 2 billion tons per year with demand for it cascading ahead at over 15% per annum, can’t be mined or transported fast enough; electricity shortages plague 24 provinces. Local officials must absorb 10 million new job entrants per year due to population growth, plus the central government plans to move 300 million from the countryside into cities over the next 15 years. Economic development is by far the highest priority at the local level, drowning out the center’s calls for sustainable development. As we push back on China’s merchantilist approach (locking up supply so less is available to the market, instead of investing to help bring new supplies to the market), there is a serious environmental risk of pushing China to develop liquid fuels from coal. China’s coal reserves can supply its demand for more than 120 years If we in the west aim to restrict China’s access to oil, the repercussions are severe, in terms of the threat of war, but also to the global climate. There are two ways to make tpo fuels from coal, one dirty, using direct liquefaction; the other relatively clean as it is based on turning coal into a gas. It is imperative that we help China do the latter. More on this later. Oil imports, already 45% of oil demand, will accelerate in the decades ahead. A sense of oil insecurity has set in.
Oil use in U.S. light-duty vehicle fleet will continue grow from 9 million B/D in 2000 to 18 million B/D in 2030 Oil use by Chinese light-duty vehicle fleet could grow to 12 million B/D in 2030 With improved vehicle fuel economy, a lower growth trajectory is possible to cut oil use by half in 2030 in China
Local governments are adding one 1,000-MW power plant every week in 2005; nearly all are coal . There is a sense that energy growth is out of control, with local provinces building unauthorized power plants as rapidly as possible to keep up with demand. ERI now foresees that electricity supply will come into balance with demand in 2007, a “boom-bust” investment cycles which is why we see mostly capital flight currently from China’s electricity sector.
China’s leaders have set aggressive national growth targets that are likely to keep China’s growth engine in overdrive for the foreseeable future. In 2003, Hu Jintao set a national target, calling for there to be three more Chinas, the size of today’s, by 2020. Hu also embarked on what are known as the “3 Transcendences”: (1) transcend old, resource wasteful technology, maximize recycling, and move to sustainable development; (2) transcend the traditional ways for great powers to emerge on the world stage (reject hegemony), and pursue peaceful ascendancy (3) transcend outmoded approaches of social control, job assignments, etc. and instead strengthen rule or law and build a harmonious, stable society.
The vast bulk of China’s current growth is locking in investments in mostly antiquated technologies that will pump emissions into the air for a generation or more. (The coal plants under construction, although relatively advanced at 36-38% efficiency, plus moving to supercritical at 42% efficiency, nevertheless are deepening reliance on high-carbon technologies.) China’s new energy technology investments are cleaner, but nowhere near what they could be. New energy technologies are on average 5.7 times less efficient than Japan’s, and 2.25 times less efficient than the US.
Our program has funded analysis in China that shows how to do this. The Chinese are striving to implement this strategy. But its hard.
China historically has made marked advanced in energy efficiency. This shows China’s energy intensity improvement; China successfully managed to quadruple its economy while only doubling its energy growth between 1980-2000.
This shows how China accomplished that feat; it invested heavily in energy efficiency. But note what’s been happening in recent years; China’s investment in energy efficiency has dropped by 2/3 since its peak in 1983. China’s historic ee gains occurred under command economy conditions
This year (2006), China will establish the Top-1000 Enterprises Energy-Efficiency Program, a program to reduce the energy consumption of China’s 1,000 most energy-intensive enterprises (including in the steel, cement, chemicals, pulp and paper, etc. industries). These enterprises currently consume a third of all China’s primary energy. The Top-1000 Program will be a centerpiece of the central government’s efforts to implement the 2010 20% energy intensity improvement target.
What is the solution, and are the Chinese doing anything about it? The solution of course is low-carbon technology development, including massively stepped up energy efficiency, and a shift to renewable energy. As I mentioned, our program supports policy development in all the main energy production and consumption sectors, and is working with China’s central, provincial and local governments to put policies in place in all these areas. We have over 80 projects underway in all areas. Given the time constraints, let me just mention a few things we’re doing in the TPO sector. Prior to 2000, China’s government had not considered the importance of vehicle fuel economy for oil security or public health benefits. CSEP launched the effort in that year and put together a high-level government steering council, with analysis fed to them by a strong domestic research team teamed with international experts who brought in best practice policies from the U.S., EU, and Japan. Fuel consumption standards were adopted for light-duty (M1) vehicles in 2004 Phase 1 standards taking effect in July 2005 Phase 2 standards slated to take effect in Jan. 2008 Relative to the Japanese standards, Chinese standards are tougher for heavier passenger cars The standards are up to 20% more stringent than US CAFÉ standards. 90% of the SUVs plying America’s roads will not be allowed on China’s streets starting in 2008. Three years ago, the program set out to create a viable alternative to car use in China's major cities. We convened a "mayor's forum on mass transit," and invited Enrique Penalosa, former mayor of Bogota, Columbia, who was the architect of that city's bus rapid transit system. This started a wave in China of municipal planning to develop BRT, which consists of dedicated-lane bus systems with buses moving station-to-station with subway efficiency but costing only 5% of subways. Now, 15 cities are actively planning BRT systems, and Beijing is already completing construction of a 16-kilometer corridor, with plans for 300 kilometers by 2010. Our long-term goal is to make BRT a national policy, replicated in all major cities. The Hewlett Foundation just approved funding for a new Sustainable Transportation NGO to provide technical outreach and support to China’s cities that are developing BRT systems, since the interest of many cities is skyrocketing.
There are signs that China's leaders are beginning to grasp the urgency of slowing energy growth, diversifying away from coal and oil, and investing in energy efficiency. The 11th Five-Year Plan (2006-2010) calls for improving national energy efficiency 20 percent. This ambitious target would be the world's largest, and fastest, global warming pollution-reduction initiative. China is already beginning to implement this plan: In July 2004, China enacted vehicle fuel economy standards for passengers vehicles that are 20 percent more stringent than those in the United States, which could cut 60 million tons of global warming pollution and save nearly a half-billion barrels of oil by 2030. The law is being implemented in two phases: Beginning in 2008 90% of the SUVs plying US roads will not be legal for sale in China. The next step is to secure standards for heavy-duty vehicles (trucks and buses), that would roughly double the energy and carbon savings in 2030.
The Renewable Energy Law (effective January 1, 2006) stipulates 15% of China’s primary energy consumption be from renewables by 2020. This should launch about 120,000 megawatts of new renewable energy, including a $30 billion wind-energy market. Biomass and small hydro will also be main beneficiaries of the Law.
Our strategic goal is to help China implement policies to grow the volume of investment in renewable energy technologies, to help bring unit costs down. The strategy has been particularly successful in our wind concessions programs; our grants (in the $25-30K range to CRED) have now helped build over $1 billion in wind turbines in a dozen provinces. Another 800 MW announced on Monday; 600MW Jiangsu concession; 200 MW offshore by Three Gorges Company.
New efficiency standards for consumer appliances including refrigerators, air conditioners, lighting, washing machines, and TVs are on track to save 10 percent of all residential electricity in 2010, obviating the need for 36 large coal-fired power plants. Saves over 120 million tons CO2 in 2020.
Building code implementation pilots in six cities are progressing better than expected. When in the spotlight of Beijing, local officials “rise to the occasion”; the cities of Shanghai, Fuzhou, Xiamen, Guangzhou, Shenzhen, and Chongqing are demonstrating the administrative procedures—including inspections and enforcement during all phases of construction—necessary to ensure compliance with advanced energy codes. China is in the midst of the largest building boom in human history. Two-thirds of all China’s commercial buildings were built in the last decade; China has built 85,000 sky-rise buildings every year for the last 15 years. None of these were built to the standards of a modern building energy code. The boom continues: between now and 2015, China expects to build 50% more buildings than it has right now. Buildings eat up one-third of China’s total energy. China’s Ministry of Construction has only six people working on building codes. So five years ago, we supported the development of a new Chinese NGO to provide staff to the ministry and develop state-of-the art energy building codes. The ministry has now adopted both new residential and commercial building codes spanning 14 provinces in Central and South China designed to cut 50% of the energy consumed in new buildings. The grantees are now working on implementation measures in five cities, intending to replicate an implementation model throughout the region. Codes in the central and southern region if fully implemented will remove 72 MMT C in 2020.
The key to commercialization policy is to tap the revenues of the large market players and require them to innovate, develop, and implement clean technology. China’s central government has targeted the utility sector for aggressive reform. The goal is to make it more profitable to save energy than to produce it. Grantees helped the State Council to establish a central regulatory commission overseeing power sector regulations and reforms, equivalent to the Federal Energy Regulatory Commission in the US. The goal of China’s State Electricity Regulatory Commission is to require utilities to invest in demand-side savings and renewable energy, and to earn greater profits than can be earned from traditional supply. Demand-side energy efficiency has potential to cut 100,000 MW installed capacity by 2020; this could cut carbon dioxide emissions by over 2.5 billion metric tons through 2020. Another achievement includes new emission reduction standards for coal-fired power plants that are being piloted in 4 provinces. Finally, ADB is joining with us to sponsor development of Energy Efficiency Power Plants, where ADB finances investment in energy saving technologies such as lighting, efficient appliances, efficient motors, etc., and helps a utility save the equivalent power as constructing a new coal plant. These efforts will demonstrate that energy efficiency is China ‘s cheapest, cleanest, and fastest energy resource.
An EPP is a set of DSM programs, financed with a long-term loan, and repaid by consumers through electricity prices and savings to the electricity system. The Efficiency Power Plant has other benefits compared with conventional supply plants: ｧ The EPP improves reliability by reducing load on the transmission and distribution system; ｧ The EPP reduces demand on the coal and other fuel delivery infrastructure; ｧ The EPP reduces the environmental impacts of the power sector and eliminates the financial risk of increased pollution charges; and ｧ Unlike a power plant, however, end-use efficiency produces savings from the beginning of program delivery. Jiangsu is currently implementing China’s first EPP, focused on installing efficient electric motors in the province’s industrial enterprises. Right now, we’re actually designing one for Guangzhou. Just how much it will save is still being analyzed. The approach to financing that the province is taking is significantly different than what was originally proposed, and we expect that, though it will capture cost-effective efficiency savings, they will not amount to as much as could be acquired through the use of a broad, tariff-based funding mechanism.
BACK TO DOUG This slide shows the task ahead in a nutshell ; The challenge is to get the institutions in place in China to facilitate clean energy technology commercialization. Enforcement of the policies will be the greatest challenge.
