Courtesy of Adam Moser - thoughts on energy issues

In the last couple of weeks, Adam Moser, our friendly U.S./China Partnership in Environmental Law fellow downstairs wrote on several interesting energy issues in his weekley China News Roundup. Excerpts are posted below. He can be reached at amoser@vermontlaw.edu

China fights overcapacity pollution – limits investment and increases shutdowns

China's environment ministry vowed to launch a two-year clampdown on investment projects that flout environmental rules, throwing its weight behind a campaign to curb inefficient and polluting projects. The pledge by the MEP signals a growing seriousness by Beijing to ensure that a recent burst in lending and investment does not result in the construction of additional inefficient, polluting production capacity, particularly in sectors already flagged as being over-invested.

So far this year, the ministry has rejected 47 proposed industrial projects worth 191 billion yuan ($28 billion) on environmental grounds, 70 percent of them in the steel, petrochemical, non-ferrous metals and power generation sectors, it said. – Reuters

“Industry restructuring is a long, tough and important task,” Li Pumin, a spokesman at the National Development and Reform Commission, the country’s top economic planner, said at the same conference today. “The purpose of that is to ensure the stability and continuity of economic growth.” - Bloomberg

Quick call Dan Esty! China, EU and US are in a WTO trade and environment scuffle

From Bloomberg - At issue is the duty China levies on exported metals, which is aimed at curbing overproduction and emissions of carbon and sulfur gases from furnaces. China’s decision to introduce a tax of 40 percent on coke in 2008 prompted the U.S. and the EU last week to file a complaint to the World Trade Organization, saying the tariffs unfairly inflate prices for overseas buyers. China produces 60% of the world’s coke.

The EU claims that “as many as 500,000 jobs in industries including automotive and construction are “potentially affected” by China’s export tariffs on metals and companies “risk having to close down.”

“Developed countries prefer importing coke to producing it because the environmental barriers for building coke ovens in their countries are too high,” said Wang Ling, a Beijing-based analyst at Umetal, a steel research company.

Making coke from coal can emit more than 2,000 chemicals including benzopyrene, which can cause cancer, Wang said. As many as 94 percent of Chinese producers lack money to upgrade plants to prevent “massive amount of emissions of carbon, sulfur and nitrogen,” she said. – Let’s stop right there.

Why would coke production boom in China if profit margins were so slim and suppliers were forced to forgo pollution control for mere survival?

Interestingly, it is because not that long ago there was a strategic national plan to promote domestic coke production. This plan made low interest loans very accessible to the coke industry; then prices were strategically set to undercut global prices and capture market share. And all the while government agencies were finding it quite convenient to not enforce emission limits, or just to allow the local EPB to run a racket of collecting petty fines.

Now China decides to cut emissions and coke producers will have to invest in pollution control and thus won’t be able to undersell global producers that are subject to strict environmental regulation. So China uses the export tariff to recalibrate the artificially low global selling price, while protecting its domestic buyers over the short-term.

Who’s to blame? Everyone that has ever wanted the “China price.” The buyers from the EU and US that shifted their orders to China and caused the closing of cleaner US based coking facilities are as much to blame as the Chinese technocrats.

Profits for many companies over the last decade came from externalizing the costs of regulation by moving manufacturing or buying from China. If China takes serious steps to curb emissions and protect its environment costs associated with production in China will inevitably rise. Every business model built on the “China price” is at risk. Additionally, this export tariff on coke illustrates the effects a carbon based border tax could have on some industries.

Chinese think tank releases report on China’s carbon intensity plan

The proposal, by analysts at the China Council of International Co-operation on Environment and Development, will be submitted to Premier Wen Jiabao today. It says a 4 to 5 per cent cut each year would be needed if the nation hoped to achieve its low-carbon development goal by 2050, and would see carbon intensity "fall by between 85 per cent and 90 per cent by the middle of the century". – SCMP

Questions loom over application of CCS in China

Reuters Carbon News reports from a recent conference on CCS in China.
"We plan to start construction in 2014 and complete the works and start operations in 2016," Su Wenbin, head of China Huaneng Group's Greengen zero-emissions project, told a recent CCS conference. Greengen also has a demonstration plant in Beijing where some of the gas stripped out is used to carbonate soft drinks.

"There are still a number of outstanding issues in relation to this technology," said Ma Yanhe, Director-General of the Chinese Ministry of Science and Technology. "Apart from reducing greenhouse gas emissions, it is not making very significant contributions to sustainable development. The technology itself is also energy intensive and the significant energy consumption is quite worrisome. Finally, there is no reliable assessment methodology for the long-term environmental impact of this technology."

500 yards and 500ppm

The use of CCS in China and India is one of the most pressing environmental issues that the world faces. That is because coal, as the most dependable power source, is also the single worst fuel as regards both climate change and local-immediate human health impacts. The major challenge is ensuring that necessary investments in CCS do not end up promoting the continued use of coal over other more sustainable forms of energy. As I write this and look out a window in Beijing, visibility is literally no more than 500 yards (pictures will be coming soon). Air quality readings for 2.5-micrometer particulate matter are off the charts today at over 500ppm!! And CCS does very little to solve this problem, rather increased investment simply justifies increased coal use. (Note: the Chinese Government does not even keep official records of 2.5mm PM readings only 10mm.) These 2.5mm numbers are from the US Embassy's monitor. Joe Romma's Climate Progress covers a new report on US-China cooperation on CCS/Climate Technology from the Center for American Progress here.