China struggles with growth and greenhouse gases: the good, the bad and the Hummer

(Photo of power plant in China from Flickr and photographer Sinosplice/John Pasden)

Weekly Angst: Last week we learned China significantly passed up the U.S. in CO2 emissions – by 14%. With 80% reliance on coal for power and a fast-growing economy, China is likely to continue pouring the most greenhouse gases into the atmosphere unless drastic steps are taken. So it was of interest that the U.S. and China signed a climate agreement last week – and that the government raised its fixed gasoline prices.

The good ...
Treasury Secretary Henry Paulson (known as an environmentalist when he ran Goldman Sachs) and Vice Premier Wang Qishan signed a “10-year Energy and Environmental Cooperation Framework” in Washington. They said businesses, government and research universities would work together on “making necessary technological advances to preserve the health of our planet.” They didn’t give targets to cap emissions but said they’ll jointly develop cleaner technologies, policies and incentives. They also will discuss steps to diversify power sources and develop alternatives to fossil fuels for transportation, as well as safeguard clean water and wildlife. A few other hopeful signs:

* GreenGen, a subsidiary of the state-owned China Huaneng Group, is building an integrated gasification combined cycle (IGCC) demonstration power plant that will be more efficient and eventually capture 80% of its CO2. Since coal is relatively cheap and plentiful, China is likely to use huge amounts for the foreseeable future, so carbon capture and sequestration is pretty much essential to cutting down on CO2 emissions.

* China has a goal of 15% renewable energy by 2020 and 25% by 2025. Today, it gets about 8.5% from sources such as wind, solar and hydropower.

* Energy conservation became a national priority last April, which means managers in state-owned plants ignore it at their peril.

* The Chinese government is working with the Natural Resources Defense Council and Asian Development Bank to improve conservation in a country where poor execution has lead to enormous energy waste.

The bad …

Last year China added an average of 2 new coal-fired power plants a week. Hundreds more are slated for the future, even with a renewable portfolio.

GreenGen’s investment in the IGCC project, which could be the first of many, is looking for international support in the new technique of capture and sequestration. In particular, it was looking to the U.S. for its now-cancelled FutureGen demonstration project, which is now more likely to be a series of small carbon-capture projects. Whether that will dampen the Chinese enthusiasm for CCS remains to be seen.

In international discussions, China continues to reject mandatory caps on emissions. Its current 5 Year Plan set a target of a 10% cut in energy use per unit of GDP (or “intensity”) by 2010. GDP has been rising about 10% a year, so that means energy use will continue to grow – and so will emissions.


… and the Hummer
While Americans are scaling back on auto size, because of the rising cost of gas, and General Motors is thinking of selling or changing its Hummer, wealthy Chinese are falling in love with it. In Beijing alone, 15 car dealers are selling Hummers and a couple of local auto companies are making similar military-style vehicles, which are increasingly popular with urban-dwellers who see them as status symbols, according to the Financial Times.

Demand for SUVs is increasing too, up 40% in the first 4 months of this year, as well as for luxury imports.

Although China is the second largest importers of oil (after the U.S.), and demand for oil there is increasing about 8% a year, gasoline and diesel are subsidized so until this week they were costing about 40% of what we pay at the pump.

Late this week Beijing raised the price of gas about 17% to $3.06 per gallon, according to Greenwire. (Bloomberg says the official price is under $3 and the New York Times says its $3.83, so something’s being lost in translation. I’m going with the Greenwire number, which cites China's National Development and Reform Commission as its source.) U.S. Treasury Secretary Paulson had recommended raising the price to curb demand. Under the old price, Chinese refineries were losing money because they had to pay more for crude than they could get for the gas. Diesel prices were raised as well.

Interestingly, the average fuel-economy mandated for cars in China is considerably better than ours, about 35 mpg, which is what we’re aiming for by 2020.

To read more and see a chart of vehicle sales in China, go to The Financial Times.

(Sources: E&E PM, Greenwire, The Financial Times, Bloomberg.)