event

China’s Energy and Climate Challenges: A Coal Value Chain Perspective

Tue. October 23rd, 2012
Beijing

IMGXYZ4176IMGZYXChina and the United States account for more than half of global coal production and consumption. Coal is the world’s fastest growing energy source outside of renewables, expanding production by over 5 percent on an annual basis since 2000 and generating about 40 percent of the world’s electricity. These two countries have a significant role to play in shaping global energy and climate change trajectories toward a more sustainable direction. With China’s growing energy demand and concerns over emissions, mapping the contours of the coal value chain on both the policy and business levels is essential to understanding energy security, climate implications, and economic development.

Carnegie’s Kevin Tu discussed the future trends of the coal value chain and possibilities for U.S.-China collaboration on coal. Stephanie Duran, deputy director with the U.S. Department of Energy China Office, joined the discussion. This roundtable was part of the “China and Environment” seminar series and was co-hosted by the American Chamber of Commerce in China. Carnegie-Tsinghua’s Wang Tao moderated.

China’s Energy and Climate Challenges

  • Energy Sector Reform Crucial: China is reaching a critical stage in its energy conservation and emissions reduction goals, Tu said. Energy sector reform, with a focus on improving statistical measurement, reporting, and verification (MRV), is essential. He added that China also needs to look globally for opportunities for collaboration with the United States, thereby ensuring two-way information flow and productive bilateral dialogue. China will need to continue utilizing coal trade as an effective policy instrument in maintaining its self-imposed cap on domestic coal production, as well as take the lead in promoting a cleaner energy revolution, Tu said.
     
  • Coal Will Continue to Be Important: China’s biggest energy challenge, Tu and Tao pointed out, was to reduce carbon emissions while still securing energy supply to sustain economic growth. Coal is abundant and affordable but very carbon intensive, and even though China holds the world’s largest recoverable shale gas reserves, creating the equivalent of the U.S. shale gas revolution would not be easy. Tu pointed out that China relies on coal for 70 percent of its primary energy supply and 80 percent of power generation. Though China’s energy mixture is expected to converge with the rest of the world in the coming decades, Tu predicted that coal was not going away anytime soon.
     
  • Optimizing the Coal Value Chain: China’s dependence on coal has drawn attention to problems in the coal value chain, including transportation bottlenecks, environmental issues (most notably air quality, water use, and greenhouse gas emissions), social instability, and safety challenges. More than 80 percent of China’s coal resources is located in the country’s northern and western regions, whereas the demand centers are along the coast. Tu pointed out that more than thirty percent of China’s coal was produced by so-called “township and village enterprises.” The state-owned enterprises have also expanded significantly, creating economies of scale that could improve safety issues, but at the cost of private enterprises. China’s priority now, he added, should be to optimize the coal rail transport network, but not to create redundant freight capacity that will inevitably drive down end use coal prices in the coastal regions.

International Cooperation

  • U.S.-China Collaboration Potential: Duran pointed out that several projects are underway between the United States and China on coal collaboration, with scientists and engineers from both countries collaborating on developing cleaner coal technology. She listed both some of the opportunities and some of the challenges that these collaborations faced, including as congressional concerns over the potential value of such cooperation, trade issues over “innovation mercantilism,” and disputes over intellectual property protection.
     
  • Two New Policy Deliberations: Tu stated that “co-control” of coal fired air pollutants and greenhouse gas emissions, based on a system of structural adjustments and technological retrofitting, could be very critical to the future of Chinese coal. He explained that the design of multi pollutant co-control routes could be based on unit pollutant reduction cost. Tao and Tu added that international climate negotiations are an “alternative pathway” for global climate solutions, and the so-called CURE bloc (China, the United States, Russia and the EU)—which account for more than half of global economic output, energy consumption, and carbon dioxide emissions—possesses great technological capacity for innovation in combating climate change.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
event speakers

Wang Tao

Nonresident Scholar, Carnegie-Tsinghua Center for Global Policy

Wang Tao was a nonresident scholar in the Energy and Climate Program based at the Carnegie–Tsinghua Center for Global Policy.

Kevin Jianjun Tu

Senior Associate , Energy and Climate Program

Tu was a senior associate in Carnegie’s Energy and Climate Program, where he led the organization’s work on China’s energy and climate policies.

Stephanie Duran