China – the coal monster

  • In 2012 China consumed 50.4% of all coal produced on Earth. Most, but not all of that coal was produced in China, mainly from deep underground mines. Like Europe and the USA before it, China’s industrial revolution has been founded on coal that accounts for 68% of all energy consumed.
  • In the 1980s, China exported both oil and coal and continued to export coal until as recently as 2009. But the country now imports oil, coal and natural gas in exponentially growing quantities. In 2012 energy imports accounted for 14% of energy consumption. This ever-growing participation in global energy markets is likely to resume upwards pressure on global energy prices.
  • China has significant oil production of 4.2 million barrels per day (mbpd) but consumption is running at 10.6 mbpd, hence the country has significant oil imports. Gas production is well below what may be expected from the oil production data and gas consumption runs at only 5% of the total. Nor does China have a mature nuclear industry with nuclear power accounting for only 1% of primary energy consumption. Recently expanded hydro accounts for 7%. We have been told that China is embracing the new renewables revolution which now accounts for an astonishing 1% of all energy consumed!

Figure 1  Since 1993, China’s energy balance has plunged into the red. Energy imports of 386 million tonnes oil equivalent per year (mtoe/y) in 2012 is roughly equivalent to 2.8 million barrels oil equivalent per day. Note how imports of coal and natural gas have begun to increase. China’s exports of manufactured goods means that it can easily pay for these energy imports.

Data

All of the energy statistics reported here are drawn from the 2013 BP statistical review of world energy [1]. The economic and population data are drawn from the United Nations National Accounts Main Aggregates Database [3] and World Bank [4]. All data sources are referenced on charts.

[Note: Dave Rutledge brought to my attention errors in the electricity statistics plotted at 21:00 hours on 10th June and Figures 7 and 8 were subsequently corrected.]

Energy Production and Consumption

Figure 2 China’s main indigenous energy resource is coal and it is therefore no surprise that coal dominates China’s energy production and consumption. The low levels of nuclear and gas production are a surprise. New renewables remain irrelevant although it needs to be noted that China has developed significant hydro electric power and with a state organised electricity supply system, the country could potentially balance significant wind and solar off hydro.

Dave Rutledge once told me that China’s coal resources were “all over the map”. By that he meant there is no single geological formation or area where coal is mined. China seems to have been covered by coal swamps for extensive periods throughout geological time. A surprising feature of Chinese coal mining is that most of it takes place in deep underground mines. Millions of miners have been killed but safety standards are now much improved.

Economic growth in China has been in lock step with coal production of roughly 10% per annum. I have for a long time been expecting coal production to lag economic growth and that this lag may subsequently become a drag. The switch to coal imports is the first sign of this happening and when Chinese energy imports once again hit global energy prices this will create a drag on the global economy and China.

Figure 3  Indigenous coal production has enabled China’s amazing economic expansion to take place. Without coal China would have been more dependent upon imported energy placing upwards pressure on global energy prices that would have placed a drag on China’s export orientated economy.

Figure 4  “Death trains” in China. In China pollution from coal is certainly a lethal problem.

Figure 5  The rise in China’s energy production is more than matched by the rise in energy consumption the difference between the two giving rise to the energy balance shown in Figure 1. The dog leg in 2001 corresponds to the start of the 10th 5 year plan that is discussed further below. China now consumes more energy than the USA! The industrialisation phase in China is over and growth in the economy will now shift to raising living standards of the population – more consumer goods, cars and vacations.

Figure 6  China does not have a diverse energy mix. The dominance of coal followed by Oil is plain to see. This is set to change in the decades ahead where nuclear will expand as will oil when growing prosperity leads to more cars and planes.

Figure 7  Like all other statistics in China, there is a dog leg up in electricity generation in 2001. Electricity is dominated by conventional thermal and that is dominated by coal.  But with the opening of the Three Gorges Dam power scheme, hydroelectric power has grown to a very significant 17% of the total (Figure 8).

Figure 8  New renewables account for about 3% of electricity generation. Rumours of China embracing the new renewables revolution seem exaggerated. As already mentioned, China may be able to sensibly balance significant wind off its quite extensive hydroelectric power.

Population

Figure 9  China is the most populated country on Earth with 1.4 billion souls. The rate of growth slowed dramatically in the mid 1990s as the one child policy began to bear results. But the population is still growing at a rate of  0.6% per year (9 million). Population growth is one of the drivers of phenomenal GDP growth.

Figure 10  China is developing the population structure of a developed nation with fewer young people and an ageing structure. If you look closely it is possible to see the larger number of males attributed to the killing of female babies under the one child policy. Chart from Zero Hedge [6]

Economy

China’s economy began to motor in 2001 with the inception of its 10th 5 year plan. This account in Wikipedia is worth reading [5].

Figure 11  Bilateral trade and growth lay at the core of the 10th 5 year plan that began in 2001. While maintaining balanced trade was an objective of  the plan, China has run a structural surplus that took off since 2001 now totalling $2.5 trillion. This surplus is nothing like as significant as the US deficit that stands at $9 trillion.

Figure 12  China is a classic example of how energy is required to generate real GDP. The next multi-country chart plots this as GNI PPP and is perhaps more instructive.

Figure 13  There are a few key observations to make about China from this “work of chart” that is in progress. On average Chinese now use about 2 tonnes oil equivalent per year, similar to Portugal but less than the UK that uses 3, and Germany close to 4. For the same energy consumption, Portugal produces 2.5 times the per capita GNI. Chinese total and per capita energy consumption can be expected to continue to grow, perhaps to 3 to 4 toe per annum. This will continue to place enormous strain on the global energy system. While China’s GNI – energy trend is positive it is at a lower gradient, i.e. less efficient than all other countries. This may be down to a number of factors including 1) the GNI numbers are wrong 2) a polarised society with large numbers who are not economically active 3) low price manufacturing is undervalued and 4) real energy inefficiencies in the economy. At some point the Chinese planners will need to work out how to dog leg this prosperity trend upwards, aiming for that point of maximum power.

References

[1] BP: Statistical Review of World Energy 2013
[2] Maximum power principle
[3] UN: National Accounts Main Aggregates Database
[4] The World Bank
[5] Wikipedia: Five-year plans of the People’s Republic of China
[6] Zero Hedge: China’s Unprecedented Demographic Problem Takes Shape

Other countries in this series of posts

Egypt – energy, population and economy
Russian Power
Post-peak Algeria?
Libya – energy, population and economy
Turkey – on its way to a mature economy
Ukrainian Death Spiral
Does the UK Economy Run on Energy or Hot Air?
Portugal – renewables to the rescue?
Belarus grows while Ukraine withers
Goodluck Nigeria – a failed state?
Germany: energiewende kaput?
America energy independence

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26 Responses to China – the coal monster

  1. Hi Euan,

    China’s share of world coal consumption is 50%; the US share is 12%. The world changes.

    Dave

    • Euan Mearns says:

      Dave, seems like Obama has his heart set on US 0% coal. Can they prevent the US exporting cheap coal to China and Europe? As you and I know, the only way to reduce emissions is to leave the C in the ground.

      E

      • Dave Rutledge says:

        Hi Euan,

        “Can they prevent the US exporting cheap coal to China and Europe?”

        Europe, no. Illinois is up 31% in 2012 at 43Mt.

        Asia, don’t know. We will see what happens when the Panama Canal expansion is complete.

        Dave

    • ankhara777 says:

      USA population is 1/4 to china……12% x 4 = 48%….

  2. Roger Andrews says:

    China is a money monster too. Foreign reserves now at $3.5 trillion and still growing:

    http://economicstudents.com/wp-content/uploads/2013/07/henry2.png

  3. Glen Mcmillian says:

    I don’t know exactly how to interpret that smiley face but I take it as EITHER humor OR sarcasm.

    Other than liquidity and convenience loaning to a government is an almost sure fired way to wind up with less purchasing power a decade or two down the road than you have the day you loan the money.

    People tend to forget that governments have the ability to inflate the hell out of their currencies and actually announce their intentions of doing so as a matter of course.

    Of course if you have so much you can’t conveniently invest it in in other ways that are safe and lightly taxed …..

    Who are China and India supposed to buy the imported energy from that they are counting on to expand their economies?

    I just don’t see tight oil and gas as being safe bets to ever be produced in such ever increasing amounts given the lack of ACTUALLY PROVEN by extensive drilling in producing fields and the unavoidable elephant in the living room- depletion of existing conventional fields.

    My opinion is that the Chinese are well aware of depletion of conventional production at top leadership levels and that they will keep the nuclear and renewables pedals to the metal.( trucking slang for continuous maximum effort)

    Those people who are opposed to renewables but seldom stop to consider the economic effects of renewable power in terms of suppressing the purchase costs of coal and gas which add up to nearly astronomical sums over the years.A country getting ten percent of its power from renewables is going to save pretty close to ten percent of the bill for coal and gas year after year; and while it is very difficult to quantify the effect on the prices of fossil fuels due to the loss of markets to renewables the effect in total over time must be enormous.

    IF I remember correctly we have been getting around fifteen percent of our juice from nukes in the US for around four decades now. That is a pretty big chunk of avoided coal and natural gas purchases and it must have had a substantial effect on the price of coal and natural gas;this has been good for every body –except the owners and workers in the coal and gas business of course.

    My own opinion remains as always that any renewables built and financed now (in good locations) are going to turn out to be gold mines for their national owners a few years down the road in terms of avoiding the cost of buying ever more expensive coal and gas and even wood.

    This may ruin the balance sheets of conventional producers of coal, gas and nuclear electricity but this is a political rather than an engineering problem and solving it does not require anything other than a good down in the trenches knife fight.

    The utilities we have these days do love to bitch about the subsidies renewables are getting but they some how conveniently fail to remember that they got the greatest subsidy in effect any business could ever want- a government sanctioned monopoly to sell electricity for most of a century- as well as sweetheart deals on a lot of property such as hydro sites and right of ways.

    It is not a problem paying back a low interest government loan if you have the public by it’s privates and are selling something as useful as electricity at monopoly rates guaranteed to turn a profit for a century or so.

    I have no idea how many such loans have been made to electrical utilities but I do know there have been a lot of them over the years and that some of them were for truly substantial sums of money at the time they were made although inflation makes the amounts seem small these days decades later.

    I am a believer in nuclear power but I also know about the Price Anderson act and the fact that without it there would be no civilian nuclear power in the US.It is highly probable there wouldn’t be any nukes in any western country unless the government guaranteed or subsidized the costs of insurance.

  4. Alfred says:

    “386 million tonnes oil equivalent per day (mtoe/d) ” should be per annum

  5. peter2108 says:

    I really like Fig 13 – GDP against energy use per capita. But it is somewhat spolied by the overplotting and the multitude of symbols are hard to read. Perhaps show fewer countries on the plot?

    • Euan Mearns says:

      Does this help?

      • BAU says:

        How about a larger picture with more pixels, and smaller dots? A work of chart, in any case! :)

        • Euan Mearns says:

          Jeeeez ;-)

          Click on chart should produce a real big version. The main observations would be 1) Ukraine and Nigeria are basket cases, 2) most of the developing countries are making reasonable progress in developing, 3) the OECD countries have magic levers they can pull, 4) Russia is showing signs of developing into an OECD type economy.

          The x-axis is scaled to 10 to leave room for Canada.

          • Paolo Pulicani says:

            A Critique of Techno-Optimism: Efficiency without Sufficiency is Lost

            Samuel Alexander

            ….
            Given that the richest nations demonstrably have the largest ecological footprints, it is surprising, or at least disappointing, that mainstream environmental discourse still tends to assume that sustained growth in GDP, across the globe, will solve the ecological predicament; or at least, that sustained growth is not incompatible with sustainability (UN, 2012). There seems to be an implicit acceptance of the EKC hypothesis, driven by techno-optimism, even though it lacks empirical foundation. This can be explained primarily in terms of political convenience. Politicians seem very reluctant to accept any incompatibility between growth and environmental protection, because that would involve choosing between those goals. Instead of making tough choices, politicians just pretend that there is no incompatibility, which is what people and businesses seem to want to hear. All the while, the biocapacity of the planet continues to decline (Lawn and Clarke, 2010).
            There is, however, the theoretical possibility that in the future our economies are able to achieve sustainability by decoupling their economic activity from environmental impact, through efficiency gains (UNEP, 2011). It is this seductive line of reasoning that now deserves deeper consideration. After all, the fact that technology and growth have not been able to produce a sustainable economy does not mean that it is not possible to do so in the future. As Nordhaus and Shellenberger (2011) argue, ‘The solution to the unintended consequences of modernity is, and always been, more modernity – just as the solution to the unintended consequences of our technologies has always been more technology.’ While this can be accepted as a theoretical possibility, there are dynamics at play – including the laws of physics – that suggest that decoupling through efficiency gains will not reduce the overall ecological impacts of economic activity if global growth remains the primary economic goal.
            In assessing the prospects of efficiency gains as a means of reducing environmental impact, it is imperative to distinguish between ‘relative’ and ‘absolute’ decoupling (Jackson, 2009). Relative decoupling refers to a decline in the ecological impact per unit of economic output. Absolute decoupling refers to a decline in the overall ecological impact of total economic output. While relative decoupling may occur, making each commodity less materially intensive, if the total consumption of commodities increases then there may be no absolute decoupling; indeed, the absolute ecological impact of total economic activity may increase.
            Given that the global economy already exceeds the planet’s sustainable carrying capacity (Global Footprint Network, 2013), it is clear that absolute decoupling is what is needed. As shown below, however, it is just as clear that absolute decoupling is not occurring. Overall (or absolute) energy use and resource extraction continues to rise, even if in places the energy or resource intensity per capita is in decline (Wiedmann et al, 2013).
            Consider, for example, the energy intensity per unit of global economic output, where the evidence of relative decoupling is quite clear. Tim Jackson (2009: 69) reports that the amount of energy needed to produce each unit of the world’s economic output has fallen more or less continuously in recent decades, with the global energy intensity per unit now 33 per cent lower on average than it was in 1970. Unsurprisingly, this improved energy efficiency is also leading to relative decoupling in terms of carbon emissions intensities. The global carbon intensity per unit of economic output declined by almost one quarter from just over 1 kilogram of CO2 per US dollar in 1980 to 770 grams of CO2 per US dollar in 2006.
            However, despite declining energy and carbon intensities, Jackson shows that total CO2 emissions have increased 80% since 1970. ‘Emissions today,’ he adds, ‘are almost 40% higher than they were in 1990 – the Kyoto base year – and since the year 2000 they have been growing at 3% per year’ (Jackson, 2009: 71). This shows that despite significant relative decoupling of energy intensities, absolute levels of carbon emissions are rising significantly. Efficiency gains are not fulfilling their promise to reduce overall impact.
            Peter Victor (2008) arrived at essentially the same conclusion when he reviewed studies of decoupling with respect to the total material resource requirements of Germany, the Netherlands, United States, and Japan – some of the most technologically advanced nations on the planet. He reports that although a degree of relative decoupling has occurred in recent decades, the decoupling was insufficient to prevent the total use of resources increasing. He explains that ‘[t]his is because the rate of increase in GDP in each of the four countries was greater than the rate of decrease in material intensity’ (Victor, 2008: 55). This suggests that even if these technologically advanced nations were able to fully decarbonise their economies in response to climate change, the material intensity of their economies (in terms of resource consumption) would remain unsustainably high. This points to the important but often forgotten fact that acute environmental crises would remain (e.g. deforestation, ocean depletion, biodiversity loss, soil erosion, etc) even if the issue of climate change were somehow resolved. Globally the message is essentially the same:

            Comparing 2002 with 1980 about 25 per cent less natural resources (measured in physical units) were used to produce one dollar of GDP. This relative decoupling of economic growth and resource use was insufficient to prevent the total quantity of resource extraction increasing, which it did by 36 per cent. (Victor, 2008: 55-6)

            The message of this analysis is not that decoupling through techno-efficiency improvements is unnecessary – far from it. Decoupling has an absolutely vital role to play in the attainment of a sustainable society (von Weizsacker et al, 2009). But the evidence shows that despite many examples of relative decoupling, growth in overall economic output has meant that absolute impacts on the environment are still increasing. Every year more carbon emissions are sent into the atmosphere and more renewable and non-renewable resources are extracted from our finite Earth. In short, decades of extraordinary technological development have resulted in increased, not reduced, environmental impacts. It is not clear, therefore, whether the ‘optimism’ in ‘techno-optimism’ has any rational basis at all.
            …..

          • Euan Mearns says:

            Jevons’ Paradox, the more efficient we become the more we use. Efficiency is the route to our survival and perhaps our destruction. I am much more concerned about deforestation, over fishing, pollution, disease etc than I am about climate change, especially when chopping down forests to make electricity is concerned.

            For so long as population continues to rise and the poor aspire to be wealthy energy and resource consumption will keep going up until scarcity creates rationing through higher prices. Population is following a logistic and should peak this century and no one actually knows what the carrying capacity of Earth actually is. A declining population actually creates a whole set of new socio-economic problems.

        • Roger Andrews says:

          Euan: If society uses energy to generate wealth then a variable we should be looking at is how much wealth a specified amount of energy generates. The simplest way of doing this is to calculate how much GPD is generated from a ton of oil equivalent, and I’ve plotted the numbers since 1990 for the UK, US and China on the graph below. I’m not quite sure what the results are telling us but you might find them interesting:

          http://oi58.tinypic.com/dwexiv.jpg

  6. Herve D says:

    Wind and sun electricity need to invest upfront 100% of cumulative production costs (15-25years) amortization.

    Nuclear is in the same boat (80% of future cumulative production costs reimbursements over 50-60years plant life remaining 20% are to be paid all along the plant life, jobs + fuels) but requires 60years to reimburse.

    Despite this financial advantage, wind is still twice expensive as nuclear. Of course unsincere administration can artificially inflate nuclear costs by imposing excessive security investments (this presently occurs in most of western states, fuelled by ideology) but does’nt occur in other “free areas” like Russia, China,…
    These guys are presently taking the world business leadership and lion’s share for new nuclear build up, developing cheaper and safer plants (based upon the many years of experience in the West): Fast neutron, molten salts and high temperature reactors, metallic fuels are key innovations at West’s reach but forbidden by ideology and religious Faith in renewables.
    The time our western democracies extract themselves from present totalitarian ecologic ideology would be at least 40 years, the time to remove present generation of persons in power. But about 2050, the world would be very very different from now and I fear America and Europe be the “poverty” continents.

  7. From the figures provided, in this post, renewables (hydro included) supply around 20% of China’s electricity, and 12% of energy, compared to nuclear at 1% of energy (though WNA actually puts it at nearly 2% of electricity) . The current plan is to expand nuclear to about 4% of electricity by 2020, and non fossil primary energy overall to around 17%, i.e mostly with renewables. Wind has already overtaken the nuclear output. There are convincing scenarios in which renewables supply 80% or more of China’s electricity by 2050, and a new one claiming they could get to 100% of all energy by then, given the political will. Coal ( and nuclear) can (and I think should) be beaten. There and elsewhere.

    • Herve D says:

      Dreams, unachievable dreams: Imagin please 80% of China electricity from renewable, this means the installed capacity shall be at least 4 times the average China electricity power drain, assuming wind + sun can provides 25% charge factor (14% in Germany, actual result..). This means that during normal renewable production days, only 25% of produced power would be absorbed by their electric grid and 75% could not be absorbed but HAVE to be absorbed into 100% yield reversible storage….Only water storage is affordable.
      Dream !
      To figure out this, 40 cubic meters of water falling from 10 meter heigth are needed to generate 1 single KWh.
      To store the necessary amount of energy China would need 200,000 square kilometers lake surrounded with artificial dams as no geological area allows such a huge place…to be fully loaded / de-loaded once a month
      Otherwise to construct a 1700km long sea wall of 20 meters high…

  8. Jonathan Madden says:

    Euan,

    Eye opening stats – thank you.

    US asset purchases are surely distorting the picture. $55Bn p.c.m. at least. Forcing interest rates to near zero and creating bubbles in property. China may have massive nominal $ reserves, but to ask where they may be spent is to miss the point.

    We are ‘enjoying’ a huge cash-induced party, post 2008. I do not know how long it can or will last. Its purpose is to increase growth, arguably which cannot happen for much longer if there is a primary energy crisis. China can throw vast resources at infrastructure in overseas countries to open up resource markets to feed their demand for minerals and energy.

    But I suggest that in an artificial economic environment with distorted asset values, trying to realise the apparent true value of cash will inflate the asset you’re trying to acquire and develop. As you’ve described in a previous article, there is money-shovelling going on at present on a vast scale, fuelled by quantitative easing. Many transactions are purely financial, causing asset inflation and not a lot else.

    To say it is difficult to predict the future, near or far, is an understatement. If we are in the middle of a global party then a downturn must ensue. Watching US monetary policy closely would seem to be a sensible policy.

  9. I agree it’s very ambitious. But the WWF scenario has 100GW of storage (including pumped hydro) and, being only 80% renewable, also has fossil plants to provide balancing when wind etc was low. They did a full run through to test viability over time with varying renewables/demand, Even with storage, this mix would produce a surplus at times which could be exported ( to Mongolia, Korea, Japan etc) via supergrid links. This could also be used to import surplus from these regions at other times, to help with balancing, depending on the weather system and demand patterns: see Asia Grid concept at http://www.ciwg.net/files/74235701.pdf

  10. Kit P says:

    Euan
    I think you will find your safety statics are out of date for coal mining in China. Last I checked about 500 miners were kill a year. While not to western standards, this is an order of magnitude impovement. I live five miles from a very efficient 5000 MWe coal station with modern pollution controls running on imported coal. I am impressed with the low enviromental impact.
    China did not get serious about nuclear power and coal plant thermal performance until they started importing coal.

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