Harbin, the big industrial city in China’s northeast, had a few of its alarmingly regular “airpocalypse” days earlier this week. The smog was so bad that visibility was reduced to 50 metres in some areas. At its worst, the tiny and potentially deadly airborne particulates known as PM2.5 reached 1,000 micrograms per cubic metre. The World Health Organization’s recommended safe level is 25.
I was in Beijing a few days earlier and there were a couple of cloudless days when I could barely see the towers a few hundred metres from my hotel. The sky was like grey soup; my eyes were stinging. Any first-time visitor to China realizes within minutes that a green revolution is not just the country’s economic goal – it’s a national health goal, one with dire consequences if it fails.
But you would be wrong to think that improving air quality, creating jobs and reducing carbon-dioxide output are the main drivers of the pursuit of clean energy. It’s really about energy security. China realizes it can (literally) manufacture its own energy security in wind-vane and solar-panel factories or it can traipse around the world competing with other energy-thirsty countries for oil, gas and coal.
Not all these forays would be picnics. “If the present fossil-fuelled pattern of industrialization continues, it will drive [China and India] into conflict-prone zones of the world in search of ever-less accessible oil supplies,” John Mathews, research director at Australia’s Macquarie Graduate School of Management, said last week at a Beijing conference sponsored by the Ford Foundation and the Chinese Academy of Sciences. China is the world’s second-biggest economy and its phenomenal growth has been driven almost entirely by the “black” fuels.
In September, its net imports of oil and refined products reached a record 6.3 million barrels a day, vaulting it past the United States to become the world’s top importer, according to the U.S. Energy Information Administration.
China is building coal-powered electricity generating plants at the rate of one a week. Its annual coal consumption – about four billion tons – is so vast that it is burning nearly as much coal as the rest of the world. Consumption is expected to reach 4.3 billion tons by 2015, and keep rising, as manufacturing climbs. In 2010, the non-OECD countries, led by China, were responsible for 40 per cent of global manufacturing, up from 20 per cent in 2000.
Clearly, China’s hydrocarbon consumption growth rates are unsustainable for environmental and security reasons. While the notion of “peak” oil is losing its allure, thanks in good part to surging U.S. shale oil production, there is no doubt that extracting oil is getting more difficult and expensive ever year.
The easy production is gone. The new frontiers are in deep ocean water and in developing countries, where political instability and conflict are often the rule. You don’t hear about it much in the Western press, but Chinese oil and gas workers find themselves in ugly situations in Africa fairly often. In 2007, in the Somali-inhabited Ogaden area of southern Ethiopia, rebels killed nine Chinese workers at a gas exploration camp. Others were kidnapped.
The first Persian Gulf war, after Iraq’s invasion of Kuwait, was an oil war. The Chinese don’t want any of that.
The solution, then, is renewable energy, which is coming on as strong as oil and coal. Mr. Mathews, of the Macquarie school, notes that, by 2012, China was adding more hydro, nuclear and other forms of renewable energy than coal-fired power. The country’s 12th five-year plan calls for 30 per cent of electricity to be come from non-fossil fuels by 2015, up from 5 per cent in 2001. Wind-power capacity already exceeds that of nuclear power.
The big problem is finding the hundreds of billions of dollars to finance the transition to renewable energy, not just in China but globally. Government-controlled banks can flood the market with cheap financing, but that can lead to all sorts of distortions.
The photovoltaic industry was so loaded with knock-down loans that it triggered plummeting prices and a global photovoltaic glut that bankrupted many manufacturers, including Canada’s Arise Technologies.
A better financing method would be green bonds, such as the one pioneered this year by the Export-Import Bank of Korea, know as Kexim. The five-year, $500-million (U.S.) “climate friendly” bond carried a 1.75-per-cent coupon. Kexim said it will use the bond to deliver loans to projects of the “low carbon and climate resilient growth” variety. If the bond works as intended, there are bound to be copycat versions in China and elsewhere.
The biggest problem is ensuring a speedy transition to a green economy. China’s air is foul and destroying lungs. And sooner or later, the country’s rush to gobble up oil reserves in unstable countries will backfire. The rest of the world wishes it godspeed and luck. But at the rate China is industrializing, its air quality and security situation could get a lot worse before it gets better.