Preventing radical climate change predominantly falls to the two biggest carbon emitters, the United States and China; China passed the U.S. in emissions in 2006, though remains far below the U.S. on a per capita basis. New York City’s long term security thus hinges on agreements between our two countries. But if China achieves American lifestyles using fossil fuels – duplicating the way the U.S. developed in the 20th century – emissions will far exceed the ‘trillion tonne’ mark regarded as the safe limit for greenhouse gases. The delicate relationship unfolding is well described in the current issue of Rolling Stone, “China, the Climate and the Fate of the Planet.”
Ella Chou is a rising expert on energy in both the China and the U.S. She spoke with City Atlas about China’s energy future, North American energy independence, fracking, and the relationship between China and the U.S. Chou is a Senior Research Assistant at The Brookings Institution, one of the oldest and most prestigious research organizations in Washington, D.C. Our conversation with Chou continues a discussion that began at the Asia Society, where Chou joined a panel on fracking in China.
Can you describe China’s current energy system?
That’s a very big question. Coal makes up about 70% of China’s primary energy consumption. Natural gas accounts for only 4%, petroleum about 17% , and electricity 9%. When we are looking at electricity, though, we are seeing the share of renewables growing much, much faster. Wind energy in 2013 produced more megawatts than nuclear. China is pushing very hard on nuclear as well. Right now the biggest challenge they have is to reduce the coal mix of the entire primary energy mix from 70% to 65% and to raise the percentage of natural gas from around 4.5% to 7% or maybe even 8%. Right now, our estimation is that 8% of natural gas would be very hard for China. That’s the biggest challenge for them, that’s why you have seen a lot of the gas deals, such as the China-Russian gas deal. You have seen a lot of action on fracking and a very ambitious target for synthesis gas.
Speaking of nuclear energy, one of American’s top climate scientists, James Hansen, believes that China should accelerate the use of nuclear power to achieve CO2 reductions. He proposes building nuclear power plants at a rapid rate to replace China’s coal power. What do you think of Hansen’s plan?
China already has a very ambitious nuclear target and they are definitely on that route right now. If you’re looking at the existing nuclear power plants built in 2014, they’re going to have 8.64 million kilowatts of nuclear capacity just in 2014. In 2017, they’re going to get to 15 million kilowatts. That’s a lot. They’re doubling their nuclear power.
When you look at the American nuclear industry, they haven’t done much in the past 20 years. So compared with the Western world, China is pushing very hard. China’s target right now is ambitious enough, I just hope that they can carry it out in a safe and secure manner.
You’re an expert on U.S.-China relations. How to you approach the problem of fracking and energy from this angle? What is fracking’s role in the international relations between China and US?
During the fracking panel at the Asia Society, one of the panelists mentioned that the U.S. lack of standards and regulation has been exported to China together with its fracking technology. How do you think can the two sides cooperate with each other on both corporate and governmental level to minimize the harm and enhance the efficacy?
Because Congress exempted the oil and gas industries from federal regulation in 2005, it’s a challenge on the U.S. side to say, “You guys should do this or that.” However, the Bureau of Energy and Resources in the State Department is still trying to get the regulators together with the Chinese to work on standards and efficient development of shale gas. Because the U.S. has a decentralized government, even though we don’t have the federal regulation, some states have their own rules and then they have some of the best practices or recommendations, so they can recommend to the China side some of the things that they can do to be more efficient. This efficiency perspective is more appealing to China. It’s also in the interests of the oil and gas companies to use less water and to occupy less land to reduce cost.
If you talk with the State Department, or the Department of Energy officials, they’re going to tell you that even though U.S. and China have engagement on the national level, the local Chinese governments have been a little reluctant and guarded about their cooperation with U.S. On the U.S. government side, they are still trying to figure out the best way to engage with China on that issue.
They’re doing some trade delegations right now as we speak. Nine delegates from the National Energy Administration from China are touring Pittsburgh, Dallas, Houston and DC with USTDA (United States Trade and Development Agency). They take a more business and commercial perspective because the USTDA’s mission is to put the US companies on a level playing field in the international arena.
How do you think the growing environmentalism at the grassroots level can affect the political decision-making process?
They are actually very far from the decision-making process. The environmental groups in China are doing a lot of great work, but they tend to focus on the issues that are more visible: air pollution, water pollution, and food safety. Their focus is not on methane leakage or carbon dioxide because that’s hard to see.
They can, however, play a more important role in the future. The newly revised Environmental Protection Law, which was revised after 25 years for the first time after its promulgation, gives these civil society organizations a standing to initiate public interest litigation, so we’ll see how that plays out. In a lot of cases, even though they are allowed to bring a case to the court, the court will not accept it, or the court could still be biased because the court answers to the government at the same level. There’s a limit to what they can do.
Do you think fracking has been misrepresented by the mass media?
I would say that it’s varied. I don’t think it is misrepresented in the U.S. because you see both sides of the debate. On the one hand, you have Josh Fox, the director of the Gasland movies, who is leading the anti-fracking movement. And he is right, because, even though the environmental damage of fracking is moderate compared with other large-scale industrial movement, especially compared with synthesis gas in China, for the local communities, the impact is very direct and significant. But on the other hand, there are a lot of reports, especially on the commercial and business side, which analyze the role of shale gas in bringing down the U.S. natural gas prices, and largely contribute to what is going to be North American energy independence.
That’s a huge deal. North American energy independence can mean so much. The U.S. may revert the ban on crude oil export now. That’s almost unthinkable 30 years ago. The shale gas and oil abundance is really leading a revolution and is making people rethink our security strategy. If North America is going to be energy independent, do we still have to send ships to the Middle East? Do we still have the responsibility to protect all these sea lanes? Of course the answer is yes because the United States is still tied to the global oil market, but it just shows you that there are a lot of people trumpeting the benefits of fracking. I don’t think the debate is one-sided. I think there’s a very healthy debate here.
How about in China?
In China it’s very new and it’s barely going on. When you actually compare the numbers, China only drilled a couple hundred wells, whereas the U.S., they drill thousands every year. So it’s at a very different scale. That’s why I think the media or even the intellectuals there are just trying to figure out exactly what’s going on, and what a good estimate of the reserve is. There isn’t even a very accurate estimation of China’s shale gas reserve. Of course according to the EIA (U.S. Energy Information Administration), China’s shale gas reserve is number one in the world. But USGS (U.S. Geological Survey) disagrees with the EIA’s estimation, they think that EIA overestimated China’s shale potential, and their methodology was incorrect. So right now we don’t even know how much shale is out there and how much is recoverable. But with more companies engaging in this field, they can make progress on this front.
You’ve mentioned some problems that China has with fracking, what is the next step for the Chinese government to address these issues?
They actually just came out with a technical standard for assessing shale gas. I think it’s really important to roll out environmental standards or a guideline, including water and land management, wastewater treatment and transportation, and methane leakage mitigation. There’s also the infrastructure issue: roads, pipelines that are necessary for the development of shale gas. CNPC (China National Petroleum Corporation) is building the first shale gas pipeline from Changning to Yunnan and the first segment of that is already finished. It’s also very important to have transparency, and full disclosure of the environmental and social impacts of these projects. The local communities should be more involved, and if they were to be reallocated, they should be properly compensated. That has been a problem with a lot of China’s large-scale projects, such as the Three Gorges Dam. I think the environmental, infrastructure and local community issues should be addressed.
What energy future do you think would be best for the Chinese people?
(Laughs.) That’s a huge question. I’m a total environmentalist, so I am absolutely biased on this front. I will double down on renewables. China is investing more than any other country in renewables, so I need to give credit where credit is due. China has very ambitious renewable targets. I hope that China someday can achieve 50% renewables in the electricity sector. That would be great progress. I hope that China can phase out all subsidies, for fossil fuel and renewables, and levy a carbon tax. This would put it on a trajectory to reach significant carbon emission reduction. Right now we are seeing a lot of anticipation of the 13th 5-year plan to see whether it’s possible to have a carbon emissions cap. That would be a very important step. I am rooting for renewables, not big on shale gas.
In your opinion, is it more important to change our energy supply or our energy demand?
The first thing to change the energy demand would be to take energy efficiency measures. I think energy efficiency is definitely a priority – we call it low hanging fruit. Let’s take your average home as an example: if we are using electricity inefficiently, like putting air conditioners on when all the windows are open, you are generating a lot of demand. The utilities might have to build a new power plant just to meet the demand collectively generated by the tens of thousands of homes they serve, but still the residents are going to complain when the power goes out and say, “Damn utilities, black out again.” It’s what you see in the summer peak hours. If we can use energy more efficiently, and our buildings can meet efficiency standards, and our system is more intelligent, then we don’t even have to build new power plants. We can just use our existing power plants to handle the demand and dispatch power to when and where needed. That would be a better way to do it. There’s also the issue of water usage in all the power generation. China just doesn’t have that much water.
In the fracking panel, one of the panelists said that China’s solar panels have the most competitive prices in the global market but most of them end up on American roofs. What do you think of this?
This trend has been gradually reversing, as the anti-dumping tariffs increased the price of Chinese solar panels. The wave of WTO cases made China commit to expanding their domestic market, which I think is very important. They committed to some very aggressive distributive generation targets in China. Originally the target for 2014 was 21 gigawatt, which now has been revised to 35 gigawatt photovoltaics by 2015. I think it makes China more competitive and it also benefits the environment and the people.
What do you think prevents further development of renewable energy such as solar and wind in China?
We have seen the reverse of the national “Golden Sun” solar subsidies project that led to an industrial consolidation where lots of companies went bankrupt a couple of years ago. I think for private companies, they really need policy consistency. For solar to flourish, they would need to tackle the financing issue. Uncertainties in return and inexperience in the renewable sector make banks very reluctant to lend to solar companies.
For wind, it is a little bit different. Wind in China has been government driven whereas the solar industry has been more private company driven. In the previous years we have been hearing a lot about wind overcapacity, and wind projects that are not connected to the grid. Most of them are connected to the grid right now, but this highlights the need for integrated system planning. And the other thing is the fossil fuel subsidies. That needs to stop. Even if they cancel all the renewable subsidies, that’s fine.
But they need to cancel all the fossil fuel subsidies so that every kind of energy is on a level-playing field and they also need to take into consideration the social cost of carbon. Put a price on carbon, or do carbon trading. But if the cost of carbon is not correctly accounted for, the market isn’t able to do its job.