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This article is from the In-Depth Report The Future of Climate Change

The Price of Coal in China: Can China Fuel Growth without Warming the World?

China relies on coal for most of its energy while striving to cut greenhouse gas emissions and other pollution
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© iStockphoto.com / Alasdair Thompson

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DANDONG, China—The coal burned in the Dandong Power Plant lights up the night all along the Chinese side of the Yalu River, as a rainbow of shifting illuminated patterns outlines the Friendship Bridge to North Korea, which disappears into darkness after crossing the border. And the smoke that billows out of the plant's towering, candy-cane striped smokestack day and night includes nearly three metric tons of invisible carbon dioxide for every metric ton of coal burned, or more than 11,000 metric tons of CO2 added to the atmosphere on just one late autumn day.

Thanks to the Dandong plant and hundreds others like it, China is in the midst of unprecedented economic growth—and an unprecedented surge in the use of energy, primarily from burning coal. Coal is the fuel of China and that isn't going to change anytime soon. As a result, China is now the world's largest emitter of greenhouse gases, along with all the other noxious by-products of coal burning. At the same time, the Chinese government has committed to reducing its CO2 emissions per economic unit by at least 40 percent by 2020. Tasked with ensuring that the nation delivers on that goal is the National Development and Reform Commission (NDRC), the government agency that essentially sets Chinese energy and industrial policy.

"In Manhattan, lights are lit 24 hours and China will never do that," says NDRC vice chairman Zhang Guobao via a translator, although the lights of this border town abutting North Korea blaze well into the night, illuminating businesses that tout their names in both Chinese and Korean characters. "China can never learn from the United States in terms of lifestyle. Per capita energy consumption is five times that of China and suppose, one day, that we learn from the U.S.A.: Can you imagine what the world will be?"

In order to meet the 40 percent reduction goal, for instance, the NDRC has restricted coal-burning at Dandong and other power plants, part of the agency's plan to reduce national coal consumption by 4.9 million metric tons. Dandong's share of that cut was 7,400 metric tons—a goal the plant has met largely through efficiency measures, according to Shi Chun, vice factory director for Dandong Power Plant, including even keeping the lights off inside the plant at night.

But efficiency measures can only go so far as China works to bring hundreds of millions more of its citizens out of poverty. "Asia has become the center of gravity for world energy demand," says Mikkal Herberg, an expert on Asia and energy at the University of California, San Diego. "Seventy percent of total world energy demand growth over the last two decades has been in Asia. China has accounted for over 40 percent of the increase." In fact, China's energy demand has tripled since 1990, and between 2000 and 2007 China's energy demand grew as much as all of South America's energy demand combined. "They created a new continent of energy demand in that period."

With the nation's 12th five-year plan currently being finalized, the question is: Can China continue to grow richer without wrecking the global environment?

"Will China's carbon dioxide emissions overwhelm the world?" notes Mark Levine, a senior staff scientist at Lawrence Berkeley National Laboratory in California, who has been working in the country for 24 years on energy-efficiency measures. "That's the question."

Command and control
Energy use is the core of economic development—and in China's case that means more coal but also finding ways to use it more efficiently and cleanly.

The NDRC oversees the country's rapid growth as well as, more recently, efforts to voluntarily reduce its greenhouse gas emissions and negotiations at international gatherings like this year's meeting of the parties to the United Nations Framework Convention on Climate Change (COP16) held in Cancún, Mexico. The NDRC also effectively sets energy prices—ranging from the price paid for coal mined in Shanxi to the fee paid to operators of wind farms in Inner Mongolia as part of its mission "to maintain the aggregate balance and overall control of important commodities." And the NDRC manages the mandates—such as shutting down old, small, inefficient boilers in favor of larger, more modern ones or shifting heavy industry from city centers to industrial parks—that literally determine the color of the sky over Chinese cities or the contours of the surrounding landscape.

Just as the smokestack defined industrial development starting in the U.K. and on through the U.S. to China's neighbors Japan and South Korea, so too does the smokestack symbolize modern China. And the smokestack remains a conduit for the same fuel that kicked off and sustained the Industrial Revolution in the 19th century—coal. In Dandong and most Chinese cities, the taste of coal is in the air, the smoke from the burning of eons-old swamp forests.

"In this particular phase of economic development in China, our economic structure is more focused on industry," explains Zhang, who is also director of China's recently created National Energy Administration, via a translator. "We have only developed the economy for three decades and now we face great pressure from the international community [to clean up]. That is unfair."

Coal accounts for more than 70 percent of all of China's energy—from electricity to giant chemical plants that turn the dirty, black rock into liquid fuels. China uses more coal than the U.S., Europe and Japan combined—three billion metric tons in 2009, according to the U.S. Energy Information Administration. And, even as China adds wind farms, nuclear power plants and other electricity sources at a pace that surpasses anywhere else in the world, coal accounts for more than 80 percent of its electricity, the main reason that China has passed the U.S. as the world's largest emitter of greenhouse gases.

"China is confronted by the great challenge of emission reductions," Zhang says. "Therefore, it is necessary for us to allocate for the use of clean-coal combustion technologies."

Cleaner coal
The quest to burn coal cleanly has been a boon for chemistry. First, acid rain necessitated adding giant chemistry sets that use a slurry of limestone and water to catch the sulfur dioxide that would otherwise billow out a coal-fired power plant smokestack. The Huaneng Group—one of five quasi-governmental private energy companies in China—added such technology to the Dandong Power Plant in 2009.

"The government subsidizes 0.15 renminbi (0.02 cent U.S.) per kilowatt-hour for the power produced by units with desulfurization," says Dandong's Shi via a translator. "So we make a profit," and save the forests, lakes, rivers and countries downwind of the power plant from acid rain.

And the company has begun to install more chemistry that will capture smog-forming nitrogen oxides before they billow out the smokestack as well—albeit at the cost of some additional carbon dioxide being added to the atmosphere.

In addition, burning the coal in the first place has become more expensive; the price of coal has been allowed to rise by the NDRC—particularly the higher-quality coal shipped by rail from Inner Mongolia. "That means our profit is coming down, indeed we are facing great cost pressure," Shi says. "We blend coals in order to optimize the cost. Our units are designed to burn coal from Inner Mongolia but we blend some brown coal and local coal into the mix."

But, regardless of China's national goals, the Dandong Power Plant will not get a chemistry set to control its greenhouse gas emissions anytime soon, although the Huaneng Group is responsible for China's only two existing carbon-capture demonstration projects. The technology is simply too expensive to add, in addition to requiring even more coal to be burned to provide the power to run that chemistry set in the first place. "It depends on the will of the [Huaneng] Group," Shi says, and whether the energy company is willing—or ordered—to install such greenhouse gas pollution controls in future.

And coal technologies that might make such carbon capture—and ultimately storage deep beneath the ground—feasible, such as turning the coal into a gas before burning it, are not favored by at least some of those in charge at the NDRC. "[Gasified coal's] cost is no cheaper than nuclear power," Zhang says. "Frankly speaking, personally, I do not quite support [this] technology."

New energy
In a bid to displace some of the hegemony of coal, the NDRC has mandated that companies like Huaneng generate at least 8 percent of their electricity from so-called "new energy"—such as wind turbines. A vast pool of money derived from a 0.04-renminbi (0.006-cent) fee charged for every kilowatt-hour of electricity sold in the country helps subsidize such efforts, leading to the addition of some 12 gigawatts worth of wind turbines in northeastern China alone, or roughly 5.5 percent of total power generation. "Areas without wind resources subsidize the areas with wind resources," explains Wang Gang, executive vice president of Northeast China Grid Co., Ltd., via a translator.

Households pay roughly 0.5 renminbi (0.075 cent) per kilowatt-hour of electricity. "That kind of subsidy doesn't come from the government's pocket; it comes from each Chinese consumer's pocket," explains public affairs director Thomas Yao of Goldwind Science and Technology, a wind turbine manufacturer.

But the wind is unreliable: In Liaoning Province, which encompasses Dandong, the winds are strongest in fall and winter and at night—exactly when coal-fired power plants are most needed for their other output: heat. In fact, the Dandong Power Plant is now completing a retrofit to provide local heat in order to replace some 132 smaller boilers in the port, part of more than 7,000 megawatts of such small, dirty units shut down nationwide since 2005 in a bid to reduce air pollution. "The coldest areas need heating from September to May," Wang says. "In winter, we cannot reduce the capacity or generation of thermal indefinitely; we need to keep a minimum in order to ensure heating."

That makes it difficult for even the NDRC to simply order emissions improvements.

Energy efficiency
Meeting efficiency targets, on the other hand, appears simpler—one sure way to save energy is to cut the power. That's exactly what city and provincial governments throughout China did in November, improvising in order to meet economy-wide energy-efficiency targets enshrined in the nation's 11th five-year plan, which runs through the end of this year.

As of early 2010 China had reduced its energy intensity—a measure of energy used per economic unit produced—by more than 15 percent. The plan called for a 20 percent decrease by the end of the year but Chinese manufacturers' robust recovery from the Great Recession meant that energy intensity began to creep up as the months of 2010 passed. Sensing failure, government officials imposed strict energy controls, including blackouts, to ensure the target would be achieved.

"China, with its huge population, needs energy conservation," NDRC's Zhang says. And China has it. "In the past 30 years annual average [gross domestic product] growth registered at 9.8 percent. In the same period of time, energy growth registered at 5.6 percent."

Of course, factory owners promptly switched to back-up diesel generators in order to avoid fines for late deliveries of goods, sparking diesel shortages through wide swathes of the country. In fact, lines of trucks waiting to fill up with diesel stretched for kilometers in coastal cities from Shanghai to Shenzhen—and burning diesel still means CO2 emissions.

"They're willing to do a lot to meet that [efficiency] target, including some very irrational things," Berkeley Lab's Levine notes. As a result of the state-mandated blackouts—and all of the NDRC's various policy measures—China will meet its self-imposed energy conservation target, said NDRC deputy secretary general Zhao Jiarong in a speech on December 3.

And the NDRC will continue such energy-efficiency measures as part of its bid to meet China's commitment to greenhouse gas intensity reductions. On January 1, new energy-efficiency mandates for all of China's power grid companies will take effect, with the full force of the NDRC ordering a 0.3 percent decline in electricity produced compared to 2010—roughly 11 billion kilowatt-hours in savings.

The NDRC has already increased the efficiency of coal-burning power plants across China from an average of roughly 370 grams of coal burned for every kilowatt-hour in 2005 to roughly 340 grams per kilowatt-hour today—and it expects to reach a rate of 330 grams per kilowatt-hour by 2015, according to China's State Electricity Regulatory Commission. According to Shi, Dandong Power Plant is ahead of the curve—burning roughly 320 grams of coal for every kilowatt-hour of electricity it sends out over the connecting high-voltage power lines.

Unpredictable energy
At the same time, predicting China's energy growth has become even more difficult in recent years, according to Levine; thanks to the nation's ongoing construction and export booms, the failure to continue to adopt energy-efficiency improvements such as tighter appliance standards, and even the manipulation of statistics by government officials keen on promotion. "China's energy growth is unpredictable in the short term," Levine says—and that means even efficiency will not prevent increasing greenhouse gas emissions. "It makes no sense [for China] to accept an absolute cap on emissions."

That's a sentiment with which the NDRC agrees—ordering Chinese coal mines to boost output in order to stabilize prices in early December as well as raising the total amount of coal to be sold under contract to 769 million metric tons. The NDRC will also freeze such contract coal prices for 2011 at 570 renminbi ($85.50) per metric ton. The price of such coal in the market is currently closer to 800 renminbi ($120) per metric ton.

That will not help greenhouse gas emissions—or any of the other problems associated with coal, from pollution to the hundreds of miners who still die each year in Chinese collieries. "In the near future, it is our priority to increase the proportion of nuclear and renewable energy in our energy mix," Zhang says, both of which combined—not including dams—currently make up less than 3 percent of China's electricity supply. But "for the foreseeable future, coal will continue to take up a big part of our energy mix."

Editor's Note: Reporting for this feature took place as a result of a Jefferson Fellowship from the East–West Center in Honolulu, Hawaii.

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