September 30, 2016
September 30, 2016 Some day, who knows, the EU might become a province of China. But even today, China is no longer the Far East. What the Chinese do, certainly in energy, affects us in Europe, and people all over the world, here and now. It is well-known that China has embarked on a huge renewable energy programme. We have covered China’s renewable energy revolution extensively on Energy Post, most recently in this article by Australian professor and China expert John Mathews. But China also has a gigantic legacy fossil-fuel industry. Which will not just move over and go away. On the contrary. China’s coal power industry, now that it has come under pressure domestically, is seeking growth by expanding abroad, “going out” as the Chinese call it. That means: building coal-fired power plants wherever they can, as far afield as Turkey and Bosnia. And this despite promises at the highest political level from president Xi Jinping that the government would strictly control public investment for overseas projects with high carbon emissions. Indeed, as Beth Walker reports for China Dialogue, new data collected by China Dialogue and the CEE Bankwatch Network show that “since 2015 many new Chinese coal plant project deals have been announced and are under development”. Chinese banks and companies are currently involved in at least 79 coal fired generation projects, with a total capacity of over 52 GW, more than the 46 GW of planned coal closures in the US by 2020, notes Walker. According to Walker, Beijing has encouraged state owned coal companies and energy intensive industries such as concrete, steel and cement, to “go out” as part of the One Belt One Road Initiative (OBOR). This aims to open up new opportunities for Chinese companies and to build infrastructure to link China to European markets and beyond. “The majority of these projects are under loan consideration by China’s policy-driven financing, and supplied by equipment from the country’s largest power generation manufacturers”, says Wawa Wang, public finance policy officer at CEE Bankwatch Network. All this of course calls into question the feasibility of meeting the COP21 climate targets. The main problem, says Yang Fuqiang of the Natural Resources Defense Council in Beijing, is that China has no “roadmap” for phasing out overseas coal investment. And without a “central plan” to stop coal power exports, we can expect the Chinese coal industry to continue to cover the world with new coal power plants. Full article: China stokes global coal growth, by Beth Walker. If you are interested in China’s general “Silk Road” strategy by which it is expanding its influence abroad, I can recommend Pepe Escobar’s articles on Energy Post, such as The new China-Europe connection: how China’s new Silk Road strategy will change the face of the world. September 30, 2016 China and coal are a familiar combination. What many people perhaps don’t realise is that China also has three very large national oil companies: Sinopec, CNOOC and CNPC. These are not household names in the west, like ExxonMobil, Shell and BP, but they are also among the world’s biggest companies. Bigger even than the western oil companies, according to the top-10 of the Fortune 500 global companies list 2016: The Chinese national oil companies started to “go out” some years ago, mainly from 2009 on. They bought up oil assets in Africa Canada and other parts of the world. However, the results of these foreign ventures, writes geophysicist Jilles van den Beukel (ex-Shell), are dubious at best. Van den Beukel has written a fascinating account of how Sinopec, CNOOC and China National Petroleum scooped up large acquisitions, beating their western rivals by paying above-market prices. In the process, they have incurred phenomenal debts. Without financial support from Chinese state-owned banks, they would have been bankrupt long ago. So why would this concern us? Well, as Van den Beukel explains, the total debt of Chinese state-owned enterprises – of which national oil companies form a major part – is now higher than the country’s total GDP. So far these companies have been bailed out by the Chinese government, but this “just shifts the problem one level up”, argues Van den Beukel. It impacts on the financial stability of China itself. And that, of course, should clearly concern the rest of the world as much as China itself. Full alarming article: Chinese national oil companies: giants built on shaky foundations September 30, 2016 China is “going out” not only in coal power and oil, but also in nuclear power. The Chinese involvement in the Hinkley Point C nuclear project, in which China General Nuclear Power Group (CGN) will have a 30% share, has led to heated public debate in the UK. The UK government has announced it will take measures that will allow it to keep control over the nuclear plant. Yet, according to professors Peter Strachan and Alex Russell, the decision to go ahead with Hinkley Point C is just one more proof that the Conservative government’s energy policy is both economically and morally bankrupt. In a hard-hitting article for Energy Post, Strachan and Russell point out that UK energy policy rests on three pillars: a massive rollout of new nuclear power (Hinkley Point is only the start of the British nuclear programme), a massive effort to start shale gas production in Britain, and a relentless attack on renewable energy. Economically, these choices are all wrong, say Strachan and Russell. Nuclear power will be highly expensive. Fracking too is hardly an economically sensible choice in the current low oil-price environment, with the world awash in (shale) oil and (shale) gas. The cost of renewable energy, on the other hand, is coming down fast. Renewables are already supplying 25% of UK electricity – and with its wind and water resources, the UK could become the Saudi Arabia of renewables. Morally, too, this would be the right choice. Nuclear power is risky and creates radioactive waste. Fracking has all kinds of environmental drawbacks, including the use of large amounts of water. It has also now been shown it leads to earth tremors and earthquakes that can even be seen from Space. “The future of humanity”, conclude Strachan and Russell, “depends on an all-encompassing global acceptance of the replacement of fossil fuels and nuclear power by renewables. If there is still a perception that British moral values lead where the world follows then its status is at best precarious. [Prime Minister] Theresa May and [Energy Secretary] Greg Clark must step up to the plate and nail the renewables flag to the top of UK energy policy. Nuclear power and fossil fuels have no economic or moral right to a long-term place in UK energy policy.” Full article: The economic and moral bankruptcy of UK energy policy September 30, 2016 While members of the European Parliament from all major political parties this week tabled amendments to strengthen the EU Emission Trading System (ETS), one of its main pillars, the UK, is preparing to leave the ETS. It has little choice: leaving the EU will mean leaving its emission trading scheme. So what would be the alternatives for the UK? In a very clear analysis, Professor Steven Sorrell of the University of Sussex (and a member of the Sussex Energy Group) writes that there appear to be three options for the UK. One is the Norway model, in which the UK would become part of the European Economic Area (EEA), which would mean it could stay in the ETS. This, however, seems unlikely to be politically feasible, since it would give the country no say in any relevant EU legislation. The Brexiteers would not accept this. Second is the Linking model, which would involve the UK establishing its own emission trading system and linking that to ETS. This would reduce compliance costs for UK businesses, but it would also have some drawbacks, according to Sorrell. He notes that oversupply in the EU ETS has already led the UK to introduce a national carbon price floor. But while this may facilitate the low-carbon transition in the UK, it simply frees up EU allowances elsewhere. Thus, while the carbon price floor raises the net carbon price faced by UK installations ,it lowers the EU ETS allowance price, and therefore provides no net benefit to the climate. Hence, notes Sorrell, “if the UK continues to participate within EU-ETS – either directly, or indirectly via a link – the ultimate environmental benefits of any policies that affect the ‘trading sectors’ in the UK will be contingent on the stringency of the EU-ETS cap. And post Brexit, the UK will no longer have any influence on the negotiation of that cap.” For this reason, Sorrell advocates a third option: “a unilateral model in which the UK establishes its own domestic carbon pricing scheme, but does not – at least at this stage – seek a link to the EU-ETS.” Such a system could take the form of a) a domestic emissions trading scheme, or b) a revenue neutral carbon tax that either covered the same sectors or extended more widely throughout the economy. Of these two options, Sorrell prefers “a carbon tax with a broad tax base”, because this could put an end to the confusion and distortions caused by the various schemes now in existence. And, “with a wide base, such a tax could also generate substantial revenue that could be used to reduce distortionary taxes, compensate losers or fund other low carbon investments.” Full article: Brexit: an opportunity to rethink UK carbon pricingEXPRESS #1
The shocking story of China’s global coal power drive
EXPRESS #2
The equally alarming story of China’s tottering oil companies
EXPRESS #3
The alarming energy course taken by the UK government
EXPRESS #4
UK leaves the EU ETS: opportunity for a radical policy change