ENERGY WATCH #1 - October 2, 2018
Only two years ago, analysts and (famous) economists, including “eminent climate economist Lord Nicholas Stern of the London School of Economics”, hailed it as a “turning point in the climate change battle”: China’s apparent “coal peak”.
“The battle against climate change has passed a historic turning point with China’s huge coal burning finally having peaked, according to senior economists”, wrote The Guardian. “Its coal consumption peaked in 2014, much earlier than expected, and then began falling.”
The Guardian referred to a paper published in Nature Geoscience by Stern with colleagues from Tsinghua University in Beijing: “The economists argue in a new paper … that this can now be seen as permanent trend, not a blip, due to major shifts in the Chinese economy and a crackdown on pollution.”
“I think it is a real turning point,” said Stern. “I think historians really will see [the coal peak of] 2014 as a very important event in the history of the climate and economy of the world.”
Last week on 26 September the Guardian ran a very different headline: “Satellite images show ‘runaway’ expansion of coal power in China”.
The economists turned out to be very wrong. There is no coal “peak demand” in China.
A new report (Global Coal Plant Tracker) released on 20 September by NGO CoalSwarm notes that “Like an approaching tsunami triggered by a distant earthquake, a massive cohort of hundreds of new coal-fired power plants is on course to be added to the already overbuilt Chinese coal plant fleet.”
The report, which got widespread coverage in the media last week (here the BBC report), showed that no less than 259 GW of new coal capacity is under development in China, as much as the entire U.S. coal power fleet.
The “wave of new capacity” that is starting to come online is “the result of a permitting surge from late 2014 to early 2016, after a regulatory devolution from central to provincial authorities, notes Coal Swarm.“In 2016 and 2017, central authorities sought to rein in the surge through a series of suspension orders. Contrary to previous reporting and analysis, many of the restrictions only delayed new projects rather than stopping them.”
According to CoalSwarm:
- China’s developmental pipeline places it on a trajectory to exceed its own announced 1100 GW coal power cap through 2020, with coal power capacity already at 993 GW in 2018.
- Adding 259 GW of new coal power in China is wildly out of line with the Paris climate agreement. According to the IEA, a 50% chance of limiting future temperature increases to 1.75°C requires China phase out its traditional coal plants by 2045.
- The surge in new projects will overwhelm China’s own 1100 GW coal cap in the country’s current Five-Year Plan.
- Given that China’s coal fleet operates less than half the time, 259 GW additional coal power capacity is unneeded and represents US$210 billion in capital expenditures that could instead fund nearly 300 GW of solar PV or 175 GW of onshore wind power.
The new findings from CoalSwarm are confirmed by two other reports, which got much less coverage, but point to the same trend. As we reported last week on Energy Post Weekly, according to figures from Greenpeace, the use of coal in China is growing rapidly again: 2% in 2017 and 3% in the first half of 2018.
In addition, energy consultancy Wood MacKenzie reported that China could add as much as 400 million tons of coal mining capacity over the next two years – a 10% increase. “For all its talk about cutting coal mining capacity, China actually plans to add more”, noted news agency Bloomberg.
China promised to “peak” emissions around 2030, decrease carbon dioxide emissions per unit of economic output and use more green energy, notes Bloomberg. But the Wood Mackenzie analysis “shows that China is far away from a green energy renaissance like many environmental activists hope.”
“Indeed, China’s greenhouse gas emissions increased 4 percent in the first quarter of 2018, and that was after the country’s emissions jumped 1.7 percent in 2017.”
All this news comes at a particularly sensitive moment – on the eve of another round of U.N. climate talks, in Poland, which should make it clear how the world is planning to implement the pledges made at Paris in 2015.
However, since both the U.S. and China, the two biggest greenhouse gas emitters, are ignoring Paris – one in words, the other in deeds – we may wonder what’s left of the promises of Paris.
And how will Europe deal with this reality? Will it be prepared to confront China or will it go on pretending that China is a “climate leader”?
Well, as a matter of fact, the EU has enough problems of its own meeting its climate pledges. Coal is not just a Chinese problem.
Take Germany. As in China, a fierce struggle is taking place in Germany over coal power. Latest news: Andrea Nahles, the leader of the SPD – the German Labour party which is part of Angela Merkel’s governing coalition – said last week that the Coal Commission, installed by the government to advise on the future of coal power in Germany, should not be too hasty in deciding on a coal phaseout date.
According to Nahles, a coal phase out date is not possible without ensuring energy security, competitive pricing and a “future perspective” for the coal regions. “Climate protection has to be aligned with the interests of industry and workers”, said Nahles.
Even in the UK, a country that has been very successful reducing CO2 emissions by replacing coal with gas, demand for coal from the power sector has rebounded recently.
“Britain’s ability to meet its emissions targets is being challenged by a comeback for coal power stations that threatens to drive up the energy sector’s carbon emissions for the first time in six years”, reports The Guardian.
“Coal plants have become more economic to run than their gas counterparts in the past month because wholesale gas prices have hit 10-year highs. A report by Imperial College London said the extra coal-burning had increased emissions by 15% in September, equivalent to an extra 1,000 tonnes of carbon dioxide per hour.”
“If the trend continues in the coming months, the sector’s emissions would rise by as much as 1.2 million tonnes this year, according to researchers at the university.”
If even countries like Germany and the UK are unable to rein in coal power use, what can we expect of countries like China and India?
Eastern Europe is another example of course of how difficult it is even for European countries to cut back coal use.
A new report by NGO Bankwatchnotes that “five of Europe’s biggest climate offenders – the companies Energa and Grupa Azoty (Poland), ČEZ (Czech Republic), Elektroprivreda Srbije (Serbia), and Bulgarian Energy Holding (Bulgaria)”, which rely heavily on fossil fuels, primarily coal, for energy generation, continue to receive “hefty financial support from both the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).”
“Despite governments’ pledges to address the climate crisis, these major energy companies have shown no commitment to reduce their reliance on oil, gas and coal. Some of them are even developing additional coal capacity”, notes Bankwatch.
The report “reveals that, while virtually halting their direct investments in coal in the last five years, the EIB and EBRD have provided corporate level financing and extended loans for distribution and renewable energy projects to the same fossil-fuel dependent companies. Therefore, by allowing these investments without a long term decarbonisation plan, the two European public banks have effectively turned a blind eye to the companies’ fossil fuels dependence, and ultimately helped perpetuate it.”
In Bosnia-Herzegovina, to give another example, a fight is going over the Tuzla 7 coal power plant. The Aarhus Resource Centre, Sarajevo, and CEE Bankwatch Network have lodged a formal complaint with the Energy Community Secretariat, claiming that “plans to use public money to guarantee a Chinese loan for the planned Tuzla 7 coal power plant could be illegal and need to be investigated.”
The Federation of Bosnia-Herzegovina Government has already approved a guarantee for a EUR 614 million loan from the China Export-Import Bank, notes Bankwatch, “and is trying to rush it through the Parliament before general elections on 7 October.”
“However, under the Energy Community Treaty, Bosnia-Herzegovina must follow EU rules on subsidies in the energy sector. Among other things, in most cases state guarantees may only cover maximum 80 percent of the total loan amount. The proposed guarantee for Tuzla 7, however, covers 100 percent of the loan, plus interest and other associated costs. There are circumstances in which this is allowed, but Aarhus Resource Centre and Bankwatch argue that the relevant conditions are not fulfilled in this case.”
All of this shows that the problem goes much deeper than China. Beijing may well be well-intentioned, just as European political leaders are. But a transition from coal to renewables is turning out to be an extremely difficult process.
With regard to China, the world may have been fooled by the idea that for the Chinese to curb air pollution is aligned with cutting CO2 emissions. By doing the one, China will be doing the other as well – that has been very much the story in recent years.
However, already in 2015 in a report for the climate-skeptical Global Warming Policy Foundation (GWPF), economist and environmental activist Patricia Adams pointed out that the two aren’t necessarily the same.
She noted that curbing air pollution is perfectly possible by installing equipment on coal power plants to reduce or eliminate nitrogen oxide and sulfur dioxide emissions. Such policies allow China to go on using coal power and produce CO2 emissions without causing air pollution, Adams wrote.
She points out that the same actually happened in the West, where prior to the economic recession of 2007-2009, per capita emissions of NOx and Sox declined strongly while CO2 emissions grew.
Adams also warned, back in 2015, that regional political leaders would resist directives from Beijing to reduce the use of coal power. “Over the last decade China has been building 16 massive ‘coal bases’ – industrial complexes located near the mine mouth – in inland provinces”, writes Adams. “These include large power plants connected to coastal cities via ultra-high-voltage transmission lines, plants to convert coal to liquid and gaseous fuels, and related facilities such as concrete and chemical plants. The liquid and ‘syngas’, will also be transported to China’s big cities to be burned in power plants, factories and cars. While this would curb smog in China’s principal cities, it would thwart carbon dioxide reduction efforts.”
The Chinese pretension at “climate leadership” in international negotiations, says Adams, who worked as environmental activists in China, is merely a form of international propaganda. “China understands that what China says is more important to the West than what China does”, she concludes bleakly.
But, to repeat, it’s not just a Chinese problem. For one thing, in these “16 massive industrial complexes”, China is actually producing a lot of stuff that is consumed by the rest of the world. This is known as “the carbon loophole” in climate policy. It shows the hypocrisy of western nations that “outsource” production to developing countries and then claim lower CO2 emissions at home.
Where does all this leave us? Not in a very good spot. Paris seems fairly dead – and there seems to be no political leadership able to revive it.