Executive Summary

In 1958, Mao Zedong led China to take the Great Leap Forward, which began the shift from China's agricultural base to an industrial one. Although the tragic famine that resulted from that policy is well known, it also began a history of environmental deregulation that continues into the present.

Under the leadership of the Communist Party, China has achieved remarkable rates of economic growth. At the same time, a corresponding increase in energy demand has had a devastating impact on the environment, so much so that China is pointed to as an integral player in any future environmental plans for the entire world. Economic growth, whatever the environmental cost, has been the policy of the past in China. At this juncture that policy is untenable, as this report will show, and must not be the policy of the future.. [2]

Introduction

Located in eastern Asia, China, with a total land area of 9.6 million sq. km, is the third largest country in the world, accounting for nearly 7 percent of the world's total land mass. Neighbored by 15 countries, China's borders stretch across 22,800 km of land. The country's coastline covers approximately 18,000 km along the eastern and southern peripheries, giving China access to many excellent harbors and ports. [13]

China has some of the largest rivers in the world. The Yangtze, located in the center of the country, measures 6,300 km long. [23] Combined with the Yellow River, to its north, and the Mekong River, in the south, it provides the country with the fertile delta region of plains and valleys, characteristic of the east. To the west, high mountains close off an area that is extremely dry and isolated. [7] Among China's many mountains are the Altai, Tien Shan, Kunlun Shan, and Himalayas (among the world's tallest). Also, within this area lie the Gobi and Takla Makan Deserts.

The interior landscape of the country is dominated by a "four-step staircase," sloping from east to west. [13] As you move from east to west, you encounter hills and ridges; then plateaus; then elevated basins, ending at the Plateau of Tibet, which is flanked by the Himalayas to the south. Two-thirds of the country is uplands. [8] Of the total land area, 10 percent is arable, 31 percent is meadows and pastures, 14 percent is forest and woodlands, 3 percent is water, and 42 percent is non-arable. China's maritime claims (many of which are disputed) include the country's natural continental shelf (the shallow areas of the East China and Yellow Seas), and 12 nm of territorial sea. [12]

With a landscape as dynamic as this, it is no surprise that China holds some of the world's largest reserves of mineral resources. China has deposits of all the world's known minerals, and its total reserves rank third in the world. Located mostly in Shanxi, Inner Mongolia, Liaoning and Heilongjiang, the country's coal reserves serve as the nation's primary source of energy. China's petroleum resources, however, are more widely dispersed, with 370 oil fields and 110 gas fields scattered throughout the country. Offshore oil production has also progressed, with several large basins discovered in the country's maritime claims since the 1980's. Iron ore reserves are also widely spread out over China's landscape, with 48.7 billion tons confirmed. China also has reserves of many nonferrous metals, such as tungsten, tin, antimony, zinc, molybdenum, lead, and mercury, and its rare earth metals surpass the world's total. [13]

Located in the mid-latitudes, China's climate can be separated into two regions [8]. The north and west are typically semi-arid to arid, with extreme temperature fluctuations [8]. The south and east, on the other hand, are much warmer and more humid, with year round rainfall [8]. Seasonal temperatures vary during the winter, reaching from -13^oF in northern Manchuria, to 60^oF on the sub-tropical coast [8]. During the summer, temperatures are more uniform, ranging from approximately 70^oF - 90^oF [8]. Throughout the summer months, the humid east region is affected by a monsoon chlamydia], often leading to frequent typhoons and flooding [12].

Most of China's population is located in the east, while the west provides homes for about only 5 percent of the total [23]. The country's density is 313 people per sq. mile, and approximately 350 million live in urban areas. To regulate the influx towards urban areas, the Chinese government requires proof of a housing permit and a permanent job.

In 1996, the population totaled 1.2 billion (22 percent of the world's total), sustaining China as the most populous nation in the world [6]. With a birth rate of 17.12 per each 1,000 people, and a death rate of only 6.57 per every 1,000, China's population continues to grow at a rate of 10.55 per 1,000 [6]. In 1978, to combat the problems of over-population, China instituted a policy of one child per Han Chinese family (the dominant ethnic group). Abortion was urged for second pregnancies, and sterilization was highly promoted after the first child [7]. Internationally, this policy has been extremely controversial. While surely allowing the population to grow unchecked would have been disastrous, the means by which it was controlled have been deemed a violation of human rights. And, as a result, this has come to play a large part in many of China's international dealings.

In 1911, China's centuries old dynastic system was overturned, and a weak republican form of government was established. But, in 1949, this bourgeois government was overthrown by our communist form, influenced by the former Soviet Union. Currently, China's government has a single party structure, headed by the Communist Party (CCP) - the largest political party in the world. China is politically divided into 23 provinces, five autonomous regions, and 4 municipalities, all of which report to the central government in the capital, Beijing. Every five years, the legislative body, called the National People's Congress, is indirectly elected by the provinces, municipalities, autonomous regions, and armed force. Theoretically the origin of state power, the 2,938 member Congress, headed by the Prime Minister, appoints the president and executive state council [8].

But, in actuality, true power lies with the 22 member Politburo and Standing Committee of 6. Currently, the CCP's main focus is to maintain party domination and avoid political reform. After the 1976 death of Mao Zedong, the party split into two factions - the reformers and the conservatives. With the culmination of the "pro-democracy" movements at the 1989 Tiananmen Square Massacre, the conservatives rose in power under Li Peng. Former senior leader, Deng Xiaoping, moved to balance the two factions. The subsequent rise of Vice Premier Zhu Rongji suggest that the reformers are once again dominant [8]. However, in early 1997, Deng Xiaoping died, leaving China's leadership in question. The current president is Jiang Zemin, but factions within the party seemed poised to challenge his authority. China's next election is in 1998, and this may prove to be the most important for China's immediate future.

China's most immediate problem may be the increasingly independent actions of the provinces. This is particularly seen in the southeast, where vast amounts of wealth are accumulating. Also, party power is being challenged by growing rural discontent over the distribution of wealth. This unrest may be summed up by the popular saying that "The Central Committee pretends to rule, and the provinces pretend to obey." As a result, both factions in the party recognize that economic reform is imperative to the party's hold on power. But, while the reformers feel that rapid economic growth is the solution, the conservatives feel that any reform should be slow, and highly controlled by the central government.

China's economy, a central or "command" economy, is currently experiencing a boom period. The growth rate averaged nearly 10 percent from 1978 to 1988, but has risen nearly 13 percent in 1992 and 1993. The real GDP growth rate at the end of 1995 was 10.2 percent, and the rate of inflation was 17 percent [23]. China ranks tenth in the world in per capita GNP, at $361. The country's major trading partners are Hong Kong (43 percent), Japan (15 percent), and the United States (8 percent). In 1995, China's merchandise exports totaled $126.5 billion (US), while imports amounted to $108.8 billion [8]. Primarily an agrarian society [23], the country also exports include textiles, garments, footwear, toys and crude oil, although China has now become a net importer of oil. [8]. China's major imports are comprised of rolled steel, motor vehicles, textiles, machinery, and oil products. Realizing that the economy is the key to the country's future success, the Chinese government has recently shown interest in dec centralization of the economy. This would allow for entrepreneurial growth, and would also make the country's economic climate more hospitable to outside investors [23]. Since the 1979 economic reforms were put into place, China's GDP has been growing at twice the rate of the country's energy growth (Guest Speaker 4/10).

Industry

The Industrial sector uses by far the largest amount of Coal, comprising over 65% of its total use. While the total Mtce's of coal have risen, the percentage share of coal has fallen relative to the total of this sectors energy use. With the increasing popularity of coal in China, we expect to see overall coal use in the industrial sector to continue to increase. The overall percentage use of Oil and Natural Gas have fallen off in recent years and now accounts for less than 3% of end use. Fuel Oil dominates Industrial Oil use. With the growing demand of Oil Imports, we may see a change in Oil consumption in the near future [18].

China's increase in production of industrial products and its escalating economic growth indicate that the industrial sector will dominate future energy use [22]. But, deficiencies in equipment technologies have severely affected overall efficiency. Since 1980, manufacture of energy-intensive products has increased. In the 1980s the Chinese government began collecting data on energy intensity, but while reductions have been seen in some areas, others are yet unclear. Energy intensity for steel manufacture has been on a steady decline, but China still uses significantly more energy to produce the product than other countries. Fuel used to produce building materials (cement, brick, flat glass) has also declined. But a surge in electricity use has increased the overall energy intensity. While studies show that some rural plants actually have a lower energy intensity, the products produced there are of significantly lower quality. Further, China's energy intensity in this area is parallel to that of other developed countries (United States, Russia). Data on intensities of chemical production processes have not provided a clear pattern of increase or decrease. [18]

Transportation

Approximately 75% of the energy end use in the Transportation sector comes from Petroleum products. Coal-burning steam locomotives are being phased out in favor of diesel and electric ones. Electricity use has quintupled over the past decade, showing the increased quantity of electrical railway projects. Given this popularity, however, railway activity energy consumption has dropped from one half to one third, reflecting the lowered energy intensity of rail. Counteracting this is the increase in road transport consumption, up to one half from one third. China is also growing more dependant on road transport, burning more diesel and gasoline. Aircraft fuel use has kept apace of overall sectoral energy increases.[18]

Overall, production of motor vehicles has increased. In the mid-1980s, production was at 400,000 units per year. By the next decade, this amount had jumped to almost 1.3 million, and this is expected to continue increasing. Passenger vehicle production has increased at the highest rate, accounting for 18 percent of total motor vehicle manufacture. In the 1980s, the trucks to passenger vehicle ratio was at four to one. But, by 1992, the ratio had shifted to two to one. During the same period, motorcycle stock has increased nearly tenfold to 6.5 million, and tractor production has steadied. [18]

Data shows that the miles per gallon for trucks and buses has steadily declined, but that fuel efficiency of freight vehicles has improved, as size increases. Fuel economy in newer passenger cars has improved dramatically, though estimations may be under valued at the design phase (fuel use is actually 20 to 30 percent higher). [18]

Agricultural

Agricultural energy consumption has grown slower than any other sector since 1980. As with the Industry sector, electricity has been the quickest growing fuel in this sector. Electricity replaced coal as the leading source in 1988 and is still growing, where coal and oil products are falling off. [18]

Since 1980, power of agricultural machinery has doubled. However, over the same period, oil use in the sector increased by only one-fifth, possibly suggesting rural oil shortages or large amounts of unreported consumption.[18]

Residential

Residential energy use was the fastest growing sector until it actually dropped off in 1992. Biomass makes up the majority of the energy source for this sector. This is declining, however, with the availability of rural coal and more efficient biomass stoves. Coal use in the urban sector has been on the decline, while the distribution of coal briquettes for household use had been growing rapidly. The use of briquettes is important because they burn more efficiently and cleanly than raw coal. Total end use of coal has fallen from 90 percent to 72 percent since the 1980s. Coal is depleting for four reasons: the penetration of coal briquettes, more efficient stoves, the spread of electrical heating and cooking appliances, and increasing availability of gas, such as biogas. [18]

The latter three contribute to the fact that urban households account for more than half of energy use in the entire household sector. Urban areas still account for over half the energy use in the residential sector, but that will change as more and more energy is made available to the rural areas. Energy and appliance penetration into rural areas will slow the migration of people into the urban areas, and promote agricultural practices. A gap exists, though it is decreasing, between urban and rural use of electricity. Location is the main determinate of energy use--urban households and those living in colder northern climes typically have higher per capita use. [18]

In addition to the use of coal, rural households rely on renewable energy in the form of biomass as a primary source of energy. Wood, crop wastes, and dung are the primary fuels. The use of biomass seems to be decreasing as more households switch to coal and adopt efficient biomass stoves. [18]

Gas fuel is catching on quickly with the availability of LPG's and efficient appliances in urban areas. Nearly 60 percent of households in cities have access to gas fuels (about half being LPG) for cooking, increasing the use of gas at a pace similar to that of electricity. Again location is related to the gap between rural and urban demand, gas fuels are still unavailable in rural areas. Less than 100 million people of a population of 1.2 billion now use gas. Urban households own more of the appliances such as TVs, electric fans, clothes washers, and refrigerators. [18]

Coal

Estimated coal resources, defined as the estimated total substance existing, are behind those of the United States and former Soviet Union due largely to lack of exploration. Reported total resources differ between Chinese reports and international estimates- 960 Gt compared to 590 Gt. Of the total 12% is anthracite, 29% is coking quality bituminous, 46% various grades of bituminous steam coal, and 13% lignite (brown coal). China's proven reserves are 115 GT, with reserves defined as that quantity that is deemed recoverable given current economic and technological conditions. [18]

A new policy in the early 1980s shifted production to small rural coal mines. These mines were to alleviate local shortages. As a result of this policy, between 1980 and 1993, 70% growth in output came from the new rural mines. The rural mines account for two-thirds of total output. (See Map II-2) [18]

Most of the easily accessible and high quality coal is located in Northern China, especially Shanxi Province. Coal from the South is generally higher in sulfur and ash, making it less suitable for a variety of uses. Even the majority of coal producing regions, coal production lags behind rates of demand. Because most of the desired coal is located in the North, large amounts are shipped from the north to the south, putting quite a strain on railroads. Coal makes up the largest percentages of use on rail lines totaling 30% of metric ton-km in 1993. [18]

Because only 18% of raw coal is washed, most of the coal transported contains large amounts of waste material, "taxing an already overburdened transportation system and lowering efficiencies in end uses." [18, II-3] Constraints on the improvement of coal by way of washing include lack of available water as well as lack of consumer willingness to pay more for higher quality coal. [18]

China has been an exporter of coal since 1950. While coal imports have remained between 1 Mt. and 2.5 Mt. per year since the 1960s, exports quadrupled between 1980 and 1993. The most important buyers include Japan, followed by South Korea, Taiwan, Hong Kong, and North Korea. Many of Japan's loans to China for improved railways, coal-washing stations, and ports are motivated by the export of Shanxi coal to Japan. [18]

The most important issue to address, with regards to consumption of coal, concerns carbon dioxide emissions. Estimates which condemn the country as the largest future contributor of hazards emissions neglect the contributions already made and continue to be made from the Westernized states. We will not move on this issue unless the West makes concessions of its own and/or aids us in a substantial way towards the reduction of our reliance on coal and the adoption of sources ready to meet our future needs. When changes in environmental priorities finally happen on a global scale, as we believe they eventually will, we want to be prepared to move in step with the most developed and advanced states so as to at least maintain, if not improve, our position relative to other powerful states. [18]

Global warming may not be of central concern to our domestic agenda. However, other issues related to coal use are certainly at the top of our list. These include but are not limited to indoor air quality, air pollution, water pollution, and deforestation. First, the burning of coal contributes to many of China's environmental and health problems. The World Health Organization (WHO) and the PRC National Environmental Protection Agency conducted atmospheric tests which showed that North China exceeded WHO's recommended safety level. The impact of these figures translates into life expectancy, with 26 percent of all deaths traced to respiratory diseases. [1] Second, we will expand what has already been a highly successful program for the diffusion of improved biomass stoves. Because reliance on biomass contributes substantially to the environmental issues noted above, improved stoves can be key to decreasing ecological problems now and in the future. From 1982 to 1994, improved stoves have been used by 144 million households. Sixty-two percent of the Chinese market has been penetrated. [16] Now, we make it a goal to reach 100 percent of this market by the year 2000. We will continue to adopt up to date energy technology and energy saving techniques, paying particular attention to the diffusion of new ideas and practices. We have "conducted extensive publicity and training courses, so as to stimulate the farmers' enthusiasm, thus relying mainly on the farmers' own efforts with the aid of the state and regions as supplement." [16; p.464] Local action is key to the successful implementation of whatever action taken by government. In addition, while we recognize the importance of investing in alternative and sustainable fuels in the future so as to reduce reliance on biomass. It is nevertheless imperative that we do what we can at present and in the near future to improve upon our current reliance on biomass. To this end, we will continue technological efforts to improve existing stoves. [16; p.468]

Coke

Coke is of course a refined product derived from essentially baking raw coal, and it is in turn used in making steel. China’s turbulent history has impacted on current coke production methods. Coke production approximately tripled to about 60 Mt during the infamous “Great Leap Forward” in the late 1950s/early 1960s. This temporary spike was due primarily to rise demand for coke to fuel Mao’s plan for overnight industrialization via steel made in backyard smelters. During this time, thousands of low-quality coking ovens were made. However, the steel resulting from use of this inferior coke was of abysmal quality and virtually unusable. By 1966, this spike fell back to its more historic trendline for coke production at around 18-20 Mt. Currently, national policy has been to discourage such “antique” coke production due to its highly inefficient use of coal and the fact that inferior coke emits far more emissions than does “modern” coke. However, in the scramble to supply the coke demand for China’s enlarging steel capacity, many such low-tech coke ovens have been pumping out product, particularly in rural areas.[18]

Crude Oil

China's proven reserves amount to about 3.2 Mt, ranking it tenth in the world amongst oil producing countries. Estimations within the country put reserves as high as 9.6 Mt. Since the early 1960's, easily accessible oil fields in the north and northeast have been in production. In the past, exploration was focused primarily near existing sources, but development of more remote sources in the west, such as the Tarim and Junggar Bassins, have increased. In addition, there has been speculation in many of the country's off-shore areas. However, none of these recent explorations have been successful in discovering any substantial new oil sources. Currently, China produces 211 Mtce of crude oil, imports another 19 Mtce, and exports about 27 Mtce (figures are from 1994 estimates). This makes the country a net exporter, but, with the decline of domestic fields, growing dependence on foreign oil has become a great concern. [18]

The majority of China's proven reserves lie in the provinces of Heilongjiang , Shandong, and Liaoning. And, together, the three provinces account for about 70 percent of the country's overall oil production. In the 1970s, crude oil production grew steadily, but dropped off slightly in the 1980s, due to the failure of new explorations. Two of the nation's largest oil fields (Daqing in Heilongjiang and Shengli in Shandong) are already thought to have peaked. And, several other large fields have experienced great declines. Growth in offshore oil production has reached 4 percent, as compared to .2 percent just a decade ago. [18]

Oil field self-consumption and electricity use has also steadily increased in recent years. This may partially be due to the fact that it is getting more difficult to extract oil from the older fields, and, in some cases, the use of secondary recovery techniques. Also, increased rates of theft and "unofficial diversions," have become increasingly problematic. Approximately 4 percent of the overall crude oil supply is lost in transmission or distribution, and this will continue to be a problem with development of remote western sites, which require extremely long lines that cross mountainous terrain. [18]

Since the 1980s, composition of refined petroleum products has shifted markedly as the result of increased investments in refinery upgrade equipment (fluid catalytic crackers in particular). The overall yield of light and middle distillates increased to 63 wt percent in 1993, an increase of 15 wt percent from 1980 estimates. Transport fuel production has also grown, but diesel refinement has remained steady. Also, since 1980, the total yield of sweet distillates has leveled off, but the ratio of lamp kerosene to jet fuel has almost reversed. Presently, 75 percent of overall kerosene output is credited to jet fuel, up from only 25 percent in 1980. Currently, about 7 Mtce of the oil is lost in the refining process. [18]

In 1970, imports of crude oil and refined products dramatically increased, making the nation a net petroleum importer for the first time. Since then, levels of imports have decreased to a total of 25 Mt in 1994. However, late in 1993, there was an increase in petroleum product imports, which lead to a sharp decline in domestic refinery throughput. Current estimates suggest that the country would need to import as much as 150 Mt annually by 2010. With a growing dependence on fossil fuels, the Chinese government worries that the country's security will be compromised as the necessity to import larger amounts of Middle Eastern oil grows. And, because Middle Eastern oil has a higher sulfur content, China will need extensive refinery expansion and upgrades to existing equipment. Also, China has implemented policies favoring domestic production and restricting foreign product imports, resulting in an increase of 5 percent in domestic refinery utilization in 1995. [18]

Currently, China averages only one automobile per every 1,000 people [8], giving a total of 5.5 million automobiles. As the country's economy continues to grow, and wealth accumulates though, this number is expected to rise. As a result, the overall consumption rate will dramatically increase, and, without substantial new crude oil discoveries, reliance on foreign oil will grow. Also, of the total 203 Mtce crude oil, 11.35 Mtce is converted to electricity. But, with a growing demand for electricity throughout the country, this amount may increase without a substantial input from either coal (contributing already 245.73 Mtce) or the renewables. [18]

Environmentally, heavy reliance on fossil fuels has damaging affects. Nitrogen Oxides (NO_x), a byproduct of fossil fuel combustion (from power plants and automobiles), is a major contributor to acid rain. The effects of acid rain are far reaching, and include damage to bodies of water (raises acidity and kills living organisms), forests (defoliation and leaching of important nutrients), buildings (corrosion), automobiles (corrosion of paint), and agriculture (depletion of soil nutrients and crop deterioration). As a result, it is imperative that China reduce its need for petroleum and its refined products. [18]

Hydropower

Although, theoretically, China leads the world in potential hydropower capacity, it currently lags behind in terms of actual installed capacity. With estimates reaching as high as 370 GW, the country has only exploited roughly 10 percent of its potential [22]. The most promising sites, accounting for approximately two-thirds of the total, are located in the southwestern parts of the country. Due to this, transmission lines would need to travel long distances and cross mountainous terrain to reach the populated areas along the eastern coastline. There are, however, numerous small scale rural projects operating, typically at less that 25 MW (for a total of 14 GW), accounting for 19 percent of China's capacity and 13 percent of the country's annual generation. The percentage share of hydro power generation relative to total electrical generation has declined somewhat from the 1980's, where it provided roughly one-quarter of the nation's electricity production. In terms of actual Mtce generation capacity, of course, hydro power is increasing rapidly. Currently, China is working on an estimated 18,200 MW capacity project on the Yangtze River. [18]

Also, China has researched tapping its tidal power resources, and currently has 8.5 MW installed capacity. But, although more closely located near the population centers, the resource base is small, and capital costs exceed those for typical hydropower projects.

The Three Gorges Dam

On April 2 1992, the National People's Congress approved the construction of China's most ambitious engineering project since the Great Wall. Located on the Yangtze River, the dam, standing at 600 feet and 1.4 miles long, is projected to provide the country with 84.7 billion KWH (18,200 MW total installed capacity) of electricity per year, approximately one ninth of China's total generation. The dam, with its twenty-six generators [14], is expected to replace the now 50 million tons of coal that are being burned , and provide a much cleaner energy choice [20].

In the past, the areas on the lower and middle regions of the river have been subject to current flooding. In the last century alone, more than 300,000 people have lost their lives. With a 22.1 billion cubic meters flood control storage, the dam is predicted to protect the 15 million people [14] and 1.6 million hectares of land along the Jingjiang section of the river. Also, the dam is expected to increase the navigatability of the Yangtze, allowing 10,000 ton towboats access to cities as far north as Chongqing [20].

Funding for the $28 billion (US) project has come from three primary sources - the Three Gorges Construction Funds, the State Development Bank, and revenues from the existing Gezhouba Hydro power plant. Also, by 2003 (projected completion of the first generator set), revenues from the dam itself are expected to contribute back to the funding [20]. Internationally, world monetary funds and development agencies, like the World Bank, have withdrawn their support [14], leaving a $7.1 billion shortfall [20]. This is due to the controversy surrounding the dam's construction and environmental and cultural implications.

The dam's reservoir, over 400 miles long, will displace as many as 140 cities, 1,600 factories and a total of 1.3 million residents. As a result, the Chinese government has implemented the most aggressive forced resettlement plan in the country's history. Also, approximately 80,000 acres of arable land will be lost. In addition to that, the region has significant historical/cultural importance. According to ancient legend, the river's banks are the cornerstone of the country's first dynasty [14]. But, with the damming of the river, some 44 historical sites will be lost (relocation programs are currently under way) [20].

The Yangtze River is also the home of the endangered Chinese river dolphin and Chinese sturgeon. Environmentalists worry that the dam's construction will harm the species' habitats, and lead to their extinction [14]. To address this, China has created several protected areas and breeding fields for the two endangered animals [20]. Another concern is that the dam sits on land that is prone to earthquakes. There is also fear that, as sediment fills the reservoir, it will cause the river to grow torrential. And, eventually the pressure will cause the dam to burst [14]. As far as security, the Chinese feel that the dam would be an easy target of enemy or terrorist attack. As a result, the construction of the dam also includes the placement of several sub-surface missiles. [18]

But, even with the controversy surrounding it, the Three Gorges project, by merit of its projected capacity alone, is a viable alternative for China. Because the country cannot continue to rely on coal, the potential for a large hydro power source to replace it is especially appealing.

Solar

Potential for solar generated power is highest in the western and northern regions of Xinjiang, Qinghai, Xizang (Tibet), Hainan, and inner Mongolia. The majority of these areas are located in arid, isolated regions. And, without technological breakthroughs in more effective transmission lines and storage units, solar energy has been more applicable to rural areas. As a result, solar water heaters and large plastic-covered greenhouses have been widely promoted, and are commonly found throughout the countryside. Also, many new houses have begun incorporating passive solar designs, and solar cookers have been made available to those in remote western areas (where sunlight is most abundant, and fuel supplies are lowest). China currently has only 2 MW of installed capacity, but the country has capacity to manufacture several MW of photovoltaics per year. The primary reason that this resource had not been widely used are the facts that the most effective sites are far from the population centers that would most need them, and, like geothermal sources, full development of the resource is highly capital intensive. [18]

Wind

Many of China's wind resources are also located in the same areas where solar is abundant (isolated western and northern regions). But, there are also excellent sites along the coast, where most of the country's population is. Currently, the country has an estimated 30 MW capacity. Most wind farms have capacity of less than one MW, although the Dabancheng project has 10 MW. Like solar, this resource has been primarily used in remote rural applications thus far. And, development of wind is also highly capital intensive. But its abundance and optimal location make it an attractive option for domestic and foreign investors. China currently has plans to have 1 GW of operating capacity by the year 2000, and a US partnership was signed into place in early 1995 to develop some 30 to 110 MW projects. [18]

Geothermal

As of 1993, China had 30 MW of geothermal energy capacity. There is a concentration of promising sites along the coast and within the Himalayas. The most promising, though, are in Xizang (Tibet) and Yunnan. Although the largest project, in Lhasa, has an installed capacity of 25 MW, the majority of existing generators are less than 300 kW. While the resource is abundant, and near the population concentrations along the coast, as of 1995 there was no reported substantial use. This is primarily due to the fact that, like the other renewables, full development of the energy source is capital intensive. Geothermal has been useful, though, in remote applications, where connection to the electricity grid has not been possible. And, in some cases, the resources has been tapped to provide process heat for other electricity generating processes. [18]

Biomass

Providing about 80 percent of a rural households energy [22], biomass sources include fuel wood, charcoal, bagasse (sugar cane production waste), dung, and crop residues. But, heavy reliance on biomass has severe repercussions for a country still heavily reliant on agricultural industry (this accounts for about 67% of the working force [23]. Steady use of agricultural residues eventually depletes the soil of rich nutrients, and this fact alone makes larger scale use of the resource unlikely.

However, since the 1970's, biogas digesters, which do not degrade land nutrients, have been promoted in the southwest. The potential total capacity is projected to account for up to 6 percent of China's total energy demand. The most successful digesters, to date, have been the community and industrial ones, with units producing up to 300,000 cubic meters of biogas per year. Currently, there are approximately 4.5 million household digesters operating at 1 to 1.5 cubic meters of biogas per day. [18]

Due to the highly capital intensive nature of most renewables, it is unlikely that, with the exception of the Three Gorges Hydro project, any will become substantial contributor's to China's overall energy picture without large amounts of international aid (money and, more importantly, technology). Although much more environmentally benign than coal or fossil fuel, the majority of renewable resources appear to be far from the load centers on the eastern coast. This poses a problem for transmission, as many times they must cross difficult mountainous terrain. In addition, there are still many issues facing the renewables industry in general, such as actual conversion effectiveness, and storage capabilities. However, through joint ventures(with the private sector) and international co-operatives, this abundant resource can play important role in China's future energy planning. [18]

During the Ninth Five-Year Plan (FYP, 1996-2000), China is to expand its nuclear power program rapidly. This expansion will provide non-polluting electrical generating capacity-at present it accounts for only 1 percent of total electrical generating capacity. The 9th FYP calls for construction of several new nuclear plants totaling 7,400 MW capacity. These include the new units at Qinshan 2, to be produced using domestic technology; two 1,000 MW French units at Lingao, near Daya Bay; two Russian 1,000 MW plants at Wafangdian, Liaoning Province; and two 700 MW Canadian reactors at Qinshan. This expansion is projected to grow, and will be enhanced by China's increasing wealth and attraction of foreign investors. Nuclear power has been argued to be an important option, although this is not our conclusion, for China's environmental future because "for each 1,000 MW in new nuclear capacity that displaces a coal-fired power plant could reduce China's potential carbon emissions by roughly three million tones per year." [19]

The biggest barrier to nuclear production is the initial capital investments; the plants are cost efficient only over the long term. We must be cautious to depend on nuclear for electricity generating capacity for the future, for that reason, among others [19]. Some have suggested that one way found to avoid large capital investments may be to invest in smaller plants. For example, Coastal Power Company third plant in Jiangsu Province plans to develop several small projects in the country's most prosperous areas [3].

NUCLEAR POWER SUPPLY-Civilian Nuclear Power Program

Two nuclear plants, Daya Bay and Qinshan are already operating, though officials downplay the possibility that a significant portion of China's electricity generation can be shifted to nuclear power plants. The $4 million Daya Bay project is owned by the Guangdong Nuclear Power Joint Venture Co. Ltd (75 percent). The remaining shares are owned by the Hong Kong-listed China Light & Power Co. By contrast, Quinshan is a $255 million project that currently employs a 300 MW unit designed in China. [19]

China is one of the few countries considering using nuclear power for residential and industrial heating. Because of a high degree of risk, most countries have not opted to use nuclear power for these purposes. China has been experimenting with a 5 MW reactor at Qinghua as a heat source. [19] Safety is of course an important issue and China has a working relationship with many other foreign powers regarding nuclear safety. China has long worked with the US Nuclear Regulatory Commission, for example.

When burned, natural gas emits about 60 percent less carbon dioxide than oil and coal. At present, natural gas accounts for only 2 percent of energy use. However, there is some evidence that China has "extensive and unexploited reserves." [2] Development by China National Petroleum Corporation (CNPC) with some foreign assistance, has produced three large-scale gas production areas in the country: the Shaanxi-Gansu-Ningxia region; Zinging's Tarim Basin; and eastern Sichuan Province. In the Shaanxani-Gansu-Ningxia region, China has proven total gas reserves of 230 billion cu m. An additional 200 billion cu m have been found in eastern Sichuan Province and in Xinjuang total reserves are estimated at 160 billion cu m. Chinese energy officials are aiming to double China's gas production capacity to 30 billion cu m by the year 2005. By then, the country's gas production capacity will have grown another 10 billion cu m, with cumulative total reaching 25 billion cu m. [11]

Foreign firms are assisting China with this exploration. For example, in early 1996 the China National Offshore Oil Corporation (CNOOC) and Atlantic Richfield Co. started China's largest offshore energy project, the Yacheng 13-1 natural gas field in the Yinggehai Basin. [11]

One negative draw back to natural gas use is one of its component, methane. Methane is much more hazardous than carbon dioxide per molecule so small leaks in transmission could counteract the positive effects of natural gas, even though methane does not remain in the atmosphere as long as carbon dioxide does. [11]

While much attention has been focused on finding new sources of energy to meet the country's growing demands, more effort should be put into to reducing the overall demand itself. By increasing economic productivity (the amount of economic activity created by each unit of energy), and lowering the energy intensity (the amount of energy needed to produce one unit of economic goods or services), overall demand of energy will decrease and existing supplies will be used more efficiently. [18]

Starting in the 1980s, the Chinese government has implemented policies to increase energy conservation, by establishing a corporation to oversee grants and low-interest loans. At least half of this funding has been earmarked for capital construction projects and improvements in technologies. Cogeneration, recycling of waste heat and gas, improvements in inefficient plants and improvements in steel production technologies have been of particular interest. Conservation investment has accounted for nearly 10 percent of reductions in China's industrial energy intensity. Further analysis suggests that the cost to attain reductions in energy consumption were generally less than the cost of developing new energy supplies. [18]

Residentially, conservation efforts have focused on the reduction of biomass combustion in rural households, through the use of improved stoves. Additionally, programs have been put into place to explore the possibilities of passive solar designs in houses. [18]

There is also a great deal of room for improvement within the transportation sector. Currently, the majority of the country's people rely on devices such as bicycles and animal drawn carts for travel. But, as the number of automobiles in the country grows, China's demand for petroleum products will increase. But with improved efficiency of automobiles, heavy reliance on foreign oil can be avoided. Additionally, technological innovations in the use of renewable fuels will reduce the need for imports, and lessen the effects that the automobile has on the environment. [18]

China's current boom is a result of reforms initiated by Deng Xiaoping and has produced much of the economic growth of the 1980s and 1990s. The primary objectives of economic policy have been to raise living standards and improve the economic status of China relative to other states. As a result, even as recent as the 1992 United Nations Conference on Environment and Development, China has not placed the environment very high on its priority list. To the extent that China's leaders pay increasing attention to the environment, how policy changes will occur to change current consumption patterns remains a formidable task. Furthermore, "the practical result of persistently linking environment and development...is that while the Chinese government may want to spend more money on environmental protection, it will be difficult for it to justify doing so when faced with more urgent problems of food, energy, and housing." [2]

The result of China's Stalinist emphasis of the overnight development of heavy industry has left the legacy of an economy reliant on coal. At present and into the future, the key to overcoming environmental destruction in China will require a two-fold government strategy: a shift away from coal and dramatic improvement of energy efficiency. Low energy prices have been the cornerstone of China's centrally planned economy and therefore "the single most important step toward greater efficiency would be to require market prices for energy, including coal." [2]

Some positive policy changes include the recently created Environmental and Resources Protection Committee (ERPC) which has approved 14 new or revised environmental laws that will provide more enforcement power to regulatory agencies and create a tougher regulatory regime. [2]

Serious blocks remain, however, especially as China feels that it should be able to industrialize free of concern over carbon-dioxide emissions, just as the West did. Furthermore, the United States and other Western states remain the largest of the carbon emitters, a fact which hinders China's adoption of regulation. To the extent that China has agreed to attend international conferences and the like, there is concern that China cares only for its international image and a desire to receive the scientific, technological, and financial aid that accompany global environmental participation. [2] Furthermore, "poor countries like China generally feel that they cannot afford to sacrifice current income for the uncertain costs of environmental damage 50 or 100 years from now." [4] Such concern seems to be more concentrated in the developed countries where there is more support political support for environmental measures. [4]

Climate Change Conference

Sponsored by the United Nations and held in Berlin, the Climate Conference resulted in a decision to negotiate a greenhouse gas emissions reductions protocol, and a decision to launch a pilot phase of "joint implementation." The United Nations Framework Convention on Climate Change (FCCC) held on March 26-April 7, 1995 decided to respond to the concern of the effects of increasing concentration of greenhouse gases. The idea of "joint implementation" involves activities implemented jointly among developed countries and developing countries to mitigate climate change [15].

Typically, China has viewed Western environmental concerns with suspicion. Let us recall the Montreal Protocol of 1987. Then, as now, the Western powers asked China to sign a global treaty which would commit all signatories to the reduction of pollutants. Then, as now, we recognize concern about environmental damage. However, as Zhang Chongxian of the Environmental Protection Agency said in response to Montreal, "the call for modernization is so irresistible that China will continue to produce [CFC] ozone depleting chemicals." [17;101] We will not sign the Climate Change Treaty because it would cripple our economy which is so heavily dependent upon coal use and production. In addition, the suspicion we must harbor in defense of our interests against Western powers, precludes signing onto to environmental treaties. As shown by Figure IX-22 [18], "Shares of Global CO₂ Emissions, USA, USSR, China, Japan, and India," China has not significantly contributed to the current CO₂ crisis. The industrialized states, particulary the USA, have historically as well as currently, produced the lion' s share of CO₂ emissions. At the same time, we know that the environment will be an important aspect of every country's future. The challenge we face today is to balance the tension between modernization, the environment, and our security.

Behind closed doors, we acknowledge two points. First, that improving our environment is a top priority because it is in our best long term interest to do so. Second, then, is the denial of these goals. We are a key player in any environmental plan. We can use this leverage to our advantage. So long as the rest of the world points to our state as pivotal to the environmental health of the globe, we are in a position to bargain for improvements. This way we will extract money, technology and whatever else in return for the environmental regulations so desperately desired by the rest of the world.

To achieve clarity in helping to plot China's future energy path, we have provided with this report a detailed energy balance of China's current overall energy production—including biomass and imports/exports—and the sectoral breakdown of consumption of those energy supplies. The energy balance gives planners a graphical vision of overall energy use, and also helps to identify wasteful or problem energy usage. The current 1994 balance gives planners a baseline from which to begin to evaluate China's energy needs and capabilities. In addition, we have plotted two energy balances for the year 2014: one depicts production/consumption trends if current trend lines are extrapolated without intervention; the second depicts an alternative energy future based on adopting the energy policy suggestions that follow.

Whereas we have tried to be as accurate and as thoughtful as possible in these future balances, we must add a modest disclaimer in noting that few, if any, predictions involving future economic or energy growth have ever come to pass. Also note that we have not included Hong Kong, due to rejoin its mother country in 1999, in any of our balances or energy discussions, due to its special separate status, and that it functions more as a developed "nation" as regards its urbanized energy use. In addition to energy-specific recommendations, we also urge China to expand its exchange student program, in order to gain from West as much current technical knowledge as possible. Students from China should be carefully selected for either loyalty to the Party, or with a complete disinterest in politics, in order to avoid future Tianmen incidents.

In general, we have concluded that China must shift, as much as possible, from a coal- based energy system, due to the severe health repercussions of pollution in China, to the increasing world pressures to reduce C02, and to the general desire to modernize our country. In doing so, we want to be cautious to not "put all of our eggs in one basket" in case that basket develops unseen cracks. Therefore, we propose in general to make use of many technologies, both traditional and modern, to achieve China's energy needs in the next century. Following are the assumptions and conclusions that we made in plotting the extrapolation of current trends to 2014.

Oil

As noted, China is now a net importer of oil, when factoring in petroleum products. We assumed from current information on crude production that domestic oil production has peaked in 1997, will stabilize for a few years and then will begin a slow but steady decline of 1 to 2% per year. This assumes, given our past disappointments with "new finds," that there are no new major oil fields found which are economically recoverable. Given this projected decline, we envision crude oil exports, currently at 27 Mtce, will drop rapidly to virtually zero, as all product is refined for domestic use. Given an inevitable rise of demand for gasoline and other refined products, this will mean inevitable rapid increases in imported crude oil/oil products, and result in an overwhelming drain of hard currency, and place China in an unacceptable dependence on the whims of the oil-exporting nations. This projected import demand by the year 2010 has been estimated to roughly equal our current domestic crude production at around 215 Mtce! [18]

Our task must be to severely limit this new demand. To this end, we must examine any and all methods, however authoritarian, to severely limit the use of private automobiles in China. One such method would be to heavily tax fuels as well as car sales. If China follows the automobile highway path of the West, our destination will surely lead to ruin.

Coal

Extrapolating the existing trend line for coal production at 6% growth per year, we found that coal production would more than triple by 2014, from current 865 Mtce (841 used inside China) to an unimaginable 2776 Mtce. Most of this increase would be due to use in thermal electrical generation. Consequently, the CO2 emissions from coal use would more than triple, which is indeed a very frightening scenario, and would cause political havoc. This fact is central to our later discussions of alternatives, as China would be in violation of all international agreements for limitations on CO2, and the immediate health threat to Chinese citizens from coal pollution alone would be simply intolerable.

China could also pursue an expanded export policy, to increase coal exports in order to attain capital needed for other more benign energy investments. Countries like Japan, who already import large quantities of Chinese coal, could perhaps be persuaded by joint ventures, price breaks, ect., to invest more capital in coal-washing facilities in China, thus making available more higher quality coal. Whereas the coal from such an export policy would still be burned and produce carbon dioxide, this pollution would not be credited by the international community in China's account. If we could export just 3% more coal per year than the trendlines suggest (9% instead of 6% yearly increase), then we would realize a gain by 2014 of some 60 Mtce in coal exports, an added gain more than double our current coal exports. Coke production has followed increases in coal use, and given its intimate tie to the expanding economy via steel, use of this refined product will at least triple.

Natural Gas

China has for too long ignored this valuable resource. Natural gas has risen at a fairly steady rate of about 2.5% per year, which projected out would be an increase from about 22 Mtce to 37 Mtce. This increase assumes that promising gas fields actually turn out to be recoverable gas fields, and that these fields are close enough to urban areas for China to rationalize investment in the extraction and transportation of this desirable resource. We strongly encourage this further exploration efforts and overall growth in natural gas to replace other fuels, and hope that we have underestimated China's potential for the year 2014.

Electricity

Electricity generation is, and will become ever more so, the key to modernization. Electricity is the analogous to money in an economy, in that it is the universal medium of exchange, and can be used for virtually any energy need. China generated electricity in a number of ways in 1994, prime among these methods was thermal generation, followed by hydropower, with nuclear power a distant third, and renewables a far-distant fourth place.

Thermal Generation

Thermal generating plants are typically large-scale, and they predominately burn coal, followed by oil. Over the last ten years, from 1985-1994, these plants have averaged a 9% yearly increase in electrical generation. Extrapolated at this rate of increase, Chinese utilities would jump nearly seven-fold, from using 246 Mtce of coal in 1994, to almost 1,400 Mtce in 2014. Oil use for generation, assuming its availability, would jump from about 11 Mtce to 67 Mtce.

Hydropower

As has been noted, China has the world's largest potential hydropower electrical generation capacities, but has exploited only about 12% of this capacity. Whereas there are 150 current hydro projects, including the massive Three Gorges project, it is somewhat difficult to project future hydro growth due to the erratic up and down growth of the last ten years. Taking an average of the growth rates of the last ten years results in a 7% yearly increase, which projected forward would push gross hydro generation from about 69 Mtce to about 265 Mtce in 2014. This continued growth is most desirable, and will hopefully surpass our projections, as hydro power is a "free" good as regards fuel, and is a virtually non-polluting source of generation. We recommend for social and other environmental reasons that relatively small hydro projects be given precedence in the future over massive ones such as Three Gorges, to both lessen environmental impact, and lessen the degree of capital risk on any one project.

Nuclear

Asia in general and China in particular have been, in our opinion, seduced by the nuclear plant manufacturer's siren's song. While only two nuclear plants were on-line in China in 1994, with a gross electrical capacity at of only 2.1 GW in 1994, plans underway would result in an average 15% yearly increase to boost nuclear generation capacity to 20 GW by 2010, and 45 GW by 2020! [18]

Whereas some argue that this is a "clean" energy source, and replaces millions of tons of polluting coal, we believe that Chinese leaders should carefully reevaluate this nuclear solution and look closely at the experience of the West. Many Western critics oppose nuclear power from both environmental as well as economic perspectives. The environmental, storage problem, and risk factors are well documented. The fiscally conservative The Economist, once an backer of nuclear power, stated in October, 1995 that "many western governments ... now admit that gas and hydro power can produce cheaper electricity..." In addition to these basic considerations of the return on investment, we must remember that China's domestic uranium resources are a mere 0.6% of the world's uranium resources. If we follow the nuclear path projected above, it is very likely that we will soon become hostage to the political and economic demands of the uranium- rich countries. In particular we should note that the U.S. has a third of total supply, and would certainly require regulatory inspections and other interference in return for uranium exports. For all of these reasons, we recommend that China abandon plans for nuclear plants not already on- line or near completion, and shift those investments, to the degree possible, to renewable sources of energy.

Wind

China has a potentially very large exploitable wind power electrical generating capacity, particularly on coastal sites close to the population centers. Wind power currently generates a minuscule amount of electricity at 30 MW (.11 Mtce), but this renewable source has great potential in China. Plans already exist to raise wind's generation capacity to 1 million KW by 2000, which equals about 3.5 Mtce. In our energy balance for the year 2014, after manipulating the rate of increase to achieve this fantastic leap to the year 2000, we lowered the increase to 20% per year, which netted about 45 Mtce by the year 2014. This figure, of course, could be off in either direction, depending on China's commitment, or lack thereof, to wind power. While the start-up costs of wind generators are high, there is no fuel costs whatsoever. This is a source that we highly recommend that funds available from canceled nuclear plants be shifted to instead.

Photo-voltaics

As the current capacity of P.V. systems in China is only 2 MW, this number in Mtce would not have shown up on our current energy balance. However, rapid advances in the efficiency of P.V. technology, as well as the possibility of getting installations in China at least partially funded through foreign agencies concerned with C02 issues, makes this technology high on the list of our recommendations for China to pursue. An added benefit of this technology is the lack of need for a grid of any type, perfect for remote rural locations when coupled with some type of back-up system. We believe that China would do well to have its engineers and foreign exchange engineer students look closely at P.V. technology, and to the degree that manufacturing plants can be set-up in China to make most, if not all, of the needed components.

As noted in our report, biomass use in China consists of primarily fuelwood and crop residues and has served primarily the needs of rural household energy needs. We do not have any illusions that biomass will be the "organic solution" to China's future energy needs. However, we do think that biomass can contribute a great deal to an overall solution, in conjunction with other renewable forms of energy.

Fuelwood use has been decreasing and is likely to decrease in most sectors, as energy transition/fuel switching occurs toward commercial fuels—such as coal briquettes—and to "free" renewables such as biogas digesters for cooking needs. In addition many areas now lack any forestation from which to gather wood.

The improved stove campaign has gloriously achieved more than 120 million units installed and has resulted in improved efficiencies through reducing the amount of cooking fuels required to begin with. We strongly urge that the government continue its ideological support for this campaign.

In general, because the relatively limited amount of land China has under cultivation is already suffering depletion, and since China has such a huge population to feed, government policy has been—and should continue—to discourage large thermal biomass applications, such as burning crop stalks, as this use deprives the rural soils of needed nutrients. Crop stalk use did rise 3.9% between 1990 and 1992, but we do not believe this will continue as a trend.

However, a thermal biomass use we would like to promote is the use of rice-hulls for combustion in small thermal plants. Rice hulls contribute little to soil replenishment. They are already ‘produced' in abundant amounts at rice mills as a "waste" product, so they require virtually no extra energy expenditure to gather. Further, their small compact shape is convenient for feeding into combustion chambers. Therefore, although there is the CO2 downside, we feel that installing small thermal electric generators nearby rice mills would be a good supplement to rural energy needs.

Another non-destructive biomass use that has found success in China, and should be further exploited, are biogas digesters. Unlike the burning of biomass, biogas digestors provide both a valuable resource, biogas, as well as create compost as a valuable by-product. Biogas digestors are an ideal use of animal dung, and even human wastes in near-urban areas without municipal waste systems. Biogas currently is estimated to produce about 1 Mtce, but estimates for current potential biogas use range as high as 82 Mtce, which would fulfill about 20% of a household sector energy needs.[ESMAP, p. 50-51] Therefore, on our future energy balance, we have scaled biogas production up with a 25% yearly increase in order to roughly achieve in 2014 what is estimated to be possible now. The government could further promote interest in biogas through events like design competitions, but beyond helping to with initial training programs, there is no need to subsidize this popular energy system.

In summation, China is facing both unprecedented environmental disaster, and unprecedented opportunities. As the projections of the future balance make clear from a perusal of coal and oil production/consumption, China's current course is simply untenable, environmentally, economically, and politically. Following this path would result in China becoming a bankrupt, open cancer ward, and would become a pariah among nations. Choosing an alternate path—with emphasis on renewable energy sources, with modest increases in coal and oil use, heavy restrictions on automobile sales, and cancellation of nuclear power plants in order to free-up investment money—could enable China to truly participate in the possibilities of making the 21st century the Pacific Century. To this end we hope our report is useful to the Ministry.
 

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