Esty and Porter Recommend Imposing a Price on Carbon Emission in the U. S.

Summary:  Carbon dioxide is a major greenhouse gas produced by burning fossil fuels.  It leads to increased average global temperature, which is thought to be causing a variety of climate-related harms to life across the planet.  Carbon dioxide may be considered to be a waste product of our energy economy that has not yet been properly accounted for in the energy cost structure.

As a first step in developing a national energy policy in the U. S., Dan Esty and Michael E. Porter, writing in the New York Times, propose an economy-wide price on carbon.  It would start initially at a low rate and increase over time to a more significant value.  They point out that other nations and regions of the world already put a price on fossil fuel-derived carbon dioxide.  This would be an important initiative for the U. S., changing consumer behaviors and promoting innovation in a new energy economy.

Introduction. The world relies heavily on burning fossil fuels (coal, oil products and natural gas) to provide its energy needs.  These fuels all contain carbon that, when burned, emits carbon dioxide gas (CO₂) into the atmosphere.  Carbon dioxide is a major greenhouse gas which has been accumulating in the earth’s atmosphere faster than it can be removed by other processes.  With the industrial revolution, mankind began to be dependent on energy from fossil fuels as opposed to using renewable surface fuels such as wood.  Since its start the atmospheric concentration of CO₂ has increased from about 280 parts per million (ppm; i.e., 280 volumes of CO₂ in a total of 1,000,000 volumes of air) to about 390 ppm presently.  Today the atmospheric concentration of CO₂ is increasing at about 2 ppm per year. 

CO₂ is a greenhouse gas, acting to retain a portion of the sun’s energy reaching the earth, resulting in a warming of the long-term global average atmospheric temperature, to date, of about 0.7°C (1. 3°F) above the level prior to the start of the industrial revolution.  Humanity is on track to continue burning fossil fuels at an ever increasing rate, barring interventions to reverse the trend, which would lead to even higher global average temperature levels.  The increased temperature has serious climatic consequences worldwide which are detrimental to the wellbeing of humans across the face of the earth.

CO₂ as Waste. Another way of considering the use of fossil fuels, described in the previous post on this blog, is that CO₂ is a waste product of our industrialized life style, but one whose costs have not been built in to the fuel and energy industry.  Some human activities have factored in the costs of generating and disposing of our waste; household and retail waste, and treatment of waste water are some examples that come to mind.  The services that dispose of these wastes are already charged to consumers, for example through local taxes or direct billings to the users.  In contrast, there is no cost structure built into the pricing of energy from fossil fuels that accounts for the harmful results to man’s welfare arising from higher global temperatures.  Adding a waste charge to our use of fossil fuel energy makes sense in order properly to account for such harms.

The U. S. Has No Energy Policy. The United States is the only major consumer of fossil fuel-derived energy without a national energy policy.  The recent sharp increase in the price for crude petroleum, dating at least from the outbreak of the revolutionary movement in Libya in the spring of 2011, has resulted in correspondingly sharp increases in the price of gasoline and diesel used for personal and commercial transport.  The reaction from the public and politicians has been a clamor to “do something” to lower the prices.  “Something” might include drawing oil from the U. S. strategic petroleum reserve, or encouraging foreign suppliers to pump more oil from the ground for delivery to the U. S., to increase the supply and thereby lower the price “tomorrow”, i.e. in the near term.  This shows how the U. S. is highly dependent on, if not addicted to, imported oil for its transportation fuel.

Imposing a Price on Carbon.  Instead of such a short-term response acknowledging our dependence, strategically the appropriate response would be to adopt a rigorous, substantive energy policy that would reduce our dependence on fossil fuels, including imported crude oil.  In the New York Times of April 28, 2011,  Dan Esty, the Commissioner of the Department of Environmental Protection of the American state of Connecticut, and Michael E. Porter, a professor at Harvard University’s Business School, propose an economy-wide price on carbon, starting initially at a low rate but increasing over time to a more significant value.  In 2012 the price is proposed to be $5/ton of greenhouse gases emitted, reaching $100/ton by 2032.  By way of reference, for gasoline this would correspond to an increase of $0.043 per gallon in 2012, becoming an increase of $0.87 per gallon by 2032 (based on calculations that appeared in an early post on this blog).  Comm. Esty and Prof. Porter point out that the initial burden on consumers and businesses as shown here would be almost negligible. 

As noted, the carbon price is envisioned to apply on all forms of fossil fuels, being assessed, for example, on the basis of flue discharges of greenhouse gases at large scale generating plants, and on the basis of gallons of fuel delivered for motor vehicle fuels; likewise natural gas delivery would also be assessed.  As the charge increases, it would promote behaviors that lead to increased competitiveness and innovation.

Carbon Pricing in Other Regions of the World. The authors note that a carbon tax on fossil fuels already figures prominently in other areas of the world.  Europe has had a cap-and-trade regime governing fossil fuel use, first imposed as the nations of Europe joined the Kyoto Protocol of 1997.  In 2011 the European Union issued a long-term energy policy, according to which the member states pledge to reduce greenhouse gas emissions by 80% to 95% below 1990 levels by 2050.  Second, although China, being a developing country, is excluded from coverage under the Kyoto Protocol, in its 12^th Five Year Plan for the years 2011-2015 it is closing its most inefficient coal-fired electricity plants.  It is also drastically increasing its use of renewable or alternative energy sources.  Additionally China is putting a small number of local cap-and-trade markets in place as pilot projects.

Regional Greenhouse Gas Accords in North America.  Energy policy is highly politicized in the United States.  Since the U. S. has failed to develop a single nation-wide policy, three regional greenhouse gas agreements have been adopted among various American states and Canadian provinces—the Western Climate Initiative, the Midwest Greenhouse Gas Reduction Accord, and the New England and mid-Atlantic Regional Greenhouse Gas Initiative.  These programs have levels of coverage and differing terms duration.  Being agreements between sovereign states and provinces, actual implementation requires that each participating state or province pass its own legislation in order to put the terms of the agreement in force.  These factors obviously render compliance complicated and regionally inconsistent.  Commercial and industrial activity is impeded by not having a single national policy covering the countries in question.

Conclusion.  Commissioner Esty and Professor Porter recommend that the U. S. put in place a price on carbon, starting in 2012 at a very low level, and ramping up to a more significant price over 20 years.  They point out that this would affect consumer behavior in a way that would lead to greater energy efficiency and development of alternative energy sources.  The U. S. currently has no national energy policy.  This proposal would be a good start to putting one in place. 

© 2011 Henry Auer

Carbon Dioxide – The Waste Product of Our Energy Economy

Summary.  Human activity generates waste.  As the earth’s population grows, and as the world-wide standard of living rises, we create more and more waste.  Examples include household trash, electronic devices, and acid rain.  Most significantly, as we burn more and more fossil fuels to produce the energy that powers modern life, we emit more and more carbon dioxide into the atmosphere.  This substance, an important greenhouse gas, is being released as the waste product of our energy economy. 

As with other forms of waste, significant costs are implicit in reversing any harmful effects that the waste may have on our environment.  It is imperative to treat manmade carbon dioxide as a cost-bearing waste product because of the harmful effects of the global warming that it produces.  These harms carry enormous costs with them.  Accounting for these costs makes it more acceptable to make the investments, and bring about the changes needed, to reduce greenhouse gas emissions.

Introduction.  Humans have always generated waste as part of their life activities.  In prehistory and in historical times it has been a simple matter for mankind to discard its waste, typically in a refuse area, and not to be concerned about its effects, its cost or any need for recovery.  (Archeologists relish these deposits for the clues they contain about ancestral daily life!)  Unfortunately in our day carbon dioxide, an important greenhouse gas, likewise has been regarded as a waste not to be concerned about.

Historical Perspective: Production of Waste  The industrial revolution has brought with it a dramatic increase in the complexity of our daily life.  We use and discard products of manufacture, and burn quantities of energy derived from fossil fuels, that were inconceivable two centuries ago (please see the graphic below). 

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Diagram by Henry E. Auer

Pathway for humanity’s use of resources.  Each stage has costs associated with it.  Here we emphasize the costs incurred at the landfill stage.  The landfill can be a tract of land on earth, or a globalized atmospheric dumping ground for gases.

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Let’s consider some examples of problems attached to waste disposal, and how they have been resolved.

Household waste, including food waste and discarded common items considered to be “disposable”, has increased dramatically in recent decades.  The world’s population has doubled from three billion souls to six and one-half billion currently in about 50 years.  Much of this increase has been in countries with advanced economies that characteristically produce large amounts of waste.  As the population of the world has grown, so has its waste production.  In earlier centuries, disposal of waste was not a serious problem; land available for dumping waste far exceeded the need.  But this is no longer true.  While we in urban and suburban settings think little of waste disposal, there is in fact a cost associated with it.  Cities and towns typically provide waste disposal service as part of their operations.   New York City, for example, has run out of its own municipal landfills for solid waste.  It exports its refuse to other regions of the U. S. at a cost that was budgeted at $296 million for 2008.  This example shows that costs for dealing with waste must be clearly accounted for.

In recent decades in the U. S. many municipalities have implemented recycling programs directed at waste materials that can have a secondary use, such as aluminum and other metals, paper and various plastic materials. Many of these were originally used in packaging.  Costs associated with recycling may be considered to compensate for the original costs involved in preparing the packaging or other item for its first use.  Here again, local governments have recognized costs associated with wastes generated from human activities, and have accepted spending the money involved.  In 2008, New York City required $24 million for recycling activities, after accounting for revenue from the sale of recycled paper.  The total weight recycled was 611,000 tons.

Electronic products, including viewing personal computers, monitors, printers, and cell phones, have proliferated greatly in recent decades.  The components in these devices are frequently wired together with lead solder, the lead being a toxic heavy metal, and may contain other toxic metals such as mercury, cadmium and beryllium.  Regular and compact fluorescent bulbs contain mercury. In order to prevent these metals from leaching into our soils and water supplies, they should be collected and the toxic substances harvested from them.  In general, the costs involved in dealing with electronic waste are not built into the sales price of the item.  Thus the cycle for dealing with these substances is incomplete (see the preceding graphic); we mine and produce the toxic metals for manufacture of the final product, but do not complete the cycle for handling the toxic substances.   Only recently are recycling programs for electronic products and light bulbs being set up, and these are mostly entirely voluntary.  Society has not adequately recognized the costs involved when marketing and selling the products.

The problem of acid rain came to be recognized in the 1980’s.  The phenomenon refers in part to killing of fresh water fish, and of extensive areas of forest, by acidic components in the atmosphere.  The acidic components were identified as being produced primarily by coal-burning power generating plants upwind of the affected areas.  The coal is contaminated by sulfur, which burns to produce the acidic gas sulfur dioxide.  Burning also produces acidic oxides of nitrogen.  In clouds and raindrops the acidic gases produce sulfurous acid, nitrous acid and nitric acid when combined with water, all of which acidify groundwater when they fall to earth.  The increased acidity kills the waterways and forests, usually many hundreds of miles downwind, and frequently in a different state.  This led at first to the denial by the power companies to accept responsibility for the acid rain phenomenon.

Here again the cost of a waste, the acidic oxides of sulfur and nitrogen, originally was not built into the costs of providing electricity to the utilities’ customers.  By 1990 the Clean Air Act was amended to control these emissions, using a cap and trade market mechanism. The technology involves installing waste gas scrubbers that chemically remove the acidic gases.  By the last decade the program has been considered to be largely successful, reducing the acidic emissions considerably, at a cost estimated between $1-2 billion per year.  As recently as April 14, 2011, an agreement was reached between the Tennessee Valley Authority, which operates coal-fired electricity plants, and the Environmental Protection Agency, four states and environmental groups to close 18 such plants and modernize three dozen others with the objective of reducing acid rain. 

Carbon dioxide (CO₂) is the direct product obtained when any fossil fuel is burned in air to provide energy.  Mankind has treated CO₂ as a neglectable product in this process.  Yet CO₂ is the principal greenhouse gas released into the atmosphere by human activity.  Its amounts are unfathomably large, and have grown dramatically since beginning of the industrial revolution hand-in-hand as the production of coal, oil and natural gas have increased.  Fossil fuel extraction and CO₂ production have grown at exponential rates because a) populations that demand the amenities of modern life are growing, b) more and more people around the world are moving from agrarian life to urbanized life styles, and c) urbanized life depends on homes, appliances and modes of transportation all of which consume larger amounts of energy.

Humanity is dumping more and more CO₂, a greenhouse gas, into the “landfill” that is the earth’s atmosphere (see the preceding graphic) with each passing year.  Just as in the examples above, this CO₂ brings with it a cost associated with the effects of its waste dumping.  Increasing atmospheric concentrations of CO₂ produce worsening global warming, whose environmental impacts bring massive costs associated with alleviating their impacts.  These include aridity and drought in some regions with their associated decreases in crop yields and increased incidence and severity of forest fires; increased rainfall and flooding in other regions with their associated crop losses, property losses and human displacements; and rising sea levels, among others.  The costs of these harms are not built in to the economies of extraction and consumption of the fuels.  Just as in the other cases in the examples presented here, our CO₂ economy must incorporate costs associated with, and institute measures directed toward, reducing the emission of CO₂ as well as other manmade greenhouse gases.  We need to embark on these measures in order to limit global warming and its detrimental effects on humanity. 

Conclusion.  Just as in the cases of other commodities produced and consumed by humans, we must recognize and account for the CO₂ waste product of our energy economy.  Simply dumping this waste into the earth’s atmosphere that is our CO₂ “landfill” is harmful to life on earth, because of its effect of worsening global warming.  Recognizing the costs implicit in this waste production justifies the economic and technological investments needed to minimize CO₂ emissions. 

© 2011 Henry Auer

Producing More Natural Gas in the U. S.: The Pickens Plan

Summary.  The U. S. uses about 25% of the world’s energy, yet has only about 4% of the world’s population.  As part of its energy supply, the U. S. uses large amounts of petroleum, over half of which is imported.  Much of the petroleum is used to fuel transportation. 

Natural gas is a fossil fuel that is widely abundant in the U. S., and is more accessible as a result of recent technological improvements.  Natural gas could be used supplant our dependence on petroleum as a fuel.  Nevertheless, extracting this natural gas is tied to controversial problems related to leakage of natural gas, or methane, a far more potent greenhouse gas than carbon dioxide, from the wells into the atmosphere, and to potential contamination of ground water and surface water with toxins from the drilling compositions used.

The entrepreneur T. Boone Pickens is promoting extensive use of natural gas to fuel transportation, in order to supplant gasoline, which is derived from petroleum including the oil imports.  He has helped author legislation that would provide tax incentives for the use of natural gas in vehicles, and for the manufacture of vehicles that can burn natural gas.

Developing natural gas as an interim solution to providing energy to the U. S. transportation market would be a useful contribution, providing the problems associated with its production can be resolved.

Introduction.  Fossil Fuel Use in the U. S. The U.S., with 4% of the world’s population, uses about 25% of its energy.  According to the U. S. Energy Information Agency,  a source of independent energy statistics, as of 2009 the U. S. used 18.8 million barrels of petroleum a day, of which 9 million barrels a day was for gasoline used in transportation.  72% of U. S. oil consumption was for transportation.  Supplying this consumption included 9.7 million barrels a day of net petroleum imports (11.7 barrels of crude oil and other petroleum products are imported, but some petroleum was also exported), corresponding to 51% of total consumption.  The U. S. produced 7.3 million barrels of total petroleum products a day, which included crude oil as well as the liquefied equivalent of natural gas.

Coal is the worst of the three fossil fuels, producing the most carbon dioxide (CO₂), the important greenhouse gas, for a given amount of heat energy released.   Greenhouse gases arising from human activity are a major contributor to global warming. 
Natural gas is the most efficient of the fossil fuels, emitting the least CO₂ for the amount of heat energy obtained.  It can be used in electricity plants as well as to fuel cars and trucks when the engine is properly modified.  Nevertheless, natural gas fuel still emits CO₂.  Optimally we should move to renewable energy as soon as possible.

Natural gas is an abundant domestic fuel resource, especially with the development in recent years of hydraulic fracturing technology (“fracking”) to extract it from gas-containing shale formations that occur widely in the U. S.  (see the map below).

Gas shale formations in the U. S., shown in pale green.  Copied from http://fracfocus.org/hydraulic-fracturing-how-it-works/hydraulic-fracturing-process

World-wide, supplies may be sufficient to last as long as 250 years.

At least one major oil company, Shell, is actively producing natural gas as a supplement to extracting crude oil.  In 2012 the company will produce more natural gas than petroleum.  Shell notes that modern gas-fired electricity generating plants emit half the CO₂ of modern coal-fired plants, and 60%-70% less than older, less efficient coal plants.

Hydraulic Fracturing.  Fracking involves two aspects.  The first is horizontally-directed drilling, whereby a vertical shaft is drilled to a depth predicted to contain gas within the rock, then the drilling is reoriented horizontally to reach the oil shale formations.  Several horizontal extensions can be extended from one shaft.  The second aspect is the use high pressure fracturing liquids to rupture the gas-bearing rock and release the natural gas to be brought to the surface.  The fracturing liquids are controversial because they contain proprietary mixtures of chemicals which potentially can contaminate ground water or surface water.

Problems with Natural Gas. The problems with natural gas are two-fold.  Natural gas (i.e., methane) is itself a greenhouse gas which, when released without burning into the atmosphere, is 25x as potent a greenhouse gas as CO₂.  The New York Times on April 11^th, 2011 reported that today’s natural gas wells, especially those using hydraulic fracturing (“fracking”) to release the gas from unconventional shale, leak significant amounts of methane into the atmosphere.  These wells therefore worsen the global warming conundrum, rather than help it.

Second, fracking uses toxic chemicals in water to get the gas out.  Unfortunately the chemicals, as well as toxic substances (metals, radionuclides) leached from the shale, may contaminate ground water and may be released into surface waste water.  The Energy Policy Act of 2005, shepherded by Vice President Dick Cheney, explicitly excluded fracking from coverage under the Safe Drinking Water Act (SDWA).   The New York Times reports  that a study by Rep. Henry Waxman and others finds that hundreds of millions of gallons of fracking compositions containing carcinogens regulated under SDWA were in common use in natural gas recovery.    

This important issue was addressed in a hearing held by the U. S. Senate Committee on the Environment and Public Works on April 12, 2011.  Principal witnesses included Robert Perciasepe, Deputy Administrator of the Environmental Protection Agency (EPA).  One important policy disagreement centered on whether it was sufficient, for protection of the public and its water resources, to allow each state to regulate hydraulic fracturing wells individually, or alternatively was it necessary for the EPA to issue regulations applicable nation-wide.  A second related to instances in which waste water from fracking activities passes through treatment facilities with the fracking contaminants remaining in the effluents, rather than having been removed by treatment.

The Pickens Plan for Use of Natural Gas in Transportation.  T. Boone Pickens, a businessman active in the oil and gas industry, recognizes the disadvantageous position the U. S. is in with regard to its energy economy.  Although the biggest single country supplying the U. S. with oil is Canada, a friendly neighbor, a large fraction comes from countries of the Organization of Petroleum Exporting Countries (OPEC), whose geopolitical interests do not necessarily coincide with those of the U. S.  Using the 2009 rate of imports, but the April 2011 price of about $100/barrel, the U. S. is transferring about $219 billion a year to OPEC countries alone.  This is not in this country’s political or economic interest.

Pickens has responded to this situation with a plan to develop natural gas and alternative energy in order to reduce our dependence on imported petroleum.  This post focuses on the natural gas portion of the plan.  Pickens recognizes that natural gas should not be considered a permanent or complete solution the energy challenges facing the U. S., but rather should be used in the interim to allow fully alternative, renewable energy sources to be developed.  In the long run he believes that, for transportation, new technologies need to be developed and implemented that effectively replace fossil fuels entirely. 

In the meantime he believes that natural gas can serve as a bridge fuel that is more advantageous than using gasoline and diesel made from imported crude oil.  He proposes that cars, light trucks and heavy freight trucks all run on natural gas.  He especially believes that fleet operators and heavy trucks would benefit; his web site states that currently there are no batteries adequate for driving heavy trucks.

Mr. Pickens has promoted the NatGas Act of 2011 (New Alternative Transportation to Give Americans Solutions Act of 2011) (H.R. 1380), sponsored by a bipartisan group of 76 representatives.  The bill offers tax credits a) for use of natural gas as an alternative fuel or in an alternative fuel mixture, b) for a new vehicle powered by natural gas, including heavy trucks weighing more than 26,000 lbs, c) for vehicles converted to operate on natural gas, d) for a refueling facility that dispenses natural gas, and e) to manufacturers producing vehicles operable with natural gas.

Conclusion.  Expanded use of natural gas as a fuel for use domestically in the U. S. would contribute significantly, in the near term, to lowering emissions of CO₂.  By using natural gas we reduce payments of large amounts of money to foreign suppliers of petroleum, many of whose interests do not necessarily coincide with those of the U. S.  The Pickens plan for promoting use of natural gas as a transportation fuel makes sense in the near term.  Nevertheless, the significant problems associated with producing natural gas by hydraulic fracturing, which will be the dominant technology going forward, must be satisfactorily investigated and resolved.  At best, natural gas may make sense to serve as a fuel for use during the transition to fully renewable energy.  We should develop renewable energy as soon as we can.

© 2011 Henry Auer

China’s 12th Five Year Plan: Energy and Greenhouse Gas Emissions

Summary:  China recently became the world’s largest emitter of greenhouse gases, overtaking the U. S.  As a result of its intensive program to become a modern industrial state, it has installed, and continues to develop, new energy-producing facilities that emit large amounts of greenhouse gases.

Its new 12^th Five Year Plan seeks to bring China onto a path of increasing the efficiency of its energy production, and the energy efficiency of its economic output.  Its objectives include lowering the emissions intensity per unit of economic output by 17% by 2015, and by 40-45% with respect to the 2005 level by 2020, even while its primary energy consumption will likely increase by up to 5% per year through 2015.  Coal-based energy will continue to play a major role.  China will begin implementing market-based incentives to reduce emissions, and will promote a variety of energy efficiency programs.  Also, it will continue its major effort at reforestation.

China’s 12^th Five Year Plan is ambitious and represents a new departure for the country.  Earlier this year the European Union issued its goal of lowering greenhouse gas emissions by at least 80% by 2050.  Of major emitters, only the U. S. does not yet have a national policy in place for reducing the emission of greenhouse gases.

INTRODUCTION. 

Man-made greenhouse gases, such as carbon dioxide (CO₂), are recognized by climate scientists to cause warming of the planet.   The United Nations sponsored conferences of the world’s nations seeking to reach agreement on measures to limit greenhouse gas emissions, thereby minimizing warming of the planet.  The Kyoto Protocol of 1997 included the world’s developed countries in its coverage, but excluded developing countries, including China, from its jurisdiction.

China has long maintained that, as a populous developing country, an appropriate measure of its energy usage and its emissions of greenhouse gases should be its energy intensity or its emissions intensity, whereby these measures are based on its gross domestic product (GDP), rather than the actual amount of energy used or emissions produced.

This post reviews the energy and emissions goals projected by China in its 12^th Five Year Plan (FYP) issued in March 2011, covering 2011-2015. In the first of three sections we review China’s past energy usage and greenhouse gas emissions.  This section also summarizes projections of China’s energy use and greenhouse gas emissions modeled last year, prior to the release of the 12^th FYP.  These topics were presented in an earlier Warmgloblog post.

With this background, the second section provides a summary of the new FYP.  The third section presents conclusions and analysis of the FYP.

REVIEW OF CHINA’S ENERGY PICTURE AS OF 2010

Overview of Current Energy Production in China

China has embarked on a vast program to expand its economy and bring material benefits to large segments of its population.  From 2000 to 2009 its economy expanded by about 10% per year (U.S. Energy Information Administration (USEIA))

The Wall Street Journal on July 18, 2010 cited the International Energy Agency (Note 1)  as reporting that China has become the world’s largest consumer of energy, outstripping the U. S.

China’s energy use has grown dramatically over the past two decades, as its rapidly expanding economy has depended on new energy-intensive industries and extensive construction of new infrastructure projects (see the graphic below). 

Total primary energy consumption for the U. S. (rose) and China (yellow), in millions of metric tons of oil equivalent from 2000 to 2009 (as estimated).

Source: International Energy Agency.  Format © The Wall Street Journal (http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?mod=googlenews_wsj#project%3DCHENERGY0719%26articleTabs%3Dinteractive). 

In 2009 China consumed 2.3 billion tons of oil equivalent, while the overall usage in the U. S. was 2.2 billion tons. As recently as 10 years ago, China’s consumption had been only half that of the U. S.  Consumption by the U. S. over the same period has remained essentially constant, and even declined slightly in 2008 and 2009 (see the graphic).

The sectors of China’s economy that use energy and produce greenhouse gas emissions are shown in the following graphic.

CO2 emissions in China by sector of the economy over the period 1990-2008.  Mt, millions of metric tons.  The shading codes for the sectors below the graphic go from darkest to lightest, first left to right, then top to bottom, and in the graphic go darkest to lightest from the bottom to the top.

Source: International Energy Agency, CO₂ Emissions From Fuel Combustion, 2010 Edition http://www.iea.org/co2highlights/co2highlights.pdf © OECD/IEA.

CO₂ emissions essentially tripled over the 18 year period shown, reflecting China’s robust expansion in all areas of economic activity over this time.  Electricity generation and heating is responsible for a large fraction of China’s CO₂ emissions; as seen in the graphic, this portion of the emissions increased greatly over 2002-2008.  Electricity accounted for 48% of China’s emissions in 2008; 79% of the electricity was generated from coal.  Most of the remainder originated from hydroelectric power.

Energy Intensity.  As a developing country with a population of 1.3 billion people, the per capita energy use of energy in China is far lower than in the U. S. (see the following graphic).

Total primary energy consumption per capita for the U. S. (rose) and China (yellow) from 2000 to 2009 (as estimated), in metric tons of oil equivalent.

Source: International Energy Agency.  Format © The Wall Street Journal (http://online.wsj.com/article/SB10001424052748703720504575376712353150310.html?mod=googlenews_wsj#project%3DCHENERGY0719%26articleTabs%3Dinteractive). 

The trend in China increases sharply over the decade shown whereas that for the U.S. is steady or even declining in 2008 and 2009.

The emissions intensity based on economic activity for the five nations of the world with the highest emissions all decreased between 1990 and 2008 (see the following graphic, following the vertical axis only).  China made

Trends in CO₂ emission intensities for the top 5 emitting countries over the period 1990 (tan) to 2008 (brown).  The size of each circle represents total CO2 emissions from the country in that year.  Thus this graphic represents three pieces of information: the population intensity of CO₂ emission (tonnes per capita) along the horizontal axis; the economic intensity of CO₂ emission (kilograms CO₂ per 2000 US$ of gross domestic product (GDP) along the vertical axis; and the total amount of CO₂ emitted in 1990 and 2008, proportional to the size of the circles.

Source: International Energy Agency, CO₂ Emissions From Fuel Combustion, 2010 Edition http://www.iea.org/co2highlights/co2highlights.pdf © OECD/IEA

significant progress by this criterion.  China’s emissions intensity based on population, however, almost doubled over this period (following the horizontal axis), and the total amount of CO₂ emissions almost tripled (see the area of the circles, and the graphic third above). 

China’s Predicted Future Energy Use.  The World Energy Outlook, issued by the EIA in November 2010, projected China’s energy usage and sources of energy for the period 2008 to 2035.  Among its predictions, the graphic below shows anticipated electricity generated from coal for China and other regions of the world, based on its New Policies Scenario.  This scenario seeks to predict behavior based on the modest voluntary recommendation included in the Copenhagen Accord of 2009.  Coal-generated electricity in China (brown-orange) is predicted approximately to double in this time period. 

Reproduced from World Energy Outlook 2010 © OECD/IEA.  Data to the left of the solid vertical line at the year 2008 are actual.   Coal-fired generation beyond 2008, to the right of the vertical line, is a projection based on the New Policies Scenario.   A watt-hour (Wh) is a unit of energy used in characterizing electricity generation and usage. TWh, terawatt-hours, or thousands of billion watt-hours.  The author presumes TWh refers to annual production of electric energy.

The predicted changes in the various sources from which primary energy is obtained in the period 2008-2035 is shown for China (brown-orange) in the graphic below.

Reproduced from World Energy Outlook 2010 © OECD/IEA. 

The color scheme is the same as in the first graphic, above.  The bars for coal and oil to the left of the “0” line represent decreases in usage for these fuels over the period 2008-2035 in the OECD countries.  Single-handedly China accounts for profound increases in demand for fossil fuels over this period, as well as for renewable sources of energy.  Mtoe, energy demand (consumption) expressed as equivalents of millions of tons of oil.

Under the New Policies Scenario, China is predicted to consume major amounts of greenhouse gas-producing fuels (coal, oil and gas) over this period, as well as having significant increases in energy equivalents from non-emitting sources (nuclear, hydroelectric and other renewables).

CHINA’S 12^th FIVE YEAR PLAN

Energy and Emissions Targets.  China’s 12^th FYP was made public in March 2011.  The overall Chinese economy is projected to grow at a rate of 7% per year over 2011-2015.  In the face of this growth, the FYP pledges significant reductions in energy intensity and CO₂ intensity over this time, although total usage and emissions increase.

Energy results obtained in China in the five year plan just concluded, and planned for the coming 12^th and 13^th Five Year Plans, extending to 2020, are shown in the table below (The Climate Group).

KEY ENERGY AND CLIMATE POLICY GOALS AND INDICATORS IN CHINA 2006–2020

	11th FYP (2006-2010) (TARGET)	11th FYP (ACTUAL)	12th FYP (2011-2015) (TARGET)	13th FYP (2016-2020) (TARGET)
INDICATORS
ENERGY INTENSITY REDUCTION IN 5 YRS	20.0%	19.1%	16.0%	NOT SET
CARBON INTENSITY REDUCTION IN 5 YRS	NOT SET		17.0%	40-45% vis-à-vis 2005
NON-FOSSIL ENERGY (% OF PRIMARY ENERGY)	10.0%	9.6%	11.4%	15.0%
GROWTH RATES
PRIMARY ENERGY CONSUMPTION (ANNUAL GROWTH)	4.0%	6.3%	3.75-5%	-
ELECTRICITY ENERGY CONSUMPTION (ANNUAL GROWTH)	-	11.0%	8.5%	-5.5%
ELECTRICTY GENERATING CAPACITY (ANNUAL GROWTH)	8.4%	13.2%	8.5%	-5.0%
GDP (ANNUAL GROWTH)	7.5%	10.6%	7.0%	-

Source: Delivering Low Carbon Growth – A Guide to the 12th Five Year Plan http://www.theclimategroup.org/publications/2011/3/7/delivering-low-carbon-growth-a-guide-to-chinas-12th-five-year-plan/.

The goals for energy intensity and carbon intensity for the 12^th FYP are the first time that China has stated such objectives.  It is noteworthy that the goal for the reduction in carbon intensity for the 13^th FYP is 40-45% below 2005 levels.  However, because of the large annual growth rate of GDP which is naturally energy-intensive, China predicts its actual CO₂ emissions will rise by 1.15 gigatons (Gt) in the 12th FYP, compared to increases of 2.2 Gt in each of the 10^th and 11^th FYPs.  This projected amount of CO₂ emissions, 8.17 Gt, is lower by 0.83 gigaton from potential emission if no policy were in place.  According to The Climate Group, this should permit CO₂ emissions by China to reach a peak before 2030 (Note 2).  

From 2010 to 2015, overall electric generating capacity will increase from about 1000 GW to about 1400 GW.  This increase includes a major and growing amount of generating capacity from coal, a very slight increase in hydroelectric generating capacity, and increases totaling about 1% of total capacity in 2010 to about 3% of total capacity in 2015, for renewable energy. China intends to add 260 GW of coal-fired electric generation, although coal’s share of the energy mix will fall from 72% to 63%.  Generation of energy from fossil fuels is expected to reach a maximum rate of 4 billion tonnes of coal equivalent by 2015, according to Zhang Guobao, former head of the country's National Energy Administration,  Reducing the rate of increase of CO₂ emissions will be aided by beginning to install integrated gas combined cycle coal plants, adding 40 GW of nuclear generation (identified prior to the Japanese earthquake) to its currently installed capacity of 10 GW, 70 GW of new hydroelectric capacity and 50-90 GW of new wind energy. The share of these sources will increase to 11.4%, up from 8.3% in the 11^th FYP.  So far CO₂

capture and storage remains a subject for research and development.     

Market-based incentives.  During the 12^th FYP China will create pilot projects directed toward placing a price on greenhouse gas emissions.  Whether by direct taxes or by a carbon trading program, several provinces plan to set up pilot programs that provide economic incentives to constrain emissions.

Energy efficiency initiatives.  During the 11^th FYP China instituted the “Top 1,000 Program” devoted to identifying the 1,000 installations around the country with the poorest energy efficiency, and improving or closing them.  As part of this program, generating facilities responsible for 72 GW were closed. 

In the 12^th FYP this program will be extended to a “Top 10,000 Program”.  Clearly this will be a greater challenge, and will require increased involvement of regional and local authorities.

Additionally, the new plan reorients the importance placed on various sectors of the economy.  New emphasis is placed on energy saving and environmental protection, on new non-fossil fuel-based energy sources, and on clean energy vehicles including plug-in hybrid electric vehicles, electric cars and fuel cell vehicles.  The plan also targets adding 35,000 km (21,700 mi) high speed rail connecting China’s major cities, and expansion of urban mass transit.  8,400 km (5,200 mi) of high speed rail was in place in 2010.  Efficiency awareness by measures such as appliance labeling and improvements in housing energy usage also are planned to contribute to efficiency gains.

Reforestation.  An important aspect of the Cancun Agreements was the preservation of and addition to world-wide forests as carbon sinks.  The 12^th FYP envisions adding significantly to new forest cover, by 12.5 million hectares (30.9 million acres; 48,200 sq. mi.) by 2015.  More broadly, China’s objective is to increase forest cover by 40 million hectares (98.8 million acres; 154,000 sq, mi.) over 2005 levels by 2020.

Measurement and reporting of greenhouse gas emissions, and validation of the results was an important feature of the Cancun Agreements.  In its 12^th FYP China is committing to develop these capabilities in response to its responsibilities under the Agreements.  They are clearly necessary for the success of any market-based programs.

CONCLUSION

China’s Apparent Change in Outlook.  China is increasing its efforts to rein in emissions of greenhouse gases and to conform with other aspects of the Cancun Agreements, which were concluded in December 2010 under the auspices of the U. N. Framework Convention on Climate Change.  The participating nations committed to limiting the average global temperature increase to 2°C (3.6°F) or less as a result of emissions of man-made greenhouse gases, i.e., limiting atmospheric CO₂ concentrations to 450 parts per million (ppm) or less.  Reflecting on the deliberations at the Cancun conference, the U. S. representative, Todd Stern, noted that China may now realize that it is in its own interest to work toward reducing global warming emissions. 

Comments on the 12^th Five Year Plan.  One commentator believes, in response to the 12^th FYP, that China is now undertaking to work toward reducing greenhouse gas emissions to an extent greater even than called for to stabilize CO₂ concentrations at 450 ppm.

According to several analysts, China Increasingly understands the importance of including greenhouse gas limitations in its economic development objectives.  Building low-carbon industries is now a central feature of the country’s development strategy.  It views reducing carbon intensity as not only an environmental objective, but one that contributes to China’s competitiveness in the world’s economy. 

An important remaining challenge, however, is China’s continued near-term reliance on coal as a source of energy; this may compromise its commitment to a low-carbon economy.  According to Mark Kenber, CEO, The Climate Group, China’s commitment to reducing carbon emissions “should be a wake-up call to Europe and North America policy-makers that a clean tech race is well under way. This bold policy plan unequivocally aims to set China on a clear low carbon trajectory and will ensure the country remains a major global hub for clean energy technologies for years to come.”

Relation to Policies in Other Regions.  Early in 2011 the European Union put forth a policy of reducing greenhouse gases by at least 80% by 2050. 

In the face of China’s apparent adoption of policies that support the Cancun Agreements, and of the European Union’s recent action, the U. S. remains the only emitter of large amounts of greenhouse gases that does not have a national energy plan.  President Obama recently outlined certain energy objectives directed primarily at reducing the reliance of the U. S. on imports of crude oil.  As a result of the U. S. Supreme Court decision in Massachusetts et al. v. Environmental Protection Agency (EPA) et al.

decided April 2, 2007, the EPA is in the process of preparing greenhouse gas emissions standards and issuing them by the end of 2012.  This process is currently the subject of active Congressional debate, directed to proposed legislation that would bar the EPA from issuing such regulations. 

The absence of a national energy policy in the U. S. has led in recent years to three regional programs, the Western Climate Initiative, the Midwest Greenhouse Gas Reduction Accord, and the northeast and mid-Atlantic Regional Greenhouse Gas Initiative.  This patchwork of plans begs for a single nation-wide plan.

Notes

1. The International Energy Agency (IEA) is an autonomous organization associated with the Organization for Economic Cooperation and Development (OECD).  The IEA has 28 member states among developed countries of the world, including most European countries, the U. S., Japan, and Australia.

Xu, Bo et al. (June 1, 2010). An analysis of Chinese carbon dioxide mitigation strategy. Royal Institute of Technology, Sweden. Retrieved February 15, 2010 from www.kadinst.hku.hk/sdconf10/Papers_PDF/p263.pdf

© 2011 Henry Auer