China Makes Western CO2 “control” Pointless

Coal Consumption in China

Coal Consumption in China

China is the worlds largest energy consumer

In recent news we had that China has surpassed the USA as the worlds largest energy consumer. It’s now the “Big Boy” on the block. All the proposed CO2 “control” treaties to date have given a ‘free pass’ to the poor underdeveloped world on the theory that they needed special favors to ‘catch up’ to the evil west that had suppressed them. Well, folks, China is now the “Big Boy” on the block. Not some little backwater nobody striving to get their first light bulbs and flush toilettes. If you want to “control” CO2 emissions, you absolutely must include China. And that is just not going to happen.

http://www.businessweek.com/news/2010-07-20/china-passes-u-s-as-world-s-biggest-energy-consumer.html

China Passes U.S. as World’s Biggest Energy Consumer

July 20, 2010, 5:43 AM EDT

July 20 (Bloomberg) — China overtook the U.S. as the world’s biggest energy user last year, emphasizing that developing nations are driving global growth, according to the International Energy Agency.

China uses more coal than anything else

China is a coal based energy market. Somewhere over 70% of their energy consumption comes from coal. Exact numbers are hard to come by, and changing rapidly as they are growing like a weed. But the simple and well attested fact is they mostly use coal. So the CO2 “footprint” from energy usage in China is far higher than in other counties, such as the USA, that use more oil and natural gas in the mix.

http://www.eia.doe.gov/cabs/China/Coal.html

Coal makes up 70 percent of China’s total primary energy consumption, and China is both the largest consumer and producer of coal in the world. China holds an estimated 114.5 billion short tons of recoverable coal reserves, the third-largest in the world behind the United States and Russia and about 13 percent of the world’s total reserves. There are 27 provinces in China that produce coal. Northern China, especially Shanxi Province, contains most of China’s easily accessible coal and virtually all of the large state-owned mines. Coal from southern mines tends to be higher in sulfur and ash, and therefore unsuitable for many applications. In 2008, China consumed an estimated 3 billion short tons of coal, representing nearly 40 percent of the world total and a 129 percent increase since 2000. Coal consumption has been on the rise in China over the last eight years, reversing the decline seen from 1996 to 2000. More than 50 percent of China’s coal use in 2006 was in the non-electricity sectors, primarily in the industrial sector. The other 50 percent is used in the power sector.

Putting “controls” on US energy use (or European or Australian or New Zealand or Russian or…) will simply move the usage to China, increasing their economic growth at the expense of others and moving more energy usage TO COAL and away from more environmentally friendly fuels and sources.

China is growing energy usage fast

Even in the present western economic recession, China is growing, fast. And that comes with very fast energy consumption growth.

http://af.reuters.com/article/metalsNews/idAFTOE66J03X20100720

BEIJING July 20 (Reuters) – China is likely to consume about 11 percent more electricity this year than in 2009, with second-half growth easing on the government’s curb on heavy users and a higher year-ago base, the National Energy Administration said.

And a bit further down:

China, the world’s largest coal consumer, brought in a record amount of foreign coal last year — about 126 million tonnes — on surging demand boosted by a runaway steel sector and heating demands during a cold winter.

The largest consumer is also growing the fastest. Restrictions on other countries will only increase that rate of growth and increase the total CO2 produced (as China is not as efficient nor improving in efficiency as as fast as the western economies).

In the computer world, this was covered by Amdahl’s Law. The thing that improves the most just moves the problem onto the thing that is not improved as fast. So you can move the “problem” to China, but you can’t fix it.

Conclusion? China dominates. Nothing else matters.

Any “CO2 Treaty” or “Cap and Trade” ( AKA Cap ‘N Tax) plan is doomed to fail. Horridly and catastrophically.

It will increase costs to produce in the countries that sign up for such a plan, and those increased costs will move the most energy intensive industries to the lowest cost producers. The lowest cost producer is now China, and we see such industries already moving to China at a dizzying pace. Adding more “forcing” to that process will only accelerate it.

China mostly uses coal, and will use ever more of it over time. They are locking up coal supplies world wide by purchasing them or signing 20+ year contracts. They have no intension of reducing coal usage. They have also recently bought large chunks of Canadian Tar Sands, so you will find them being used too, despite their high CO2 production.

China is not improving energy efficiency as fast as the west, so any move of processes to China will make more CO2, not less.

Add those three together and you find that Cap ‘N Tax and Koyoto like treaties will result in a net increase in CO2 production as the sources simply move to China. This is NOT a theoretical, it’s already happening (and in large part has happened. Look at the size and growth of China steel production, for example.)

Trading Note

This implies that investments in western coal mines that sell to China, and in rail and bulk shippers (especially Chinese bulk shippers) will be winners in any agreement reached in Mexico. Further, investments in energy intensive industries, such as metal refining or cement production, would be best made in China. Watch China grow, and as the charts show the timing is right, send your money to China in direct proportion to the CO2 generation there. Coal is money, so indirectly “CO2 is money” and CO2 production can be an investment guide.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in AGW Science and Background, Economics - Trading - and Money, Favorites. Bookmark the permalink.

8 Responses to China Makes Western CO2 “control” Pointless

  1. Luís says:

    Hi Michael, some interesting observations. China will consume more than half of the Coal extracted in the whole World in 2010. Consumption has been growing at 10%, if this trend holds, it will double between now and 2017. Where will that Coal come form?

    You can read more about it here:

    http://europe.theoildrum.com/node/6700

    There are reasons to suspect that BP’s data is flawed. In all likelihood China has become a permanent net importer in 2009.

    Regards.

  2. oldtimer says:

    Your points are well made. It is clear that the export of manufacturing operations to China contibuted to the UK`s “success” in reducing CO2 emissions as part of its Kyoto treaty obligations.

    This is evident even with very small startup businesses. One of the investments in a Venture Capital Trust (a UK format that provides tax breaks to investors in start ups) designs and develops software and the small IC boards for MESH computing applications. Even the manufacture of these c1″ square circuit boards is outsourced to China. It is normal for all the startups in the portfolio that rquire a manufacturing process to look first to China.

    In the UK one of the biggest capital raising operations this year was by Fidelity for its China Fund. It raised well over £400 million. The fund manager, Anthony Bolton, has been fantastically successful over the past twenty years or so in investing in special situations and developing markets.

  3. E.M.Smith says:

    Very interesting link, Luis. That makes it about 10 years until China consumes ALL of present world production rate.

    I see no way CO2 production can ever be reduced given that China has given the world a raspberry over slowing emissions in prior talks. So it’s at 50% and growing 10% / year (call it 5% of global). Even non-compounded that’s 10 years to equal present world production.

    So the rest of the world could consume ZERO and in 10 years it’s done nothing.

    @Oldtimer: Yeah, here in Silly Con Vally about 10 years ago the Venter Cap folks started to demand a China Strategy if you were making a “pitch”. Now you can rent major facilities for 50 CENTS a square foot. (Used to be $4/square). Whole neighborhoods of ‘start-up tech’ industrial park where I made money on contracts doing IT for all the new startups are now nearly ghost towns. And the State of California thinks the answer to their budget shortfall is to raise taxes… On Whom? What’s left is already busy leaving.

    Ah well, I just hope the Chinese are nice landlords…

  4. Ed says:

    On average world temperature is +15⁰C. This is sustained by the atmospheric Greenhouse Effect 33⁰C. Without the Greenhouse Effect the planet would be un-inhabitable at -18⁰C. The Biosphere and Mankind need the Greenhouse Effect.
    So just running the numbers by roughly translating the Greenhouse Effect into ⁰C:
    • Greenhouse Effect = 33.00⁰C
    • Water Vapour accounts for about 95% of the Greenhouse Effect = + 31.35⁰C
    • Other Greenhouse Gasses GHGs account for 5% = ~1.65⁰C
    • CO2 is 75% of the effect of all GHGs = 1.24⁰C
    • Most CO2 in the atmosphere is natural, more than 93%:
    • Man-made CO2 is less than 7% of total atmospheric CO2 = 0.087⁰C:
    • so closing carbon economies of the Whole World could only ever achieve a virtually undetectable <1/10 ⁰C.
    As the temperature reduction that could be achieved by closing the whole of the World’s Carbon economies is less than 1/10 ⁰C, how can the Green movement and their supporting politicians think that their remedial actions can limit warming to only + 2.00 ⁰C?
    See: http://www.youtube.com/watch?v=Wy0_SNSM8kg
    So the probability is that any current global warming is not man-made and in any case such warming could be not be influenced by any remedial action taken by mankind however drastic.
    If this is really so, then the prospect should be greeted with Unmitigated Joy:
    • concern over CO2 as a man-made pollutant can be discounted.
    • it is not necessary to damage the world’s economy to no purpose.
    • if warming were happening, it would lead to a more benign and healthy climate for all mankind.
    • any extra CO2 is already increasing the fertility of all plant life and thus enhancing world food production.
    • a warmer climate, within natural variation, would provide a future of greater opportunity and prosperity for human development. This has been well proven in the past and would now especially benefit the third world.
    Nonetheless, this is not to say that the world should not be seeking more efficient ways of generating its energy, conserving its energy use and stopping damaging its environments. And there is a real need to wean the world off the continued use of fossil fuels simply on the grounds of:
    • security of supply
    • increasing scarcity
    • rising costs
    • their use as the feedstock for industry rather than simply burning them.
    The French long-term energy strategy with its massive commitment to nuclear power is impressive, (85% of electricity generation).
    Even if one is concerned about CO2, Nuclear Energy pays off, French CO2 emissions / head are the lowest in the developed world.
    However in the light of the state of the current solar cycle, it seems that there is a real prospect of damaging cooling occurring in the near future for several decades.

  5. Bruce of Newcastle says:

    Luis – All I can say is that the Aussie coal ports are expanding capacity as rapidly as they can, and the rail lines in my city look like peak hour with coal trains packed in as tightly they can manage with safety considerations. A new coal port in Queensland was announced a week ago, with planned capacity 200 Mt/a – which alone is the size of the 2009 Aussie contribution on the website you linked to.

    Sometimes the queue of coal ships waiting outside Newcastle is so long it makes international news. I think our record was 75 waiting off the coast, usually you can see 50 or so most days.

    Not much sign of China slowing down coal growth, although they did announce another nuclear power station this time for Fangchengchang city in Guangxi a few days ago.

  6. E.M.Smith says:

    @Ed: I agree with much of what you say, but two minor points:

    1) ANY carbon source can be a chemical feedstock, even hay and trees. We never run out of “petrochemical” feedstock unless we blast all the carbon on the planet into outer space. Since THE most common rock is limestone and it releases CO2 in making cement ( CO2 being 1/2 of ‘synthesis gas’ that feedstocks get turned into for making ‘petrochemicals’, the other half being hydrogen that we can get from water…) there really is no need to ever preserve any coal or oil for ‘feedstock’. This is not a hypothetical. Rentech is making fuels, chemicals and fertilizers from TRASH as feedstock. We don’t have a shortage of trash…

    2) There is no energy shortage and there never will be. The whole “scarcity” idea is just terribly terribly broken:

    https://chiefio.wordpress.com/2009/03/20/there-is-no-energy-shortage/

    https://chiefio.wordpress.com/2009/05/29/ulum-ultra-large-uranium-miner-ship/

    https://chiefio.wordpress.com/2009/05/08/there-is-no-shortage-of-stuff/

    We really OUGHT to reduce our energy use for reasons involving preservation of land (i.e. I’d like to keep the Virginia mountains around… ) and species, and for increased profit from more efficiency; but not due to some idealized ‘shortage’ idea.

    @Bruce of Newcastle: Good Intel!

    OK, so the Aussie coal miners are doing well.. IFF you can get rid of Sovereign Risk from the Tax Du Jour they would be a good investment…

    I’d presume the ‘bulk shippers’ are mostly Chinese Flagged? I’ll have to learn what China Shipping Stocks are available… ;-)

    FWIW, I try to figure out the hard bits and put them in normal human terms. But sometimes some bits are just not tractable. Those are best left in abstruse technical terms. I’ve chosen to do a ‘style’ of alternating between “Joe Sixpack” postings and “WTF Technical”. Sometimes I’ll do the hard core hard to grasp just to get my thoughts documented, then work on a “normal human” presentation of what it all means.

    I don’t know that I can do that with the “Math of AGW” posting (how to explain an integral without teaching calculus?…) but I’ve been a pretty good tutor at times. So I won’t give up on it. But it may take a while for me to figure out how to recast it in non-jargon terms.

    The alternative is to NOT present the ‘tech talk’ version. But that leaves the tech folks with nothing to chew on…

    So I alternate.

    Sometimes the tech folks complain about things being too low a ‘content’. Sometimes the Regular Joes complain that they don’t ‘get it’. My goal is to bridge that gap as much as I can. I firmly believe that any Regular Joe can get it if explained right; and I firmly believe that Tech Folks can learn to speak plain English. I’m not sure which of those two beliefs is the most challenging, but I think it’s the “speaking plain English” part ;-)

    So for now, I alternate and try to polish my skill set at bridge building…

  7. Bruce of Newcastle says:

    I wouldn’t be investing in bulk coal shipping, the demurrage is terrible. Something like US$100,000/day per ship, and they wait off the port for as much as a month. I have no idea how they make a buck.

    As you say the problem about investing (long) in the coal mining companies themselves is that some random government sees a bucket of money the way a bear sees a bucket of honey.

    Hey I just checked Bloomberg, they say our queue is down to eleven ships! And they’re only waiting 10 days on average. Must be the new coal loader ramping up, it opened in May.

    http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=ajV2KMNj3cjQ

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