Tag Archives: China

Other bathtubs – capital

China is rapidly eliminating old coal generating capacity, according to Technology Review.

Draining Bathtub

Coal still meets 70 percent of China’s energy needs, but the country claims to have shut down 60 gigawatts’ worth of inefficient coal-fired plants since 2005. Among them is the one shown above, which was demolished in Henan province last year. China is also poised to take the lead in deploying carbon capture and storage (CCS) technology on a large scale. The gasifiers that China uses to turn coal into chemicals and fuel emit a pure stream of carbon dioxide that is cheap to capture, providing “an excellent opportunity to move CCS forward globally,” says Sarah Forbes of the World Resources Institute in Washington, DC.

That’s laudable. However, the inflow of new coal capacity must be even greater. Here’s the latest on China’s coal output:

ChinaCoalOutput

China Statistical Yearbook 2009 & 2009 main statistical data update

That’s just a hair short of 3 billion tons in 2009, with 8%/yr growth from ’07-’09, in spite of the recession. On a per capita basis, US output and consumption is still higher, but at those staggering growth rates, it won’t take China long to catch up.

A simple model of capital turnover involves two parallel bathtubs, a “coflow” in SD lingo:

CapitalTurnover

Every time you build some capital, you also commit to the energy needed to run it (unless you don’t run it, in which case why build it?). If you get fancy, you can consider 3rd order vintaging and retrofits, as here:

Capital Turnover 3o

To get fancier still, see the structure in John Sterman’s thesis, which provides for limited retrofit potential (that Gremlin just isn’t going to be a Prius, no matter what you do to the carburetor).

The basic challenge is that, while it helps to retire old dirty capital quickly (increasing the outflow from the energy requirements bathtub), energy requirements will go up as long as the inflow of new requirements is larger, which is likely when capital itself is growing and the energy intensity of new capital is well above zero. In addition, when capital is growing rapidly, there just isn’t much old stuff around (proportionally) to throw away, because the age structure of capital will be biased toward new vintages.

Hat tip: Travis Franck

Copenhagen – the breaking point

Der Spiegel has obtained audio of the heads of state negotiating in the final hours of COP15. Its fascinating stuff. The headline reads, How China and India Sabotaged the UN Climate Summit. This point was actually raised back in December by Mark Lynas at the Guardian (there’s a nice discussion and event timeline at Inside-Out China). On the surface the video supports the view that China and India were the material obstacle to agreement on a -50% by 2050 target. However, I think it’s still hard to make attributions about motive. We don’t know, for example, whether China is opposed because it anticipates raising emissions to levels that would make 50% cuts physically impossible, or because it sees the discussion of cuts as fundamentally linked to the unaddressed question of responsibility, as hinted by He Yafei near the end of the video. Was the absence of Wen Jiabao obstruction or a defensive tactic?  We have even less information about India, merely that it objected to “prejudging options,” whatever that means.

What the headline omits is the observation in the final pages of the article, that the de facto US position may not have been so different from China’s:

Part 3: Obama Stabs the Europeans in the Back

But then Obama stabbed the Europeans in the back, saying that it would be best to shelve the concrete reduction targets for the time being. “We will try to give some opportunities for its resolution outside of this multilateral setting … And I am saying that, confident that, I think China still is as desirous of an agreement, as we are.”

‘Other Business to Attend To’

At the end of his little speech, which lasted 3 minutes and 42 seconds, Obama even downplayed the importance of the climate conference, saying “Nicolas, we are not staying until tomorrow. I’m just letting you know. Because all of us obviously have extraordinarily important other business to attend to.”

Some in the room felt queasy. Exactly which side was Obama on? He couldn’t score any domestic political points with the climate issue. The general consensus was that he was unwilling to make any legally binding commitments, because they would be used against him in the US Congress. Was he merely interested in leaving Copenhagen looking like an assertive statesman?

It was now clear that Obama and the Chinese were in fact in the same boat, and that the Europeans were about to drown.

This article and video almost makes up for Spiegel’s terrible coverage of the climate email debacle.


Related analysis of developed-developing emissions trajectories:

You can’t fix emissions inequity with more emissions

The AWG-LCA draft agreement

The AOSIS draft agreement

Danish text – emissions trajectories

One child at the crossroads

China’s one child policy is at its 30th birthday. Inside-Out China has a quick post on the debate over the future of the policy. That caught my interest, because I’ve seen recent headlines calling for an increase in China’s population growth to facilitate dealing with an aging population – a potentially disastrous policy that nevertheless has adherents in many countries, including the US.

Here are the age structures of some major countries, young and old:

population structure

Vertical axis indicates the fraction of the population that resides in each age category.

Germany and Japan have the pig-in-the-python shape that results from falling birthrates. The US has a flatter age structure, presumably due to a combination of births and immigration. Brazil and India have very young populations, with the mode at the left hand side. Given the delay between birth and fertility, that builds in a lot of future growth.

Compared to Germany and Japan, China hardly seems to be on the verge of an aging crisis. In any case, given the bathtub delay between birth and maturity, a baby boom wouldn’t improve the dependency ratio for almost two decades.

More importantly, growth is not a sustainable strategy for coping with aging. At the same time that growth augments labor, it dilutes the resource base and capital available per capita. If you believe that people are the ultimate resource, i.e. that increasing returns to human capital will create offsetting technical opportunities, that might work. I rather doubt that’s a viable strategy though; human capital is more than just warm bodies (of which there’s no shortage); it’s educated and productive bodies – which are harder to get. More likely, a growth strategy just accelerates the arrival of resource constraints. In any case, the population growth play is not robust to uncertainty about future returns to human capital – if there are bumps on the technical road, it’s disastrous.

To say that population growth is a bad strategy for China is not necessarily to say that the one child policy should stay. If its enforcement is spotty, perhaps lifting it would be a good thing. Focusing on incentives and values that internalize population tradeoffs might lead to a better long term outcome than top-down control.

Idle wind in China?

Via ClimateProgress:

China finds itself awash in wind turbine factories

China’s massive investment in wind turbines, fueled by its government’s renewable energy goals, has caused the value of the turbines to tumble more than 30 percent from 2004 levels, the vice president of Shanghai Electric Group Corp. said yesterday.

There are now “too many plants,” Lu Yachen said, noting that China is idling as much as 40 percent of its turbine factories.

The surge in turbine investments came in response to China’s goal to increase its power production capacity from wind fivefold in 2020.

The problem is that there are power grid constraints, said Dave Dai, an analyst with CLSA Asia-Pacific Markets, noting that construction is slowed because of that obstacle. Currently, only part of China’s power grid is able to accept delivery of electricity produced by renewable energy. “The issues with the grid aren’t expected to ease in the near term,” he said. Still, they “should improve with the development of smart-grid investment over time.”

The constraints may leave as much as 4 gigawatts of windpower generation capacity lying idle, Sunil Gupta, managing director for Asia and head of clean energy at Morgan Stanley, concluded in November.

China has the third-largest windpower market by generating capacity, Shanghai Electric’s Yachen said.

It’s tempting to say that the grid capacity is a typical coordination failure of centrally planned economies. Maybe so, but there are certainly similar failures in market economies – Montana gas producers are currently pipeline-constrained, and the rush to gas in California in the deregulation/Enron days was hardly a model of coordination. (Then again, electric power is hardly a free market.)

The real problem, of course, is that coal gets a free ride in China – as in most of the world – so that the incentives to solve the transmission problem for wind just aren’t there.

Will the Chinese Miracle End Soon?

Just after writing my last post on China, I found this remarkably candid SpiegelOnline interview with Pan Yue, China’s Deputy Minister of Environment. A few excerpts:


Pan: Of course I am pleased with the success of China’s economy. But at the same time I am worried. We are using too many raw materials to sustain this growth. To produce goods worth $10,000, for example, we need seven times more resources than Japan, nearly six times more than the United States and, perhaps most embarrassing, nearly three times more than India. Things can’t, nor should they be allowed to go on like that.

Pan: This miracle will end soon because the environment can no longer keep pace. Acid rain is falling on one third of the Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens does not have access to clean drinking water. One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner. Finally, five of the ten most polluted cities worldwide are in China.

Pan: …Because air and water are polluted, we are losing between 8 and 15 percent of our gross domestic product. And that doesn’t include the costs for health. …

While I was building an electric power model for China in 2005, I saw estimates of 7% GDP losses from health impacts of air pollution, so this strikes me as plausible. One could argue that even 20% of GDP lost to pollution would not be a big deal, because it represents less than three years of growth. But that is to ignore a fundamental valuation problem: that increased material consumption is probably a poor substitute for lost environmental services and especially health problems. In a utopian world where China’s development path reflected individual preferences, are these the choices we would see?

8 to 15 percent is quite a bit more than the 3% in China’s Green GDP accounts, which in any case have been put on hold due to lack of support. On other measures, China’s HDI (a measure of life expectancy, literacy, educational attainment, and GDP per capita) is going up, but its GPI peaked in 2002. The World Bank shows adjustments shaving 16 percentage points off China’s national savings, but the net remains positive. China’s ecological footprint is in deficit territory.

SPIEGEL: But the economic growth fanatics in Beijing will still likely carry on just as before.

Pan: They’re still playing the lead role — for now. For them, the gross domestic product is the only yardstick by which to gauge the government’s performance. But we are also making another mistake: We are convinced that a prospering economy automatically goes hand in hand with political stability. And I think that’s a major blunder. The faster the economy grows, the more quickly we will run the risk of a political crisis if the political reforms cannot keep pace. If the gap between the poor and the rich widens, then regions within China and the society as a whole will become unstable. If our democracy and our legal system lag behind the overall economic development, various groups in the population won’t be able to protect their own interests.

This is crucial. Even communities in the developed world that experience rapid growth go through substantial pain. In part, that’s because growth puts pressure on resources (like open space, freedom from noise and pollution) previously regarded as free, for which property rights or other control mechanisms must be established. If institutions don’t keep up, conflict ensues.

And there’s yet another mistake in this thinking…..

SPIEGEL: Which one?

Pan: It’s the assumption that the economic growth will give us the financial resources to cope with the crises surrounding the environment, raw materials, and population growth.

SPIEGEL: Why can’t that work?

Pan: There won’t be enough money, and we are simply running out of time. Developed countries with a per capita gross national product of $8,000 to $10,000 can afford that, but we cannot. Before we reach $4,000 per person, different crises in all shapes and forms will hit us. Economically we won’t be strong enough to overcome them.

Counting on future growth to solve the problems of past growth is a classic escalation trap – Herman Daly’s “Hair of the Dog that Bit You” from the Catechism of Growth Fallacies in Steady State Economics. Daly cites Wallich, “Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable.” When the growth engine sputters, the social repercussions will be serious.