Solutions to China’s pollution exist, but where’s the political will to implement them?
Andy Xie says shifting all coal burning for energy from factories to power plants would be one quick fix for China’s environment; switching diesel commercial vehicles to natural gas, another
As winter tightens its grip and poisonous smog again blankets many cities, the earlier optimism in the fight against air pollution has turned to despair once more. Air pollution, like many other ills that plague China today, is usually marketed to the people as an inevitable by-product of economic development. But system failures, rather than development per se, are the real reason for the choking air.
Burning coal is the No 1 source of air pollution. This is quite strange when one considers that Germany consumes more coal per capita than China, and the worst kind – brown coal – to boot. Why don’t people hear about terrible pollution in Germany? The truth is that modern thermal power plants can be equipped to keep pollution to a minimum. We are not talking about carbon dioxide here, which is not a local pollution issue and must be handled in the global context. Modern Chinese thermal power plants are technologically world-class. If operated appropriately, they can keep pollution to a minimum.
China’s pollution is mainly due to where the coal is burnt rather than how much is used. Power plants account for less than half of coal consumption. The amount of coal burnt for energy is about the same elsewhere as in power plants. For example, cement kilns, aluminium smelters and steel mills usually burn coal to produce their own power rather than getting it from the grid. Burning coal for heating in winter is another significant source.
If China wants to improve the environment quickly, it must shift all coal burning for energy to power plants. This would make good sense in the current environment of overcapacity. China’s power plants saw their capacity utilisation rate drop by 7.5 per cent in the first three quarters of last year. It was probably a lot worse in the last quarter. In 2016, the decline will be even more severe. If coal burning was moved to power plants, it would use up the existing capacity. There would be limited additional cost for the economy as a whole.
The problem is that many factories pay little or nothing for their coal consumption. They sometimes get free coal mines as part of their investment. Hence, they resist paying for electricity. This distribution issue is holding back the fight for clean air. China has a very powerful central government. Unfortunately, when its power is needed to resolve such issues, it becomes powerless.
Vehicle emissions are the second serious source of pollution, especially in large cities. Commercial vehicles that burn diesel contribute disproportionately. Despite claims to the contrary by Chinese energy companies, the diesel made in China is too dirty to use in developed economies.
A quick solution would be to shift commercial vehicles to natural gas. It would involve a limited number of vehicles and could achieve a big difference quickly. Unfortunately, politics is working the other way. While the natural gas price has collapsed elsewhere, it is still sky-high in China, because Chinese energy companies signed supply deals at high prices and are sticking to them to pass the losses to consumers. As China’s oil price is more responsive to international prices, there has been a shift to oil from gas, which is terrible for the environment.
China has also been stimulating car sales. While the overall market is stagnant, the cheap SUV segment has been surging. This is the worst development for the environment. It is difficult to see any policy consistency on the environment. It seems that when there is a conflict between money and the environment, the latter always loses.
Early last year, as the PM2.5 particle readings dropped, there was optimism in the air. The improvement was probably due to a weakening economy rather than any policy effectiveness. Major coal producers reported a reduction of about 10 per cent in output last year. Coal imports fell by a third. Burning less coal could have explained all the improvement.
China’s landscape is shaped by the collision between the Eurasian and Indian subcontinents. The resulting wrinkles dominate the landscape. Many cities are surrounded by mountains, making them especially vulnerable to smog. A city like Beijing, surrounded by mountains on three sides, becomes a smog-making machine when six million cars are stuck in traffic. The existing model of building cities for automobiles is just not viable for China.
The elite in Beijing lock themselves in and turn up their air purifiers wherever they are, even in their cars. They essentially live in five-star jails. When they are really angry, they pressure Hebei officials to shut factories, which triggers production to migrate south, taking the pollution with it.
In addition to the geographical constraints, population density is an important factor. China’s population is four times that of the US, with less than half the habitable land. China simply cannot go down the same path as the US in relying on automobiles for mass transport. The economy needs to shift away from the auto industry. The current dependency on it for GDP and fiscal revenue is a terrible addiction.
Instead of pushing for ever-increasing production and sales, China should mandate all personal vehicles to be emission-free in 10 years. In addition to helping the environment, it could spark innovations that would put China on top of the automobile industry.
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China needs to rethink its development model now. So many challenges, from economic stagnation and financial crises to environmental catastrophe, are hitting at the same time because the country has been drifting along with an outdated development model and governing system.
In responding, policymakers’ instincts are to find more band-aids to patch things up. But that will only lead to more and bigger crises down the road.
Andy Xie is an independent economist