Russian gas imports won’t improve China’s air quality when Beijing continues with its policy of excessive coal consumption

  • Dmitriy Frolovskiy says Beijing may tout its growing cooperation with Russia in natural gas, but the real problem lies with China’s reliance on coal and the coal-guzzling metals industry for economic growth
PUBLISHED : Wednesday, 19 December, 2018, 2:34pm
UPDATED : Wednesday, 19 December, 2018, 10:18pm

As China clamps down on air pollution, Beijing is seeking to replace coal plants with cleaner-burning natural gas, especially for heating during winter. Consequently, China has intensified relations with Russia, one of the world’s leading gas exporters, to expand energy ties. Although increasing gas use works towards alleviating some of the tensions inherent in the generation of energy, the move doesn’t address the underlying issue of pollution – the fact that China continues to rely on coal and the coal-guzzling metals industry for economic growth.

China is the main driver behind global energy demand and further predictions suggest Beijing’s share will increase to 24 per cent in 2040, or around 27 per cent of global net demand. At the same time, Beijing is making attempts to decouple growth from carbon dioxide emissions through the implementation of better energy-efficiency policies, and – most recently – through importing Russian natural gas in an attempt to create a cleaner energy mix.

The Middle Kingdom’s desire for natural gas is rightly considered a boon for Russia. Given this growing demand, Moscow has eyed long-term energy exports to China for the best part of two decades. And there have been some successes recently: Beijing received the first seaborne gas shipment in July. Several pipeline projects transporting Siberian gas to China are nearing completion, as well.

But, while strengthening the bilateral relationship is certainly a geopolitical win, Beijing needs to be careful that its growing gas use doesn’t divert attention from the underlying problem: persistent and excessive coal consumption.

Indeed, China remains the single largest coal consumer in the world, with the resource representing more than 60 per cent of the national energy mix. This disproportionate reliance has lasting negative effects on the country’s environment, poses serious public health risks, and places pressure on the political leadership. Calls for pollution and carbon emissions to be reduced have mounted in the wake of several reports chronicling the dramatic extent of bad air and the effects of rising nitrogen dioxide and ozone levels.

Rapid change, however, is unlikely as long as the current structure of the Chinese economy remains – a structure that is powered by mountains of coal. Several diversification efforts are under way, but the black stuff remains the leading fuel of China’s aluminium and steel industry, which has been churning out excess production for years. According to estimates, most Chinese smelters are currently losing money due to low aluminium prices and high costs, rendering the industry heavily indebted.

Stung by US tariffs and sanctions, China and Russia team up in the Arctic

Although the central government instituted capacity cuts this year for both steel and aluminium production, it’s up to the local governments to implement them, based on officials’ personal assessment. Given that regional officials still very much focus on industrial output as a yardstick of success, the fact that predominantly idle capacity has been axed is not surprising, and naturally has had very little real impact on reducing air pollution.

Ironically, given such misleading figures, officials declared that government’s reduction targets had been achieved, even ahead of time. But real cuts would be easy to spot: eating into actual installed capacity would lead to commodity prices spiking.

But increases in steel and aluminium prices as a result of pollution reduction measures would also exacerbate the economic downturn. As a result, Beijing seems to have loosened its insistence on production cuts, revealing the continued central role that heavy industry occupies in China’s export-based growth model, and the delicate interplay between coal and economy activity.

Why China hasn’t seen the worst of the trade war yet

Thus, although China is moving in the right direction in diversifying its energy mix, the need to achieve economic growth at any price comes at a cost. This is not to say things will not change: with the economy projected to slow in the coming year, better implementation of plans to curtail coal consumption may follow. After all, there’s little doubt that China’s coal consumption will eventually wane as the country’s economy undergoes large structural shifts from one driven by industrial production and exports to one sustained by services and domestic consumption.

This transition should inspire more measures to accelerate the reduction in coal use on a large scale. One of the proposed solutions includes not only reducing demand from heavy industry, but also from household consumers, many of whom use coal for heating. Even with such a shift, however, using gas for heating to alleviate pollution is far from an ideal solution.

Why Made in China 2025 will miss its deadline

Last year, crippling gas shortages hit China’s Southern provinces, where most households had already dismantled their old coal-heating units. Lacking heating alternatives, local governments were forced to divert commercial gas supplies to households, in the process, depriving companies of the fuel. The disruption highlighted the need for more long-term and comprehensive efforts to tackle the intricacies of diversified energy supplies.

Why deleveraging is the wrong way to fix China’s economy

The current measures are clearly insufficient to drastically improve air quality. Although China may have scored a geopolitical win with Russia, that victory amounts to little if the Chinese public is not seeing results in the fight against pollution. Beijing should not portray Russian gas imports as adequately tackling the issue. Unless China can prove that it is serious about tackling pollution, pressure on the Communist Party will keep rising.

Dmitriy Frolovskiy is a political analyst and independent journalist. He is a consultant on policy and strategy, and has written about Russia’s foreign policy