The apparent shift in the global energy market from coal to
natural gas has shaken fossil fuel markets. As Australian resource
exporters are keenly aware, this tilt has pushed seaborne coal prices
down and improved the prospects for ocean-shipped LNG.
This change of fortunes for coal and gas has led to some unexpected and unwelcome arbitrage opportunities.
Some gas-fired utilities in Europe have switched back to burning coal, some of it displaced from the US by even cheaper shale gas there. And while Europe will in the longer term pay up for renewables and Russian gas in order to steer away from coal (which is dirtier than gas in terms of pollution and emissions), developing countries will embrace coal as a cheap energy source.
Nowhere is the reign of Old King Coal more resplendent than in China. In Global Exhaustion, the analyst Andy Lees remarks that 'it was the demand for coal that drove China's growth in the last twenty years, not the other way around.' Ultimately, he argues, China's boom is underpinned by resource exploitation. China will surely lower its energy intensity over time, but Jevon's Paradox (or 'rebound effect') predicts that improving efficiency won't lower overall energy use. In fact, it has the opposite effect.
The undesirable effects of burning coal are all too obvious. China's cities need gas. But coal now has become irresistibly cheap, especially from the landlocked mines in western China, which must freight a long way to port. Whence lies the perverse course now being pursued by some Chinese energy companies: to transform coal into gas, at the mine, and then to pipe the gas to coastal cities as a 'clean' fuel. The term 'synthetic natural gas' (SNG or syngas) was invented for this product, and it is as oxymoronic as it is cynical.
The origins of SNG are revealing. During World War II, with the Allies advancing on its oilfields in the Caucasus region, Nazi Germany developed a process of gasifying Ruhr coal as a wartime substitute for oil. The technology was further advanced by apartheid-era South Africa in response to oil embargoes. Strategically speaking, this is a technology pursued by besieged states.
Gasification of coal to SNG is a high temperature process that guzzles water and emits CO2 in alarming quantities. One thousand cubic meters of SNG (equivalent to about 6 barrels of oil) uses 2-3 tonnes of coal and thrice that weight in water.
China has plans for 30 billion cubic meters (bcm) of SNG annually by 2015. To put this in context, China today imports about 30bcm of piped natural gas annually from Turkmenistan and another 30bcm via LNG. Tallying up all 28 SNG projects on the drawing board, capacity could reach 100bcm by 2018. At this upper range, SNG would gobble up 20% of industrial water in Xinjiang and Inner Mongolia.
SNG is bad economics, bad science and an environmental catastrophe.
The economics work today only because coal is cheap and gas prices are high; but it's highly vulnerable to longer-term price shifts. Also, SNG makers assume water is abundant and virtually free, at only 2% of total cost. That is a blatant mispricing. China is already in disagreements with its neighbours over its capture of water. In theory, some process water can be recycled, but coal is a notorious source of carcinogens known as BTX volatiles, which are expensive to remove.
The science is dubious too, because the SNG process converts a relatively high-quality energy source (coal) to a lower quality state (gas), and consumes a lot of energy in doing so. Thus the efficiency of conversion is low.
Finally, from an environmental perspective, the CO2 emissions from SNG production are much higher than conventional natural gas, and even worse than burning coal for power directly.
In effect, SNG is trading off global CO2 emissions and local water consumption for cleaner air in China's biggest cities. This is a classic 'externality', where one community benefits while outsiders suffer the costs. Chinese policymakers are well aware of this dilemma, which makes the SNG boom all the more puzzling. What is striking is the ambition of Chinese plans versus the widespread scepticism of SNG worldwide and inside China itself.
I do not hold the view that China has a special responsibility to contain its per capita carbon consumption below that of developed nations; that request would be unreasonable and probably futile. But the wanton resource abuse of SNG is the wrong path to growth.
This change of fortunes for coal and gas has led to some unexpected and unwelcome arbitrage opportunities.Some gas-fired utilities in Europe have switched back to burning coal, some of it displaced from the US by even cheaper shale gas there. And while Europe will in the longer term pay up for renewables and Russian gas in order to steer away from coal (which is dirtier than gas in terms of pollution and emissions), developing countries will embrace coal as a cheap energy source.
Nowhere is the reign of Old King Coal more resplendent than in China. In Global Exhaustion, the analyst Andy Lees remarks that 'it was the demand for coal that drove China's growth in the last twenty years, not the other way around.' Ultimately, he argues, China's boom is underpinned by resource exploitation. China will surely lower its energy intensity over time, but Jevon's Paradox (or 'rebound effect') predicts that improving efficiency won't lower overall energy use. In fact, it has the opposite effect.
The undesirable effects of burning coal are all too obvious. China's cities need gas. But coal now has become irresistibly cheap, especially from the landlocked mines in western China, which must freight a long way to port. Whence lies the perverse course now being pursued by some Chinese energy companies: to transform coal into gas, at the mine, and then to pipe the gas to coastal cities as a 'clean' fuel. The term 'synthetic natural gas' (SNG or syngas) was invented for this product, and it is as oxymoronic as it is cynical.
The origins of SNG are revealing. During World War II, with the Allies advancing on its oilfields in the Caucasus region, Nazi Germany developed a process of gasifying Ruhr coal as a wartime substitute for oil. The technology was further advanced by apartheid-era South Africa in response to oil embargoes. Strategically speaking, this is a technology pursued by besieged states.
Gasification of coal to SNG is a high temperature process that guzzles water and emits CO2 in alarming quantities. One thousand cubic meters of SNG (equivalent to about 6 barrels of oil) uses 2-3 tonnes of coal and thrice that weight in water.
China has plans for 30 billion cubic meters (bcm) of SNG annually by 2015. To put this in context, China today imports about 30bcm of piped natural gas annually from Turkmenistan and another 30bcm via LNG. Tallying up all 28 SNG projects on the drawing board, capacity could reach 100bcm by 2018. At this upper range, SNG would gobble up 20% of industrial water in Xinjiang and Inner Mongolia.
SNG is bad economics, bad science and an environmental catastrophe.
The economics work today only because coal is cheap and gas prices are high; but it's highly vulnerable to longer-term price shifts. Also, SNG makers assume water is abundant and virtually free, at only 2% of total cost. That is a blatant mispricing. China is already in disagreements with its neighbours over its capture of water. In theory, some process water can be recycled, but coal is a notorious source of carcinogens known as BTX volatiles, which are expensive to remove.
The science is dubious too, because the SNG process converts a relatively high-quality energy source (coal) to a lower quality state (gas), and consumes a lot of energy in doing so. Thus the efficiency of conversion is low.
Finally, from an environmental perspective, the CO2 emissions from SNG production are much higher than conventional natural gas, and even worse than burning coal for power directly.
In effect, SNG is trading off global CO2 emissions and local water consumption for cleaner air in China's biggest cities. This is a classic 'externality', where one community benefits while outsiders suffer the costs. Chinese policymakers are well aware of this dilemma, which makes the SNG boom all the more puzzling. What is striking is the ambition of Chinese plans versus the widespread scepticism of SNG worldwide and inside China itself.
I do not hold the view that China has a special responsibility to contain its per capita carbon consumption below that of developed nations; that request would be unreasonable and probably futile. But the wanton resource abuse of SNG is the wrong path to growth.
This piece brings a very troubling issue to light. The use of coal as an agent to create a synthetic gas seems to be counter productive. Like the article states, this process converts higher quality product to lower quality, all to capitalize on the current market. This process causes a tremendous amount of pollution and a drastic increase in carbon dioxide emissions. Not to mention the amount of water it consumes. The whole system and way of thinking is flawed, and totally disregards future costs. The narrow mindedness of this makes for a bad situation overall. Hopefully, this won't continue much further. But, the thought process must change.
ReplyDelete-George De Feis
This is an issue I have found highlighted in nearly every article we have read on the blog: long run versus short run. Although China has been riding the economic high resulting from its increasing demand for coal, growth driven by resource exploitation is not healthy growth (I avoid using the phrase sustainable growth here, as in the long run growth cannot truly be sustainable), and the crash that will inevitably come from this brown economy model will come back tenfold. The short run satisfaction / growth rewarded in this brown economy model will not be significant in the long run, and as the article states, "SNG is bad economics, bad science and an environmental catastrophe. The economics work today only because coal is cheap and gas prices are high; but it's highly vulnerable to longer-term price shifts."
ReplyDeleteI find this article alarming for several reasons. First, the fact that China is shifting their energy supply back to coal is mind boggling. China already has a pollution problem and the burning of coal will only exacerbate it. Another shocking detail is the thought of going back instead of progressing forward. The path of existence and technology should always move forward. Although gas isn’t a great energy source when it comes to environmental issues I would choose it over coal any day. It seems so counterproductive in the environmental world to go back to coal after making advances towards cleaner energy and technology. It is evident on so many levels that the switch price to renewable energy needs to be made. The only reason why renewable energy isn’t the go to source, is because the startup cost and supply source is much more expensive than cheap pollution filled energy such; as coal and oil.
ReplyDeleteThe first thing that came to mind when reading this article was "Is China making real progress in moving to a Green Economy?" That article showed a nice picture of bicycling with the caption,"There are reasons and motivation to be hopeful about China's progress for a greener economy." Then we read this article that tells us almost the exact opposite with one exception: "China will surely lower its energy intensity over time" as it runs out of resources to exploit. The first article told us that China was very interested in a green agenda, and then this one tells us it not only has continued its exploitative practices, but made the situation worse with an even more polluting product. My suggestion is that if those wishing for a greener world economy want to succeed, they have to stop relying on a hope that other nations will change (while simultaneously condemning America and Europe) based on some promises and conventions which rarely bring about significant reform, and have to start equally condemning nations like China instead of concluding articles with "I do not hold the view that China has a special responsibility to contain its per capita carbon consumption below that of developed nations." Being passive and politically correct will never lead to success. A large developing nation is more destructive than a developed nation. It is driven by environmental destruction and will not stop until it outgrows its competitors, even if its competitors compromised their own economies for the sake of the environment. A developed nation is stable and can change but may be skeptical if it sees developing nations growing by not following the rules. Yet, the world still gives developing nations a break.
ReplyDeleteThis article is the prime example of how words can be manipulated to make the average person believe something that is far from truth. To me this article demonstrates how callous and cynical human beings have become due to their greed. At first you feel like finally something good is coming from the section of the world, namely financial markets, where they are also thinking about the environment, and then you read more and find out that they have worked around the situation to find a way to minimize Eco-friendliness and maximize their profit yet again.
ReplyDeleteJust recently people have become aware of the fact that there are many side effects of using coal and mining. So they decide to pursue CNG, but now they are coming up with SNG, which still fits in as gas but the method to develop it is very harmful. This shows that we the public should not believe what the industrial companies tell us about their ways, we should demand to be better informed about the things they want to do in order to achieve the gas.
The process of making SNG as indicated by the article is very harmful to the environment. I think China should be penalized for their use of SNG. COal should be outlawed as a use of energy. It has been proven time and again to be detrimental to the health of the environment but people still use it. I don't understand why people still sue it if it is such a pollutant to the environment. Just because it is a cheap source of energy doesn't make it a good source of energy. With all the growth China has and the resulting wealth that was created as a result, can't China afford to spend more money on cleaner sources of energy?
ReplyDeleteThis article is shocking to me because I think that everyone is now aware of global warming and also have an idea of what the effects can be on the environment and we the people. It is shocking to know that China as a “developing economy” consumption of synthetic natural gas(SNG) is expected to be 30 billion cubic meters by 2015 when they should be clearly aware of climate change. I feel that the situation is all about gluttony, they focus primarily on rapid growth and competitions with other countries and completely ignore what the effects of coal can be in the atmosphere. I think that government should jack up coal prices instead of having it low so that countries are forced to use renewable resources because if the price of coal is cheap then they won’t stop hurting the environment.
ReplyDeleteWith facts like these, it's no wonder why China has now become the largest CO2 emitter in the world. I don't see how China's environment will improve if it becomes dependent on SNG. This is just another example of another country putting economic growth ahead of environmental protection. Countries would rather invest in technologies or practices that would provide them with short-term economic benefits because implementing these technologies or practices is an easier solution than investing in environmentally-friendly technology or practices that would have long-term economic benefits. Sure, coal seems like an attractive idea to them now because it is cheap. However, they fail to think about the pollution that comes from burning coal and what it would take to clean up that pollution. If they really want know if using SNG is smart economically they should take into account the costs of the pollution it creates. This situation sort of makes me think of the environmental Kuznets curve theory, which states that as the economy grows within the country, said country will pollute more until a GDP threshold is reached, at which point it will begin to pollute less. It seems like China, a fast-growing middle income country, is following this path. However, I'm not sure if it will actually reduce its pollution once it reaches a certain GDP level. Hopefully, it does because if China continues to pollute like this, it can have detrimental effect on not just the environment but on people's health. However, I'm not holding onto any hope that China will reverse its ways.
ReplyDeleteThis article reassures me that countries only focus on short-term goals without realizing the long term affects. In the short term SNG is a more economical approach but realistically speaking it doesn't make no sense. It puts the surrounding cities at a disadvantage and completely has no regard for the environment's well being. Also the consumption of water by SNG is ridiculously higher than coal and natural gas, which wouldn't be a problem but recycling the water would be a costly process because of the BTX volatiles, which are expensive to remove.
ReplyDeleteThis article seems to be every single problem we've read about thus far. I do not understand why China insists on burning coal and creating SNG. Their air is already filthy and their country is full of pollution. They already have a population problem as well and they seem to be adding more and more problems. Instead of figuring out a way to make everything cheaper they should be more concerned in fixing the already ruined environment before it become no environment. They are only worried about instant gratification. They are not worried about the environment or how it affects the planet. They abuse their resources as well as their people and how much the planet can handle. China should be concerned about making everything energy and resource efficient because in the long run that is going to be better for everyone.
ReplyDeleteSuggestion: For future classes I would suggest you also provide some opposing arguments to the advancement of certain "green" policies, of which I am sure there are many, as well as many green policies whose purpose backfired and actually caused more harm than good. While you or people in the class may not agree, I always felt that reading opposing arguments strengthened one's own. I felt at times that this class was a bit like "preaching to the choir" and most comments on the blog, no matter on which article, were of a similar nature and felt repetitive. On the other hand, if you attach an article with an opposing view (and in the description you can write why you think the view is specifically flawed), students can then pick apart the argument, or support it, and this would allow for more discussion which I believe should be the ultimate goal of the blog since it substitutes in-class participation. Or, as I had experienced in a previous online class, ask students to not only write a post, but also to respond to one.
ReplyDelete