China to face consequences of coal

07 May 2007 00:00  [Source: ICB Americas]

SPECULATION ABOUT the environmental consequences of China's colossal economic growth will intensify with the latest disturbing news from the International Energy Agency (IEA).

Less than three years ago, the Paris-based agency predicted that China would become the world's bigger emitter of greenhouse gases not before 2025. But last month, the agency revised its forecast, expecting China to beat the US into first place by the end of 2007. The IEA has identified the increase in coal-fired electricity production as a major factor behind its latest prediction.

China is already a huge producer of ammonia, PVC and other chemicals via coal as the primary feedstock. Will pressure be exerted by the international community on China to lessen its dependence on coal?

Foreign investors such as Shell and Dow Chemical will argue that modern gasification technologies minimize pollution.

Plus, if carbon sequestration can be perfected, it would make even more sense for China to make greater use of its abundant coal reserves rather than import ever-rising quantities of oil. The consequences of China's voracious appetite for crude already include chronic tight supply and price inflation, which has finally become a threat to global growth.

Much of the methanol made from coal will be used to replace gasoline either directly or indirectly. Dimethyl ether, made from methanol, produces less emissions than petroleum-based alternatives.

But China might be pushed into a knee-jerk legislative response as a result of international pressure that doesn't make economic or environmental sense. This could lead to approvals being a great deal harder to come by for any coal-based chemical project.

This seems unlikely. While the odd measure might be introduced for the sake of international relations, China cannot afford to introduce legislation that slows its drive toward greater energy security or pushes GDP below 10% per year, exacerbating its high unemployment.

The scary thought is that if China doesn't get more Western support through the transfer of advanced technologies that reduce emissions, it might continue pursuing growth at the expense of the environment.

But the Communist Party could be forced down a different path if rising protests against pollution - which environmental scientist Elizabeth Economy estimates kills 400,000 Chinese annually - create a greater threat to stability than high unemployment or Western chemical companies face legislation from their own governments restricting investments in China.

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