China’s appeal as an energy sop rests on profligate waste
Would efficiency standards temper the dragon's appetite for combustible fossil fuels?
Illustration by Paul Blow
If China were a Monty Python character, it would be Mr. Creosote. As the factory of the world expands to account for nearly 50 per cent of global oil demand growth in the next five years, there is perhaps no better reflection of the country’s vast appetite for energy than the impossibly obese character played by Terry Jones in the 1983 movie The Meaning of Life. The relevant scene is set at a fine French restaurant, where Jones’s character impatiently devours an entire menu’s worth of food, including courses of beluga caviar, frogs’ legs, and quails’ eggs on a bed of pureed mushrooms. (He pauses now and then to throw up in a bucket, on the table, on the floor, and on the waiter’s shoes. The sketch only ends because Jones literally bursts at the seams).
What does British cult humor have to do with the world’s newest energy sop? Look at it this way: China is to energy what Jones’s character is to food, and the parallels aren’t limited to gluttony. The economic engine of the 21st century also happens to be a terribly inefficient energy gourmand. “This is a monster,” says Wenran Jiang, a political scientist and founding director of the University of Alberta’s China Institute.
The scale of growth in China is well documented. According Jiang’s research, the People’s Republic accounts for six per cent of global gross domestic product, yet it consumes 31 per cent of the world’s coal, 30 per cent of its iron, 27 per cent of its steel, nearly 50 per cent of its cement, 38 per cent of the world’s copper, 19 per cent of its aluminum and 10 per cent of the world’s electricity.
The numbers are accompanied by an equally jarring waste of energy. Coal still provides roughly 70 per cent of China’s energy needs. But between 1949 and 2003, Chinese coal mines wasted two tonnes of coal for every tonne produced, resulting in the loss of some 65 billion tonnes of the sooty fossil fuel in 50 years, according to an October 2010 paper released by Jiang under the title The Dragon Returns: Canada in China’s Quest for Energy Security.
The figures are no more flattering higher up the value chain: A tonne of Chinese steel takes 40 per cent more energy to make than the international average. “Those are horrifying numbers,” Jiang says, adding, almost as an afterthought: “It’s a very inefficient way of consuming energy.” Profligate waste hasn’t precluded growth, though. China’s mushrooming economy has grown at nine per cent annually for the past three decades, Jiang notes. “No economies can grow like this forever,” the professor points out. “The question is: where is that point where China will slow down very substantially?”
On this count, opinions vary. The global recession that froze credit and saw investment portfolios wither overnight didn’t bypass China completely. Retreating demand for Chinese goods saw the country’s exports fall by nine per cent in 2009, Export Development Canada (EDC) notes – “a major shock for the country’s production machine” that was geared to accommodate the 20 per cent annual export growth experienced between 2002 and 2008, according to an EDC forecast released last fall.
As Beijing winds down a US$586 billion infrastructure stimulus program – equal to 13 per cent of the country’s 2008 GDP – there are fears that the country’s luxury housing market could by headed for a U.S.-style bust and questions about its ability to clamp down on inflation. “There definitely are some concerns over certain aspects of the Chinese economy,” says EDC economist Jerome Bourque.
But the fundamentals are unrivaled. “You have to take into consideration that they’ve been growing at almost double-digit pace year-over-year for the past 30 years,” the economist notes. Alberta is clearly looking to emerging markets. The Asia Advisory Council Act was tabled in the legislature following this year’s speech from the throne. It recognizes Asia as Alberta’s second-largest export market outside of the U.S., worth more than $6.5 billion in 2009. Business opportunities don’t end with the Middle Kingdom, Bourque notes. “China is a big part of the story, but there are a lot of other countries that will continue to grow very rapidly.”
Indeed, sales targets included in Enbridge Inc.’s application to the National Energy Board (NEB) for a new pipeline from Edmonton to Kitimat, British Columbia, include Japan, Taiwan, Singapore and South Korea. A survey submitted to the NEB in support of the Northern Gateway filing conducted by consulting firm Muse, Stancil & Co. estimates coastal refineries in China could absorb roughly 630,000 barrels of Canadian crude per day.
With oil sands production expected to crest 2.3 million barrels per day by 2013-14, Alberta Energy Minister Ron Liepert says the province will need all the export markets it can get. “When you think about going from 1.5 million barrels per day today to three million barrels per day in 10 years, where’s it all going to go?” he wonders.
One answer is to a resurgent U.S. economy, which the Conference Board of Canada expects will expand by 3.2 per cent in 2011. But the other destination for Alberta’s petroleum products is a Chinese economy in flux, where the focus is increasingly on value-added manufacturing, as opposed to churning out refrigerators and air conditioners purely for export markets. “China’s Hyundai is coming,” Jiang believes. “Efficiently or not efficiently, China needs energy – period.”
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