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Category — China

China Secures Oil and Gas Resources: U.S. Fiddles with ‘Green’ Energy

Around the world, China is investing in oil and gas resources to fuel its booming manufacturing industries and transportation sector to continue its sky-rocketing economic growth. China is not endowed with very much oil and gas resources of its own. Thus, it needs to partner with countries around the world to ensure availability of future supplies of oil and natural gas that it will need to keep up its current pace of economic growth.

The U.S., which does have oil and gas resources, is not following China’s lead in investing in these resources. Instead, the U.S. is looking toward wind and solar technologies to fuel its economy. However, wind and solar power are generating technologies and will not help where oil is needed in the transportation and industrial sectors.

Further, wind and solar power have capacity factors that cannot compete with those of fossil fuel generating technologies, and they can create instability issues with the electrical grid. They are also more expensive technologies and must have government support through tax credits to compete at all with fossil-fuel generating technologies.

China’s Investment in Oil and Gas

China has seized on the global recession to gain access to oil and gas resources and supplies. The atmosphere is ripe for Chinese firms to invest in these resources because:[i]

  • Acquisitions are now more favorable than they were in early 2008, due to lower oil prices and, hence, lower asset prices.
  • China is less constrained than many of its international counterparts in terms of where they can invest (e.g. Iran).
  • Financing is not a problem, because Chinese banks are willing and able to provide needed funds.
  • Competition for these assets in some areas has lessened.

Not only is China investing in places like Iran, Iraq, Kazakhstan, Nigeria, Venezuela, and Argentina, but it is in the U.S.’s backyard, looking towards usurping the U.S. supply of Canadian oil sands.  China is a good customer for Canada, as Canada fears that the U.S. may introduce a low carbon fuel standard[ii] or other legislation that would restrict our purchases of oil sands from Canada[iii].  China is also looking at a possible purchase of leases in the Gulf of Mexico where Devon Energy is looking to sell its U.S. leases.[iv] The sale of these offshore leases requires the approval of the Mineral Management Service in the U.S. Department of Interior. China is willing and able to be at the forefront of any misstep other countries make to gain a foothold and secure oil and gas supplies, and the U.S. seems to be giving it elbow room.

China is also investing in oil and natural gas pipelines to ensure access to its investments and to divert some of its oil imports from the Middle East away from the Straits of Malacca. [Read more →]

December 21, 2009   2 Comments

China Goes 'Green' – Collecting the Pot at the Climate Policy Poker Table

In two previous posts, “Green” China and CO2 Cap-and-Trade Meets the (China) Dragon, I described China’s rising greenhouse gas (GHG) emissions as a “one-country negation” to the Waxman-Markey climate bill (HR 2454). “The expected growth of coal-fired generation in China over the next 20 years will result in a net increase in CO2 emissions from their power sector of more than ten times that of reduced U.S. emissions due to coal constraints,” I concluded.

This is good, not bad, insofar as dung and wood are terrible things to burn. Moreover, China has now committed to using better combustion technology in its power sector, including more coal gasification and high pressure (supercritical) coal-fired thermal power plants. To top things off, China has apparently committed itself to substantial growth in its renewable energy output by 2020.

This is generally to the good, and represents four key influences on Chinese energy and environment policies:

  1. The market – if you have to pay world prices for fuel you can no longer afford to waste it using poor technology;
  2. It is good diplomacy to be seen as “progressive” on the subject of climate change (and it takes trade sanctions off the table);
  3. There is probably a good market in all the Kyoto/Copenhagen adopter countries for lower cost (i.e., Chinese) solar, wind and CO2 capture technologies (why should “green tech” be any different from toys, clothes and electronics?); and
  4. The people of China – better coal combustion technology will improve air quality in China’s urban areas (that’s real pollution, the kind that politicians are rewarded for reducing).

In the end China’s output of greenhouse gases (GHG), mostly CO2, will continue to rise at a rate that is well above any decreases in the US or the EU. In fact, we looked at the actual output of CO2 from this aggressive plan and found that, even with complete adoption of high efficiency technology for all coal fired power plants completed after 2015, China’s increase in CO2 from power generation would be more than fifteen times the expected reduction in US CO2 output. [Read more →]

September 2, 2009   1 Comment

Why is the Party in Power So Fearful of Copenhagen? (Is a 'death spiral' for climate alarmism ahead?)

[Editor note: Ken Green was a Working Group 1 expert reviewer for the United Nations' Intergovernmental Panel on Climate Change (IPCC) in 2001]

For weeks now, we’ve been hearing an odd refrain from the Democrats who are pushing hardest for the Waxman-Markey climate bill. They are determined, it seems, not only to have such a bill drawn up before Copenhagen, but to have it signed into law. At the same time, the EPA is widely expected to issue its endangerment finding for greenhouse gases, triggering what will undoubtedly be a hotly disputed regulatory process.

President Obama, it is reported, wants to sign climate legislation before the critically important Copenhagen climate conference in December. And Senate Majority leader Harry Reid wants the President to sign a climate bill this fall as well.

They both have plenty of company in the “act first, think later” brigade.

A New York Times article shows the sense of urgency: [Read more →]

September 1, 2009   14 Comments

"Green" China: Big PR vs. King Coal (move over dung, primitive biomass, and Waxman-Markey)

In a previous post, CO2 Cap-and-Trade Meets the (China) Dragon, I described China’s rising greenhouse gas (GHG) emissions as a “one-country negation” to the Waxman-Markey climate bill (HR 2454). “The expected growth of coal-fired generation in China over the next 20 years will result in a net increase in CO2 emissions from their power sector of more than ten times that of reduced U.S. emissions due to coal constraints,” I concluded. This is good, not bad, insofar as dung and wood are terrible things to burn.

Given China’s path, unilateral U.S. actions like Waxman-Markey are futile, symbolic measures. Indeed, U.S. industry would move to China to transfer emissions (called “leakage“) under a stringent U.S. carbon-dioxide regime.

A PR Moment from China

The Chinese government recently announced its intent to reduce the energy efficiency of its economy (GJ/$GDP) by 20%, invest something like $586 billion in renewable energy technologies, improve the power grid and other infrastructure by 2020, and phase out its older, less efficient coal-fired power plants with newer models, including supercritical (higher pressure boiler) technologies. In this vein, a recent article in the New York Times touted China’s success in building more efficient coal-fired power plants, especially in comparison with the U.S.

Importantly and correctly, replacement of older, dirtier coal-fired power plants in China is considered progress. [Read more →]

June 24, 2009   9 Comments

CO2 Cap-and-Trade Meets the (China) Dragon: Why Legislating Trillions of Dollars in Regulatory Costs Would Be Climatically Inconsequential

[Editor's Note: Projected emissions from China will more than cancel the effects of Waxman-Markey in the year 2050 when the proposed law's 83% cut in U.S. emissions would be fully imposed. This finding, calculated with the assistance of Chip Knappenberger and the MAGICC model, is part of a wide-ranging analysis below. Discussion, comments, and questions are invited by the author.]

The Waxman-Markey climate bill–characterized as a “648 page cap-and-trade monstrosity” by Al Gore’s mentor, James Hansen–is intended to bring the U.S. into line with Europe and Japan on CO2 policy. But as I have explained previously, the current U.S. policy discouraging new coal and new nuclear capacity will:

  1. Make the U.S. more dependent on energy imports,
  2. Drive up generation costs,
  3. Artificially incite demand for fickle natural gas, and related infrastructure such as LNG regasification facilities, and
  4. Increase reliance on old coal and old nuclear for baseload power, resulting in less efficient, less clean, and less reliable electricity.

Such government intervention will block self-interested private investors who would otherwise provide America with more domestic, lower-cost energy, and more modern infrastructure for better reliability. And ironically, our more expensive, imported and unreliable electricity system will hardly make a difference in worldwide CO2 levels and associated global climate change. [Read more →]

May 13, 2009   8 Comments

Government CO2 Pricing and Protectionism: Two Peas in a Pod (trade wars and worse as potential costs of GHG mitigation)

“From the East Coast to the West and across the political spectrum, House lawmakers remain divided over how to protect America from losing a competitive edge to China and other nations under climate change legislation.

“At issue is how to prevent cement, steel, aluminum and other energy-intensive industries from responding to proposed new laws that could have the effect of slashing emissions by shuttering factories only to reopen them in countries unfettered by costly regulations.”

- Lisa Friedman, “Climate law poses trade risks; lawmakers unsure how to respond” E&E News, April 28, 2009 (subscription)

Marlo Lewis’s post, Is Cap-and-Trade Inherently Protectionist?, linked carbon dioxide regulation, U.S.-side tariffs (“border adjustments”), and international protectionism. Indeed, the interventionist dynamic–regulation expanding from its own complications and shortcomings–is a major theme of political economy.

Lewis explained:

“Beyond the power shifts in Washington, D.C., there are basic reasons why cap-and-trade and protectionism are joined at the hip. First, how do you enforce compliance with a treaty like Kyoto? It’s a typical collective action problem. Even if one assumes that it is in the common interest of all nations to mitigate global warming, it is in the individual interest of each nation to bear less than its negotiated share of the collective burden—to reap the climate benefits (if any) of other nations’ compliance efforts, but to employ creative accounting on behalf of one’s own industries to give them an edge in international commerce.”

And there is another link that troubles students of international trade: protectionism fosters militarism. Lewis warns:

“But a moment’s reflection tells us that any [protectionist] campaign would fail, because developing countries would retaliate with economic sanctions of their own. We would get trade war, not compliance. Trade wars do not always end peacefully, and, as classical liberal thinkers have long warned, protectionism and militarism go hand-in-hand.”

“If goods do not cross borders, armies will,” a maxim in classical liberal circles goes.

Chu’s Trial Balloon–and China’s Reaction

And indeed, when Energy Secretary Stephen Chu raised this prospect last month, the verbal rebuke from China was swift. [Read more →]

April 29, 2009   3 Comments

Capitalist Reform to Reduce International Oil Demand: Getting World Refiners to Price at Market

A market-driven revitalization of the world oil refining sector is the best and fastest way to reduce both oil demand and related air emissions, including CO2. A combination of market-based pricing–absent from foreign refineries (most politically owned and/or managed)– and new investment brought forth by the improved profitability of such pricing, could reduce the demand for crude oil by between eight and twelve million barrels per day, or about 10–15 percent.

A Bold Hypothesis

This rather astounding assertion can be educed as follows:

  • Most countries subsidize refined oil product consumption, usually middle distillates (diesel and kerosene) at the expense of gasoline and other products;
  • Owing to the price controls on heavily used middle distillate products, most oil refiners outside the U.S. and a few other countries lose money;
  • The subsidies to middle distillate users, at the expense of gasoline and LPG consumers, creates an “unbalanced” demand barrel – one that defies both economics and chemistry; [Read more →]

April 23, 2009   3 Comments