China Economic Review:

China Economic Review: Improved energy efficiency key to sustainable development

China has been urged to raise the efficiency of coal consumption, the use of cleaner energy and the move towards sustainable development.

Despite the rapid growth in coal output in the past two years, China, where coal is the main source of energy, has had to impose power brownouts last year in many of its economically prosperous areas.

Its total coal output exceeded 1.9 billion tons in 2004, a 15 percent jump year-on-year. This still fall short of the growing demand from power, metallurgical, construction and chemical sectors.

Chen Yao, a research fellow from the Institute of Industrial Economy with the elite Chinese Academy of Social Sciences, said coal accounts for 67 percent of China's primary energy consumption, as against the world's average 25 percent, and coal-fired power plants make up 60 percent of China's coal consumption, said the researcher.

It is predicted that in 2005, China will need a total of 2.1 billion tons of coal, 200 million more tons than 2004. Its power industry will use an additional 120 million tons of coal for power production. Its metallurgical, building construction and chemical sectors will also use more coal.

To meet the growing demand for coal, China has been working hard to lift its coal mining capacity through massive investment in new mining projects.

Chen warned that increasing its coal-mining and shipping capacity alone is not the best way to ease the country's energy shortage in the long run.

"It is now the right time to look back and think over the strategy of relying on expanding coal mining capacity to meet the growing demand," he said.

The amount of energy China used to create one US dollar worth of gross domestic output (GDP) is three times that of the United States, and 6.6 times that in Japan.

China's per-kw electricity price for corporate world stood at 3.2 US cents in 2002, the lowest in the world, the researcher told China Financial And Economic News.

With sizable coal resources, China, however, is still a poor country in terms of quality coal resources, he said.

Cheap power price is owed partly for low energy efficiency, causing waste of the resources and overstraining the country's port and railway systems. It, of course, is behind numerous environmental problems caused by coal burning and mining.

The mining sector turns out 45 million tons of waste rock and 40 million tons of waste water each year, which means 400 ha of land will be used to store the waste rock. In addition, coal mining also causes cave-in of land totaling 70 sq km each year.

Therefore, China should move to explore ways to control the expansion of its coal mining sector and reduce environmental pollution caused by coal mining, while readjusting its energy consumption pattern.

China should expand the use of nuclear energy and encourage the use of natural gas in power production, solar and wind energy and other new energy alternatives in its coastal areas, while gradually reducing the number of new coal-mining projects, he said.

Therefore, China's total coal output for 2020 should not exceed 2 billion tons, and the ratio of coal to total primary energy will be reduced to around 50 percent, said the expert.

Chen acknowledged that China should also eliminate equipment that is low in coal efficiency in a bid to raise the efficiency of coal-fired power plants.

After two decades, he said, it is very likely that China would be able to save up to 500 million tons of coal and reduce its coal consumption for power generation by half. This is only if the country can increase its power generation efficiency to 200 grams of standard coal for each kilowatt hour of power.

The researcher also proposed coal pricing reform so that markets will play greater role in setting the coal prices. Proper hikes in coal prices will not only reflect the scarcity of the resources but also encourage improved technique to improve energy efficiency.

"It is vital for China to control the mere expansion of coal production, create strategic reserve of coal resources, and set up conglomerate integrating the producers of coal, steel and power, and establish an environment fund for coal-producing areas."

The coal mining industry should be allowed to team up with power plants and steel producers to form conglomerates integrating coal, power and steel production, he said.

Such moves, he said, will mean more added value for coal-mining firms, and stable supply of coke resources for power and steel firms, which have been troubled by shortage of coke leading to unstable production and lower profitability.

The coal and steel conglomerates will have improved international competitiveness as a result, he added.

Moreover, he said, China should establish an environment fund in coal-mining areas to reclaim the wasteland resources in exhausted coal mines.