U.S./China Natural Gas Trade for Cleaner Skies

China’s government is struggling to halt industrial and automobile pollution, even inspecting barbeques. Heavy winter smog in Beijing and other Chinese cities causes a range of health problems. In addition to coal-burning industries and cars, Beijing is up against mountains holding pollution in place as well as temperature inversions (the kind that contribute to smog in Los Angeles and Mexico City). The coal powering China’s industrial growth over the last three decades has a long history of generating both power and pollution.

Coal is the magic black rock that powered England’s Industrial Revolution then industrialization across western Europe and the United States. Thick pea-soup coal pollution smothered Pittsburgh. For pictures, see the June 5, 2012 Atlantic CityLab article: What Pittsburgh Looked Like When It Decided It Had a Pollution Problem.  More here on Explore PA History:

“Hell with the lid off,” was an apt description of Pittsburgh during its peak decades of industrial production. In the late nineteenth and early twentieth centuries, Pittsburgh ran on bituminous coal. Each month the steam boilers and furnaces of its industries, railroads, and homes dumped 100 tons of pollutants on its streets.

Picture: https://goo.gl/images/H4RSWH

Natural gas power is the key to cleaning up Beijing’s skies, along with nuclear and renewable energy. “For China, pollution and climate change are not the same problem: Kemp” (Reuters, November 14, 2014) blames coal power, but notes a complexity with reducing both pollution and CO2 emissions:

Climate campaigners blame the problem on China’s inefficient coal-fired power plants and argue that the solution is to replace them with cleaner burning natural gas power stations as well as zero-emission sources of electricity such as wind, solar, hydro and nuclear.

Conflating air pollution with global warming is a useful tactic for getting action because it suggests action to prevent the long-term threat of climate change would also yield tangible health benefits in the short term.

But the pollution problem is more complicated. The causes of air pollution are not the same as climate change. China’s leaders tend to see them as distinct issues and reducing air pollution is a far more pressing political problem.

Communist-era policies of providing “free” heating to the colder northern half of China are still in operation today, with electricity still generated by older polluting coal-fired power plants:

Due to budgetary limitations, free heating only extended as far south as the Huaihe River and the Qinling Mountains, which as well as the traditional boundary is roughly as far south as the freezing weather extends, according to researchers at the Massachusetts Institute of Technology (“Winter heating or clean air: unintended impacts of China’s Huai River policy”, 2009).

Most of the district heating systems, which are still in use today, employ old, inefficient coal-fired boilers to produce steam and hot water. They have few pollution controls and spew soot and mercury as well as sulfur and nitrogen compounds into the urban air.

Energy-intensive industries employ more advanced pollution control than the district power sources:

Almost all power plants have been fitted with baghouses and scrubbers to capture fly ash and sulfur and nitrogen oxides. District heating and industrial boilers are fitted with much more primitive controls and in many cases none at all. …

Cutting the air pollution in northern cities means first and foremost tackling district heating and industrial boilers. In some cases, district heating and industrial systems could be retrofitted with pollution controls or converted to cleaner burning gas.

This undated Shell Global promotional article, “Cleaning the Skies Over Beijing” offers some good news in the shift to natural gas:

That all came to an end on March 19, 2015, when the historic plant – said to be the cradle of China’s power industry – was shut for good. A day later, the 66-year-old Guohua Beijing coal-fired power plant in the heart of the central business district was also closed.

The last of Beijing’s major coal-powered stations will close in 2016, with four natural gas-fired plants replacing them as part of the city’s transition to cleaner energy. The new gas power stations can supply 2.6 times more electricity, according to the Beijing city authority, and help tackle the city’s serious air pollution.

Top-down programs and policies are limited to plans and powers of government agencies. Many economists recommend market-based reforms to create pollution and carbon credit trading. Give all firms a “right” to, say, 80% of their current emissions, then allow trading of those emissions rights to enable discovery of least-cost pollution reduction strategies. Money-losing state industries could shut down quickly (and could sell pollution credits to other firms for severance payments to workers). Pollution credits could be traded separately from CO2 emission “carbon credits.”

BloombergMarkets in China Turns to Free Markets to Tame Fossil-Fuel Pollution, August 16, 2016, reports on new emissions trading plans:

In China, authorities have previously ordered factories closed and cars off the street to combat smog. Trading will cover eight industries, including areas such as papermaking, aviation and power utilities. They will buy credits covering their emissions and can sell any surplus. A link to overseas markets may also be possible, giving another way to profit.

For China, carbon trading is part of President Xi Jinping package of emissions cuts promised in a deal with U.S. President Barack Obama that revived the global climate talks and led to the deal in Paris in December.

Economists have long focused on the wide range of pollution reduction costs from company to company. Some firms can reduce emissions inexpensively while similar reductions for other firms would be very expensive. A top-down regulation requiring all firms in a region to cut emissions by 10% or 20% wouldn’t engage emissions cost differences across companies and industries. But a market in exchangeable emissions permits could, creating incentives for engineers and entrepreneurs to search for least-cost emissions-reduction technologies.

In China some of the heaviest pollution comes from inefficient and money-losing state-owned district power and manufacturing companies. The Chinese government could actually save money if these industrial dinosaurs closed. Revenue from selling emissions credits helps incentivize the whole process (replacing incentives to hide pollution and bribe officials).

Pollution markets usually call for extinguishing 10% to 20% of emission permits with each exchange, so a firm has to purchase 110% or 120% of the emission amount they need. The more active the pollution trading market, the faster pollution levels decline.

Separating CO2 emissions from pollution in cap and trade schemes is important. Coal burning releases a range of pollutants, depending on sulphur and other impurities in the coal, how inefficient the burning process, and the pollution control equipment in place (scrubbers, for example).

Wikipedia entries on cap and trade and on carbon credits provide an overview. “China Will Start the World’s Largest Carbon Trading Market” (Scientific American, May 16, 2016) reviews political battles over access to scarce resources like water in the Western U.S. and clean air, and the opportunity in market-based approaches:

[Environmental Defense Fund’s Dan] Dudek wanted to introduce a market-based system to protect scarce resources that he’d seen debated in California, where for decades disputes over water rights were settled by legal and political fights. The winners were usually farmers and ranchers who lobbied the government to dam the state’s remaining wild rivers to irrigate more crops on dry land. Once they’d won the fight, Dudek recalled, it was “use it or lose it.” He felt the government should be encouraging people to find ways to save water.

As Dudek sometimes puts it, “the status quo is a vicious competitor.”

In 1985, Dudek, who had watched this battle as a U.S. Department of Agriculture economist and later as a professor at the University of Massachusetts, Amherst, joined EDF, the one group he felt might listen to his grand scheme to protect the environment.

The best place to do it was in China, Dudek urged Krupp, and the resource in the most trouble there was not water, but air. Dudek noted that China’s economy was exploding, and air pollution in its major cities was going to become a major health problem. He told Krupp he wanted to go China to get the government to explore using economic markets to provide incentives to reduce air pollution. …

Pollution trading markets are a challenge to put in operation, but compared to other regulatory schemes, markets in pollution credits have a fairly good track record (Though the EU’s carbon trading crashed, according to this 2013 article, “Europe’s Carbon Emissions Market Is Crashing.” (Bloomberg, March 28, 2013)

Stricter pollution controls in China could be good news for U.S. natural gas exports. In “Chinese Pollution Opens Door For U.S. Natural Gas Exports,” (Forbes, November 21, 2016), James Taylor argues for U.S. government approval of LNG export terminals:

Chinese provincial governments are shutting down everything from industrial manufacturing plants to outdoor barbecues to address oppressive air pollution, Reuters reports. The United States can economically benefit from the situation if our government will stop blocking the construction of liquefied natural gas (LNG) export terminals

Taylor says state and federal policies block LNG terminal construction, and that significant coal pollution from China makes its way to the western U.S.:

Failing to see that LNG exports would enable nations like China and India to convert their electricity base from coal to clean-burning natural gas, government officials are actively blocking the construction of LNG terminals in the name of environmentalism and opposing “fossil fuels.” Ironically, Chinese pollution swept over the Pacific Ocean by prevailing wind currents accounts for up to 11 percent of black carbon particulate matter and 24 percent of sulfates on the U.S. West Coast.

(Warning for debaters: James Taylor evidence will invite anti-James Taylor evidence. Here is his DeSmogBlog entry)

This entry was posted in Cross-Examination. Bookmark the permalink.