Bridges Trade BioRes • Volume 9 • Number 15 • 4th September 2009

China Looks to Offset Coal with Natural Gas

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Recent moves by China to boost its access to natural gas supplies suggest the country is looking to the industry to help reduce its dependency on coal. The recent signing of a US$41 billion contract between Exxon Mobil and Petrochina - the world’s two most valuable listed oil companies - to obtain natural gas in Australia, suggests China is looking to more sustainable sources to meet its energy demands.

However, some experts caution that the move will mean an increase in the demand for fuel of at least 93 billion tons by 2020 - an increase of 26 percent. And despite the reduced carbon dioxide emissions of natural gas compared to coal, experts say any increase in the use of conventional fuel sources, like coal and petroleum, has a significant impact on climate change.

At the moment, the Chinese government has major investments in three energy sectors: hydroelectricity, nuclear energy, and natural gas. Focusing on these sectors, the government is looking to lower the use of coal - currently the source of 75 percent of domestic electricity - and oil - which is the source of 10 percent. Of the proposed alternatives, natural gas has garnered the most support from environmentalists, who consider it superior to the other energy sources for its low emissions and relatively reduced impact on the environment caused during extraction.

But despite China’s intended shift, energy demand through economic growth will outstrip new supply of more sustainable energy sources. Coal remains a temptingly cheap source of energy compared to alternatives for countries like China. For example, natural gas is 60 percent more expensive in terms of overhead costs. In order to make natural gas a viable, cost effective alternative to coal, investments in new technologies to increase the efficiency of gas plants will be required. Experts say the option for ‘clean’ energy sources depends on a full economic and political evaluation that looks at long term projections and expects more modest economic returns.

The recent move suggests that China is upping the ante in order to bring more to the table when countries meet in Copenhagen to hammer out a climate change agreement at the UN Framework Convention on Climate Change Conference of the Parties in December.

Some analysts say the latest move demonstrates how China has been boosting sustainable development spending in recent years while more developed countries, like the US have been lagging behind.

In this context, China may be hoping to avoid a 20 percent cut in emissions, as suggested by the US, in favour of a gradual shift toward more sustainable energy sources as a more economically feasible plan to fight climate change.

ICTSD Reporting; “Exxon, China sign $41 billion Australian gas deal,” REUTERS, 18 August 2009.

This article has been translated from Pontes Quinzenal.