Construction began this week of a new pipeline across Siberia that's set to provide China with 38 billion cubic meters of gas from Russia every year, with Russian President Vladimir Putin and Chinese Vice Premier Zhang Gaoli signing the freshly-welded "Power of Siberia" pipeline in a "time-honored Russian tradition."
The deal made between China’s CNPC and Russia’s Gazprom is worth USD400bn and is an example of Russia’s recent increase in investment in Asian markets intended to decrease their reliance on European countries, many of whom are imposing sanctions against Russia in light of the ongoing Ukraine crisis.
With this monumental amount of gas set to start pumping into China by 2019, some speculation has been made about China’s consumption of coal. Some have even gone as far to suggest that China’s coal consumption may be close to peaking, something that may have sounded unbelievable a decade or so ago.
China is still currently both the world’s largest producer and consumer of coal, taking up around 45 percent of the global market. It is no secret that the rate of coal consumption in China has had adverse effects on the environment, with high CO2 emissions resulting in heavy air pollution and problems regarding access to clean drinking water.
However changes in policy by the Chinese government have recently been made to tackle this problem, with a proposed initiative to reduce coal consumption as a percentage of energy use in China to under 65 percent from around 67 percent in 2012. At first glance this might appear to be an insignificant decrease, but considering that China consumed around 4 billion tons of coal in 2012, this aim would mean a reduction of 80 million tons of coal consumed per year, which will at least get the ball rolling in the government’s new initiative to tackle pollution.
Russia and China’s recent deal could be an example of China’s attempts to curtail its coal usage and seek out alternative sources of energy. It seems that China is facing up to its coal problem; in fact, in 2013 China was reported to be the number one investor in renewable energy which is led by the country’s hydropower generation. China is also increasing its investments in nuclear energy, with 21 nuclear energy plants currently in operation and 27 currently being constructed.
While China is by no means out of the woods yet in terms of fixing it’s pollution problem, this potential shift in China’s energy market could prove to be a win-win situation, as the correlation between coal use and growth of China’s GDP is becoming weaker. In fact, China’s policy is to become a bigger nuclear technology exporter, which could further benefit China’s economic growth.
Although China’s efforts to cut back on its CO2 emissions may be slow, China’s growing renewable and clean energy markets suggest that there is hope yet.
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