Clogging of China’s Energy Arteries

In late August and early September, we witnessed massive congestions on the highways of Northern China. The congestions stretched as long as 100km and stranded more than 10,000 trucks for weeks. These highways are considered to be China’s energy arteries, which link its heart (the capital, Beijing) with Inner Mongolia, one of China’s emerging coal producing provinces. According to Xinhua News Agency, the clogging was the combined effect of road repair and over-traffic of coal-loaded trucks. The incessant inflow of coal trucks into Beijing reflects the fact that the city relies heavily on coal for its energy supply, as Beijing is the epitome of China’s energy consumption patterns. In 2009, coal accounted for 70% of China’s energy use, and the demand is still growing rapidly despite the economic downturn. According to the IEA Outlook 2010, China’s annual coal consumption is more than the all OECD countries combined.

The predominance of coal renders China’s energy security vulnerable to changes in reserves and the price of coal. As the largest coal producer, China produced 3050 million tons in 2009, taking up 45.6% of the world’s total output. 85% percent of China’s coal production is for domestic use.  However, the country only holds 13% of the world’s total reserves, which means its production has exceeded its reserve. As a consequence, it is now faced with the fastest reserves depletion in the world at an annual rate of 1.9%. At this depletion rate, China’s coal reserves will be exhausted within 50 years if new reserves are not discovered. In order to meet its appetite for energy, China has casted its eye on the international market. Its coal imports for the first nine months of 2009 increased by 167% compared with the same period of previous year. The rise in the share of imported coal in the total coal use adds uncertain factors to the country’s energy supply, e.g. price fluctuations in the international market.

In order to reduce dependence on international market and ensure its energy security, China needs to diversify into other sources, e.g. renewable energy. The Chinese government has realized the risks and adopted measures to cope with the problem. In the 2010 Report on the Work of the Government, Chinese Premier Wen Jiabao pointed out that China’s energy supply is one of the uncertainties faced by the country. In the 2006-2010 Five Year Plan, China planned to increase its renewable energy generation by 100% by 2020 to accommodate 20% of the country’s consumption.

However, despite the government’s commitment to diversified sources of energy at the national level, the policies have not been carried out faithfully yet. The clogging incident seems to reflect the fact that businesses are still very much entrenched in China’s conventional industrial structure, and have yet to diversify into other energy sectors. High energy consumption remains as the leading engine of China’s economy, and economic recovery and growth is the government’s top priority. Against such backdrop, we could possibly expect to see more “artery congestions”.