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COP21: Follow The Money

Paris skyline

THE PARIS CLIMATE talks — formally the United Nations 21st Conference of the Parties (COP21) — starting on November 30 will be a political bun fight in which China as the world’s biggest polluter will be at the centre. But the how, who and who pays arguments over environmentally sustainable development are only another front in the wider competitive-cooperative struggle between North and South for global influence.

Whatever the outcome of the Paris meeting, China will come off a winner.

The goal of COP21 is for more than 190 countries to agree a global and legally binding treaty that will let the world avoid the worst impacts of climate change. In practice, this means an enforceable plan to keep global warming below 2℃ by cutting greenhouse gas emissions.

The countries that account for 80% of the world’s emissions, three-quarters of which are accounted for by China, the United States, the 28 European Union members and India, have submitted plans for how they will play their part. However, these Intended Nationally Determined Contributions in aggregate fall short of what is needed to meet the 2℃ target.

China’s INDC’s are conventional enough: a speeding up of the transformation of energy production and consumption to mitigate increasing greenhouse gas emissions; continuing improvements in energy efficiency as the economy is rebalanced in a sustainable way; and increases in forest carbon sinks.

In hard numbers:

  • Peak CO2 emissions to be reached by 2030 at the latest;
  • Cut carbon intensity by 60-65% from 2005 levels;
  • 20% of energy produced by renewables by 2030 (10% in 2013); and
  • Increase forest coverage by 4.5 billion cubic meters compared to 2005.

These targets build on ones set out in 2009. That year, Beijing said that by 2020 it would lower carbon dioxide emissions per unit of GDP by 40-45% from 2005’s levels, increase the share of non-fossil fuels in primary energy consumption to around 15%, and increase forests by 40 million hectares and the forest stock volume by 1.3 billion cubic meters compared to 2005 levels.

In its INDC, Beijing claimed that by 2014, it had achieved:

  • 33.8% lower carbon dioxide emissions per unit of GDP than the 2005 level;
  • 11.2% non-fossil fuels share in primary energy consumption;
  • Forested area and forest stock volume increased by 21.6 million hectares and 2.188 billion cubic meters respectively compared to the 2005 levels;
  • 300 gigawatts of installed hydropower capacity — 2.57 times of that in 2005;
  • 95.81 gigawatts of on-grid wind power capacity — 90 times of that of 2005);
  • 28.05 gigawatts of solar power installed capacity of — 400 times of that of 2005; and
  • 19.88 gigawatts of nuclear power installed capacity — 2.9 times of that for 2005.
  • Also, China has initiated pilot carbon-trading markets in seven provinces and cities and low-carbon development pilots in 42 provinces and cities, with a goal of having a nationwide cap-and-trade market in place by 2017.

All of which is real progress, though not sufficient to have kept up fully with the growing economy, as the skies over Beijing bear daily witness.

China’s COP21 targets still look ambitious, unlikely to be achieved without either technological advances both to improve energy intensity (units of energy required per unit of GDP created) and to help nuclear energy replace coal-fired power generation, or a slowdown in the economy to reduce power demand. On some estimates, the later would mean China’s GDP growth rate slowing to at least 4.5% a year for a sustained period in the decade to 2030.

All of which helps to explain why the politics of climate control will be so confrontational at COP21 behind the feel-good words the politicians will spout.

As de facto spokesnation for developing economies, China wants the rich nations to carry the much more of the burden of reducing emissions than poor ones. Its argues that historically the developed countries have gone through their industrial revolutions and so should not expect developing economies to have artificial constraints put on them as they now go through theirs.

The motives for such a position fall along a spectrum running from fairness — developed nations shouldn’t get a ‘free ride’ on pollution just because it occurred centuries ago — to nefariousness — the old world powers are using climate change to hold back the development of new rivals arising in the East and South.

Thus, China wants ‘ambitious economy-wide absolute quantified emissions reductions targets’ for developed countries, while calling only for ‘enhanced mitigation actions’ on the part of developing economies such as itself. Furthermore, it wants developed countries to provide the finance, technology and capacity-building for developing nations to do so.

The proposed financing is scarcely chump change. Beijing wants it to start at $100 billion in 2020 and then increase yearly, with the monies coming from the West’s public purses, not private sources. It proposes that this financing is channeled through the UN’s Green Climate Fund, a somewhat misbegotten five-year-old UN agency that would be made directly accountable to COP21.

So far, the fund has barely raised more money than needed to cover its set-up costs and is wracked by internal disagreements over what it should be funding and how. As of May this year it had received pledges of only $10.2 billion towards its own $100 billion-by-2020 target.

Developing nations don’t like the fund’s focus on private investment, which in practice means Western investing institutions. Environmentalists don’t like its acceptance of fossil-fuel investments, and no one likes the fund’s governance, hence Beijing’s effort to switch it to public funding and put it under COP21’s authority.

The third area of contention at Paris beyond targets and where the money is coming from will be technology. Beijing wants COP21 to impose a clear requirement on developed nations to transfer technologies and R&D to developing countries ‘based on their technology needs’. That would give developing economies, including China, carte blanche to demand virtually any technologies from the developed nations that it wants.

China has need of such technologies, given the challenges of its COP21 proposals. It will not be able to displace coal from the central place it now occupies in the energy mix without a significant increase in nuclear power generation. China is developing an indigenous nuclear industry apace, but its third-generation technology remains unproven, its capacity for making key components for reactors is uneven, and it has limited abilities in spent fuel reprocessing and storage.

Free licence to demand technology transfers from Washington and Paris to tackle any and all of those problems so its nuclear industry can make itself internationally competitive is not going to be acceptable to the West.

However, COP21 will likely yield an agreement, not the vague promises of previous UN climate summits. China will, of course, not get everything it is calling for going in. Binding hard 2030 targets on developed nations are unlikely, as are commitments by the West to any significant public funding of the Global Climate Fund or carte blanche technology transfers.

A mechanism for strengthening national carbon reduction targets every five years is likely. Presidents Xi Jinping and Barack Obama agreed when they met in September to support such an approach, calling for COP21 to establish reporting and accountability that would strengthen emission reduction targets over time.

That, along with some concrete steps towards mobilizing financial and technical resources to assist the power countries to develop sustainable low-carbon and climate resilient economies would be achievement enough in Paris.

These outcomes would give Beijing plenty of advantages. It would get flexibility in recalibrating its tough 2030 domestic emissions targets and constrain Western efforts to impose a World Bank IFC-type private-sector financing model on climate mitigation.

At the same time, it would be free to expand its bilateral climate lending channels such as its South-South Climate Fund. Through its other burgeoning channels such as the Asian Infrastructure Investment Bank, the BRICS’ development bank, and its Silk Road Fund, it can position itself as a key player in global low-carbon investment through its overseas infrastructure and project finance.

With that would come another broad, long-term ratcheting up of Beijing’s global clout, and especially if the next U.S. administration is a more isolationist and climate-change-rejecting Republican one.

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It Is An Ill Wind That Blow’s China’s Nuclear Industry No Good

CHINA’S STATE-OWNED heavy engineering firms are getting a liking for European renewables. China General Nuclear (CGN) Corp. has beaten out several rivals to acquire a controlling stake in three U.K. wind farms being sold by the French utility EDF.

This follows China Three Gorges Corporation acquisition of wind-generation capacity in Spain and Portugal to add to that it has in Pakistan. The State Administration of Foreign Exchange (SAFE), which also supervises CGN, owns 49% of the portfolio of wind assets belonging to the Norwegian state owned electricity company, Statkraft. This stake is held through SAFE’s U.K. investment arm, Ginko Tree Investment.

CGN, which generates more than half of China’s nuclear energy and was known as the China Guangdong Nuclear Power Group until last year, paid an estimated $157 million for 80% of the three wind farms. EDF will retain the remaining 20% and continue to operate the facilities.

The three farms, all in eastern or north eastern England, are CGN’s first significant acquisition of onshore wind generating capacity outside China. It has a small interest in an Australian wind farm but set up a subsidiary earlier this year to acquire off- and onshore wind farms and solar projects in Europe. The U.K. government runs a subsidy scheme that requires energy utilities to buy a certain amount of electricity generated by renewables, which makes U.K. projects an attractive investment.

The generating capacity that CGN will be acquiring is relatively modest at 72 megawatts, sufficient to serve only 40,000 homes. By way of comparison, the group has installed generating capacity of some 7 gigawatts of solar, hydro and wind power in China plus 11.6 gigawatts of nuclear power.

Not that China’s nuclear companies are turning their back on nuclear despite industry’s post-Fukushima hiatus. CGN has another 3.9 gigawatts of capacity under construction in China and is involved in the negotiations over Hinkley Point C, a new $40 billion nuclear power plant EDF is planning to build in the west of England. That would be the first nuclear power plant built in Britain in a generation. CGN and China National Nuclear Corporation also want to build another nuclear plant in eastern England that would controversially use a Chinese built reactor.

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China’s Nuclear Power Program Gets Back On Track

Three policy documents concerning China’s nuclear power program surfaced last week: an energy white paper; the long-awaited new nuclear safety rules that come out of the review following the Fukushima Dai-Ichi disaster in Japan in March last year; and the mid-to-long-term development plan for nuclear power. The State Council discussed the latter two, having approved the new safety rules in principle in late May, and approved the final versions of both documents.

Yet for all that we haven’t learnt much if anything that is new about China’s ambitious nuclear power program. Officials have been flagging since early this year that work was resuming on reactors under construction before the moratorium on building and new approvals imposed in the immediate aftermath of Fukushima Dai-Ichi pending the safety review. That would cover 25 sites plus eight approved by not started, four of which were due to break ground last year. It is unclear how much of the construction undertaken this year was safety or remedial work as opposed to new building. The line in the white paper that a ‘few’ plants would be built between now and 2015, likely covers some or all of the eight already approved, and two or three penciled in for 2013, even if some might be delayed for reasons we’ll mention later.

It has also been clear for some months that China plans to moderate in the short term the pace of its ambitious plans for adding nuclear power generation capacity. The pre-Fukushima Dai-Ichi plan had called for the current 12GW of installed capacity to be expanded to 70GW by 2020. The white paper said the target was now 40GW by 2015, a number that we have heard before. After 2015, the white paper said, China would return to what it called a normal pace of construction.

This Bystander’s thumb-in-the-air estimate on the basis of that would be that installed capacity will get to 60GW by 2020, with half as much capacity again under construction. A slowing of the program, to be sure, but not a drastic one. (At no point has there been any suggestion that China would step back from nuclear power as Japan is doing.)

Moving to more advanced third generation reactors from the second-generation ones that account for the bulk of China’s installed reactors, was highlighted in the white paper as a safety measure. Yet this was already a policy priority before Fukushima Dai-Ichi, along with the foreign technology transfers that goes along with it. Nor is there any escaping the fact that the installed base of second-generation plants is going to be around for decades, even if their flood and earthquake defences are shored up. However, unstarted projects planned with second-generation reactors will likely be put on ice until they can be upgraded to third-generation plants. Germany and Japanese nuclear companies will, no doubt, be falling over themselves to bid for work to replace their disappearing domestic order books.

Nor is the continuation of the moratorium on building plants inland new. Most of China’s nuclear plants are along its coasts, where the  the population and power demand is, and the coal fields that feed the coal-fired power stations that generate 70% of China’s electricity are far away. There were plans to build reactors in Hunan, Hubei and Jiangxi during the 2011-15 five year plan. All three were pushed back several years ago until after 2015, as has been a plant planned for Anhui. Other provinces such as Sichuan also want nuclear power plants, but haven’t got Beijing’s approval. Finance is an issue, but the main reason for the delays for all the inland reactors is concerns about the river pollution they could cause.

There is a another reason for slowing the pace of building new reactors. There aren’t enough trained nuclear workers and safety supervisors. China takes nuclear safety seriously, more so than, say, in the construction of its high-speed rail network, though the nuclear industry has had its corruption problems, too. Beijing has also taken note of what happens to political leaders to whom nuclear disasters befall.

While a nuclear workforce could be trained in relatively short order, developing a culture of safety in a country where industrial safety is only starting to take hold as a concept, will take time. It also takes at least four years to train nuclear regulators by world standards. The arithmetic says to meet even scaled-back goals China will need to quadruple the number it has by 2020. Financial capital is the easy part. Human capital is harder.

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Resumption Of China’s Nuclear Power Program Gets Closer

The Shanghai Securities News reports that new nuclear power safety regulations are about to be published, opening the door to a formal resumption of China’s reactor building program. A halt to construction and a review of the country’s ambitious nuclear reactor plans was ordered in the wake of the Fukushima Dai-Ichi nuclear disaster in Japan in March 2011.

The State Council signed off “in principle” on the safety proposals and the development plan for the country’s ambitious nuclear power program in June. New construction approvals are already being made, the paper says. In May, state media quoted an unnamed official saying that construction was already underway at 28 sites without giving details. That may have included corrective work deemed necessary by the safety review at plants that fell short of new earthquake and flood-control standards.

It is likely, however, that Beijing will proceed cautiously with expanding its capacity targets and may scale back its goal of having 70GW of power generation capacity by 2020. Current installed capacity is 12GW. (The World Nuclear Association has a list of existing and proposed plants here and a map of them here.)

This Bystander noted earlier this year that four or five new approvals for a further 5GW of capacity, costing 50 billion yuan ($7.8 billion) to build, would be given in short order, especially with the current desire to bring forward planned infrastructure spending to stimulate the economy. Some 20-30% of that sum could flow into order books this year.

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China Gives Green Light To Resume Nuclear Power Program

The working staff work at a control room for China's experimental fast neutron reactor, July 21, 2011. China's first experimental fast neutron reactor began, for the first time, generating electricity that goes into the grid on Thursday. The development and spread of the new technology is helpful for China to develop a sustainable nuclear power industry and set up an advanced fuel-recycling system, according to experts. (Xinhua)

The State Council has signed off “in principle” on China’s new nuclear safety proposals and the development plan for the country’s ambitious nuclear power program. This provides the green light for work to resume formally on plants under construction and for approvals to be granted for new plants, which include some of the world’s most advanced. Beijing put its nuclear program on hold pending the safety review initiated in the wake of the tsunami that so devastatingly struck Japan’s Fukushima Dai-Ichi nuclear power station in March last year.

China has 14 operating nuclear reactors with a total capacity of 12GW, including that generated by its first experimental fast neutron reactor whose control room is seen in the photo above. There are at least 25 plants under construction, expected to raise capacity to 40GW by 2015. By 2020, nuclear power generation capacity is expected to reach 70GW. China’s long-term plans call for 5% of the country’s power to be generated by nuclear by 2020 and 10% by 2030, up from 1.2% in 2007.

Unlike Japan and Europe, China has just delayed, not scaled back its nuclear plans in the wake of the Fukushima  accident. Last December, the National Energy Administration said nuclear energy would be the foundation of China’s power generation over the next “10 to 20 years”, adding as much as 300 GW of capacity over that period. (The World Nuclear Association has a list of existing and proposed plants here and a map of them here.)

Earlier this year, Ren Jungshen, a nuclear safety expert at China’s Ministry of Environment Protection, said that China’s nuclear industry was on track to hit its capacity targets for 2015 and 2020, one of a series of comments by Chinese officials suggesting the program was about to resume. Late last month, state media quoted an unnamed official saying that construction was already underway at 28 sites without giving details. This may include corrective work that was deemed necessary by the safety review at plants that fell short of the new earthquake and flood-control standards.

This Bystander expects that four or five new approvals for a further 5GW of capacity, costing 50 billion yuan ($7.8 billion) to build, will be given in short order, especially with the current desire to bring forward planned infrastructure spending to stimulate the economy. Some 20-30% of that sum could flow into order books this year.


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China Powering Ahead With Nuclear Plant Construction

Half the 56 new nuclear power plants due to start commercial operation by 2015 are in China, according to the latest update of plants under construction by the World Nuclear Association. Unlike Japan and Europe, China hasn’t scaled back its nuclear plans in the wake of the Fukushima Dai-Ichi accident last year, just delayed them pending new safety regulations.

The association estimates that China’s 15 existing plants (the association includes one in Taiwan) have a capacity of 11,881 MWes. Its 26 plants under construction will add 27,640 MWes of capacity. A further 57,480 MWes of capacity is on the drawing board. It says:

In China, now with 14 operating reactors on the mainland, the country is well into the next phase of its nuclear power program. Some 26 reactors are under construction and many more are likely to be so in 2012. Those under construction include the world’s first Westinghouse AP1000 units, and a demonstration high-temperature gas-cooled reactor plant is due to start construction. Many more units are planned, with construction due to start within three years. But most capacity under construction will be the largely indigenous CPR-1000. China aims at least to quadruple its nuclear capacity from that operating and under construction by 2020.

Earlier this month, Ren Jungshen, a nuclear safety expert at China’s Ministry of Environment Protection, said that China’s nuclear industry was on track to hit its capacity targets for 2015 and 2020, the biggest hint to date that China’s nuclear power program was resuming.

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China’s Nuclear Program Post-Fukushima: Ready To Resume?

One year on from the tsunami that so devestatingly struck Japan’s Fukushima Dai-Ichi nuclear power station, a Chinese official has given the strongest hint to date that China will soon resume its own nuclear power program. Ren Junsheng, a nuclear safety expert at China’s Ministry of Environment Protection, told a conference in Hong Kong marking the first anniversary of the Fukushima accident that “the Chinese nuclear industry still feels confident to meet the installed capacity targets of 40 million and 70 million kilowatts by 2015 and 2020 respectively”.

Ren’s comments follow those by Huang Wei, China’s deputy envoy to the International Atomic Energy Agency (IAEA), who says that China had taken a series of measures to enhance nuclear safety, including safety management, in the wake of the Fukushima accident. At an IAEA meeting earlier this month, Wei said China now has 15 nuclear units in operation and 26 units in construction. Preliminary results released after comprehensive examinations ended last August showed the safety of these units were guaranteed, he said. Not, we pray, famous last words.

In January, Wang Binghua, board chairman of the State Nuclear Power Technology Corp., said that China’s first AP1000 nuclear power reactor, the Sanmen plant in Zhejiang, is expected to come into operation in 2013. That had been the clearest indication to date that China was planning to restart its nuclear power program. Ren and Wei’s comments suggest that the State Council’s review of China’s new nuclear safety proposals and the development program for the country’s ambitious nuclear program is imminent. Once the State Council has signed off, work will resume.


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