Transcript Assessing China`s Energy and Environmental Outlook: Can

Assessing China’s Energy and
Environmental Outlook :
Can Hong Kong Play a Key Role?
In-house Discussion with
Vision 2047 Foundation Members
By Patrick Cheung
July 9, 2007
Issues to be Discussed
• Will China continue to rely on fossil fuels for its energy
consumption, only more of them?
• Will the air get even dirtier?
• Can China transform itself to be much more energy efficient and
cleaner? What are the challenges and opportunities?
• Can Hong Kong play a meaningful role in this transformation?
2
Characteristics of China’s Energy Consumption
Demand
• Continuing urbanization
(40 to 70% ?) and
industrialization
• Growing service
economy
• Personal wealth
increase, e.g. car
ownership
Supply
• Limited domestic
production of oil and
natural gas
• Nuclear/Alternative
energy development
helpful only at the
margin
• Abundant coal resource
Impact on Energy Use
• Light products
demand growth, e.g.
gasoline, jet fuel,
diesel, etc.
• Imports of liquid fuels
to increase
• Strong electricity
demand growth
• Unprecedented power
generation capacity
additions
• China will continue to
rely on fossil fuels to
drive its economy
• Total potential
emissions to increase
substantially
• Coal use dominant
and swing fuel
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Primary Energy Consumption to 2030
EIA Reference Case
2004
2010
2020
2030
CAGR %
2004-2030
Total Consumption (Quads)
USA
China
World
100.7
59.6
446.7
106.5
82.6
511.1
118.2
112.8
607.0
131.2
145.4
701.6
1.0%
3.5%
1.8%
Liquids (mm barrels a day)
USA
China
World
20.7
6.4
82.5
21.4
9.4
90.7
23.8
11.9
103.7
26.6
15.7
117.6
1.0%
3.5%
1.4%
22.6
41.1
114.5
24.2
55.3
136.4
27.3
75.5
167.2
34.1
95.2
199.1
1.6%
3.3%
2.2%
22.4
69.0
25.6
22.7
66.9
26.7
23.1
66.9
27.5
26.0
65.5
28.4
N/A
N/A
N/A
Coal (Quads)
USA
China
World
Coal as % of Energy
Consumption
USA
China
World
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Primary Energy Consumption to 2030
EIA Reference Case (cont’d)
2004
2010
2020
2030
CAGR %
2004-2030
Population (millions)
USA
China
World
294
1,307
6,388
310
1,355
6,841
337
1,424
7,577
365
1,446
8,203
0.8%
0.4%
1.0%
GDP (2000$ trillions)
USA
China
World
10.7
1.7
34.9
12.8
2.9
42.9
17.1
5.3
57.8
22.5
8.8
76.9
2.9%
6.5%
3.1%
34,250
4,560
6,993
34,355
6,096
7,473
35,074
8,301
8,011
35,945
10,055
8,533
0.2%
3.1%
1.8%
Per Capita Energy Use
(mm BTUs / person)
USA
China
World
5
Primary Energy Consumption to 2030
EIA Reference Case (cont’d)
2004
2010
2020
2030
CAGR %
2004-2030
Energy Intensity
(BTUs / $GDP)
USA
China
World
9,411
35,059
12,799
8,320
28,483
11,914
6,912
21,283
10,502
5,831
16,523
9,124
-1.8%
-2.9%
-1.3%
CO2 Emissions
(million tons)
USA
China
World
5,923
4,707
26,922
6,214
6,497
30,860
6,944
8,795
36,854
7,950
11,239
42,880
1.1%
3.4%
1.8%
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Energy Intensity Pattern (2004 Data)
(‘000)
40
x Russia
x China
x South Africa
30
Energy Use
x India
Intensity
(BTU/$GDP (2000))
20
Norway x
Canada x
x South Korea
x Ethiopia
x Bangladesh
10
0
x USA
x Germany
x Hong Kong
Denmark x x Japan
x Nigeria
100
200
Per Capita Energy Consumption
mm BTU / person
300
400
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China’s Energy and Environmental Quandary
Ever greater
Dependence on
fossil fuels
Insatiable energy
demand to sustain
economic growth
CHINA
Worrying impact on
- air quality
- CO2 emissions
- resource cost
which could stifle growth
Transformational Challenge
- How to increase economy wide energy use efficiency
- How to create and implement comprehensive solutions to clean up
air quality and reduce CO2 emissions
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China’s Transformational Obstacles
Fuel input
Combustion Process /
Equipment and Delivery
Output
- Energy
- Emission
Standards /
Regulations
-
Lax standards
Tightening standards increase cost
Lack comprehensive policy/regulatory framework
Technology
-
Stock turnover
Adoption of best practices
Technology transfer
Cost
Enforcement
-
Difficult to monitor diffused sources of emissions, e.g.
electricity shortage induced micro-generation
Economic competition
Corruption
Competence
-
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Transformation of a Complex System
Wealth Creation
- Affordability
- Financibility
Knowledge base
- Policies and regulations
- System management
Technology
Transfer
Blue Sky
China
Economic
Re-structuring
Shared Values
- Will to implement
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The opportunity set is huge.
China’s Objective
High
Now
X
Value
added
Future
X
Low
Quality
(value added)
Raw
Energy
Cost
High
Now
Future
And improving quality is inherently high - value added
•
•
•
•
•
Technology driven
Information based
Service economy
Managing complexity
Cross-border facilitation
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Hong Kong’s advantages are visible.
•
Adapt in traditional cross-border facilitation role.
•
Preferred base for foreign companies in energy and environmental sectors.
•
Financing will be a key part, at which Hong Kong excels :
– Equipment/Project financing
– Capital raising
– Emissions or carbon trading
•
Opportunity set is largely a sophisticated service sector which can leverage Hong
Kong’s soft and hard infrastructure and professional services culture.
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But, it’s not an automatic slam dunk either.
Hong Kong not necessarily
centre of gravity for this
opportunity set
•
•
•
•
•
Limited energy economy
Its internal problems less complex
Energy not a dominant sector
No technology base
Little thought leadership on policies,
regulation, research, knowledge
base, etc.
China itself likely to become
More pro-active and organized
• “Its their own problem”
• International pressures directly felt
• Top government initiatives likely to
create large support infrastructure
• R&D and subsidies available
Initial thoughts on what Hong Kong
can do
• Build critical mass of thought leadership
– Quality think tanks
– University funded research
– Strengthen/ Create related university
departments
– Centre for seminars and conferences
– Widespread education to create
shared values
• Identify potential niches of opportunities, e.g.
– Urban planning
– Environmental consulting
– Air quality monitoring
– Regulatory policies
– PRD environmental systems
management
– Energy projects and equipment
financing
– Carbon and emissions trading?
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Conclusions
•
China’s energy demand will continue to increase substantially and will
continue to rely on coal and oil for its needs.
•
China faces an uphill battle to become more energy efficient and clean up
its environment, while sustaining economic growth.
•
Wealth creation and creating the capability and will to manage complex
solutions are pivotal.
•
Huge commercial opportunities exist in this transformational challenge.
•
Hong Kong will need to work hard to play a meaningful role.
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