Demographics of China

Demographics of China

Outline 1. 2. 3. 4. 5. 6. 7. 8. Introduction: What should China and India do? Current State of India Current State of China What is Carbon taxation? Why Carbon Taxation and not Cap and Trade? What we aim to do and why Results Conclusions The Chinese Economy GDP, PPP (current international $) GDP growth (annual %) 7 16 6 14 12 10 4 % 3 8

6 2 4 1 year Environmental degradation growing problem 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

1992 0 1991 2 0 1990 $ trillio n s 5 year Adjust economic structure in favor of less resource-intensive economic activities Demographics of China Largest population in the world: 1.31 billion people (2005) Population density higher in coastal region than inland Current Energy Mix Coal is backbone of energy system Meets about 60% of primary energy needs Importance growing in recent years due to increasing demand for electricity Electricity almost 80% coal-based Most of the coal concentrated in a few inland provinces, while

largest centers of demand in coastal provinces Current Energy Consumption Electric Power Consumption in China Total energy consumption increased by 9.3% over 2005. Now third-largest importer behind United States and Japan CO2 emissions Air pollution estimated to cost China 3%-7% of GDP each year Contains 20 of the worlds 30 most polluted cities 1800 1600 k W h p e r c a p ita 1400 1200 1000 800 600 400 200

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2000 2001 2003 2004 2005 ye ar Carbon Dioxide Emmisions (kt) 6000000

5000000 k t o f C a rb o n D io x id e Coal consumption increased by 9.6% Crude oil consumption by 7.1% Natural gas consumption by 19.9% In first six months of 2007, net importer of coal Imported natural gas in liquefied form from 2006 Net oil exporter until early 1990s 2000 4000000 3000000 2000000 1000000 0 1990 1991 1992 1993 1994 1995 1996

1997 ye ar 1998 1999 2002 2003 2004 Electricity Sources (China) 100% 80% % of total 60% 40% 20% 0% 1990 1991 1992 1993 1994 1995

1996 1997 1998 1999 2000 2001 2002 2003 2004 year Electricity production from coal sources (% of total) Electricity production from hydroelectric sources (% of total) Electricity production from natural gas sources (% of total) Electricity production from nuclear sources (% of total) Electricity production from oil sources (% of total) 2005 Renewable Options Hydropower Worlds largest hydropower potential National Hydropower Resources Survey (2003) estimate technologically exploitable capacity of China's water resources is

540 GW Rivers that will likely be dammed Nuclear If all nuclear power stations that have been planned to date are completed, total installed capacity will exceed 10GW in 2010, and total approximately 32GW in 2020 Hongshui River, Yangtze River, Yellow River, Lancanjiang River, Wujiang River Solar 2/3rds of China's territory enjoys annual sunshine of over 2,200 hours and annual solar radiation of over 5,000 MJ/m2 Tibetan Plateau has the richest solar energy resources Wind Estimated that utilizable wind energy resources inland area about 300 GW combined with utilizable wind energy sources in near-shore areas, could reach about 1000 GW in total China produces more wind turbines than any country in the world 40 manufacturers of smallscale wind turbines

Wind power most successful in Inner Mongolia Autonomous Region (IMAR) 1/3 of rural, remote herdsmen use wind electric generators Goals for the Future 11th Five-Year Plan (2006-2010) Growth of 7.5% per year between 2006-2010 planned to prevent overheating of economy Cut energy use per unit of GDP by 20% and pollution by 10% by 2010 compared to 2005 Target shares of each major fuel in primary energy mix in 2010 66.1% coal 20.5% oil 5.3% natural gas 0.9% nuclear power 6.8% hydropower 0.4% other renewables 2020 plans (NDRC) Nuclear Target: 40GW by 2020 Hydro Target: 300 GW by 2020 Solar and Wind

Target: over 60GW by 2020 Indias Economy With 1.50 trillion in current $, it is twelfth in the world Third largest world economy in terms if PPP Starting 2005 India allows 100% foreign investments for most industry fields FDI inflows into India reached a record US$ 19.5 billion in fiscal year 2006/07 (April-March) double that of USA Demographics of India Population 1.07 billion (second in the world) Labour force by occupation agriculture: 60%, industry: 12%, services: 28% (2003) Unemployment 7.8% (2006 est.) India still has the worlds largest number of poor people in a single country. Of its nearly 1 billion inhabitants, an estimated 350-400 million are below the poverty line, 75 per cent of the poor in the rural areas. Main industries textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, services Power Consumption and CO2 Per Capita CO2 Emission per capita (t)

1.0 0.8 0.6 0.4 0.2 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Year Current Energy Mix (mtoe) Prospect to Grow Current Potential Coal (Mtoe) 148 38114 Natural Gas (BCM) Oil (MMT) Nuclear (GW) Hydro (GW) Bio-mass (Mtoe/year) Bio-fuels (Mtoe/year) Solar (Mtoe/year) Wind (MW) 32 34 9 31

140 <1 / <1 922 740 208 150 620 30 1200 10 Various Ministries Future Goals Indias 2030 energy projections remain bellow worlds 2004 average Five Year Plan 78,577 MW capacity addition (123,668 MW as of 2005-06) during the 11th Plan of 14,000 MW through renewables and another 12,000 MW from captive route. 2030 Massive Investment Requirements: To deliver sustained GDP growth of 8.0% till 2031-322, the requirements are: - Growth in primary energy supply by 3-4 times over current consumption - Electricity Installed Capacity should increase by 6-7 times - Annual coal requirement: Nearly 3 times over current demand TERI, 2006 Environmental Concerns

A one-meter rise in sea level could displace millions of people in India, a country with a coast line of several thousand miles. The ocean sequestration capacity is leveling off Deforestation is another serious problem (large percent of energy comes form biomass) According to research carried out at Oxford University, the total number of flood zone refugees in India alone could reach anywhere between 20 and 60 million. Sea level rises could also prompt an influx of millions of refugees from Bangladesh. The Gangotri glacier, the source of the River Ganges, is retreating at a speed of about 30 meters a year, with warming temperatures likely to increase the rate of melting. Kyoto will not be reinforced Energy Policy Advances: Energy for All by 2012 The power sector is 60 % centralized and peak shortages that were common in 90 reduced Numerous ministries, university institutes and to deal with R&D, modeling, energy distribution and policy issues Admission of private and foreign investment to energy, mining and related sectors (except for nuclear) Concerns: Policy application in practice Corrected for PP, Indians pay one of the highest energy prices in the world Power sector loses ~ $6 billion per annum Not everyone pays the electricity they use (30%-40% network losses) High pollution fuels adversely affect primarily the poor Integrated Energy Policy for India (August 2007) Eleven scenarios based on source availabilities and technological development but not incentives CO2 Emissions By Different Scenarios What is a Carbon Tax? A carbon tax is a tax on emissions of carbon dioxide

and other greenhouse gases. It helps compensate for the negative externalities of pollution caused by these emissions The alternative to carbon taxation is cap and trade reforms which are when governments set a limit or cap on the amount of a pollutant that can be emitted Why not Cap and Trade? Environmental NGOs and movements argue that trading does little to solve pollution problems overall Groups that do not pollute sell their conservation to the highest bidder Overall reductions would need to come from a sufficient and challenging reduction of allowances available in the system Cap and Trade Criticisms (contd) Other Criticisms Many attribute accounting failures to the complexity of system Cap and trade systems are seen to generate more corruption than a tax system The administration and legal costs of cap and trade systems are higher than with a tax Lack of credibility in the first phase of the EU Emissions Trading In the first year, the number of permits topped the amount of pollution The price of carbon fell to almost nothing Taxes are Economically More Efficient Finally, carbon taxes appear to be more efficient than caps because the revenue can be used by

the government We would like to propose that the revenue be directed towards research and development of alternative energy sources Yes, Steve Goldberg criticized this notion in regards to the US, however the governments that rule China and India are structured very differently- We Want a Diversification of Energy Sources Carbon atoms are present in every fossil fuel coal, oil and gas In contrast, non-combustion energy sources wind, sunlight, hydropower, and nuclear do not convert carbon to carbon dioxide. Our goal it to investigate the cost associated with diversifying the power supply of China and India and a tax rate which would make this feasible Representative Trajectory sampling various energy mixes. Normalized Cost and CO2 output are the Cost and CO2 of a particular mix divided by the Cost or CO2 of the initial Distribution Initial Distribution based on IEA Alternative Reference Scneario Simulation is observed to converge to a distribution with a stable minima in the cost and in CO2 Emissions Table 3 Generation cost (dollar/kWh) for different energy sources with used tax rates for both countries China India Initial Low Tax

Mediu m Tax High Tax Initial Low Tax Mediu m Tax High Tax 0.0355 0.0495 0.076 0.1134 0.0344 0.04842 0.0751 0.1123 Clean Coal 0.065 0.0664

0.069 0.072 0.0664 0.069 0.072 Gas 0.062 0.069 0.0823 0.101 0.0328 0.03981 0.0531 0.0718 N/A N/A N/A 0.0772 0.0782 0.08 0.0827 0.055

0.0553 0.0558 0.0565 Coal Biomass N/A 0.065 Hydro 0.048 0.0483 0.04881 0.04956 Nuclear 0.044 0.0441 0.0442 0.0444 0.0463 0.0464 0.0464 0.0467 Wind

0.045 0.0451 0.0451 0.0454 0.0772 0.0773 0.0774 0.0772 Solar 0.7187 0.7195 0.7211 0.7231 0.3861 0.3869 0.3884 0.3861 Source: IEA, WEO 2007; World Nuclear Association; IEA, Renewable; CEA, 2004; Government of India Planning Commission, 2007; Authors' calculations Table 4 Scenario 1

Scenario 1: China with Traditional Coal Technology Low Tax ($14.02/t CO2) Initial cost Medium Tax ($40.65/t CO2) High Tax ($77.92/t CO2) $397 billion $530 billion $716 billion 4969 Tt 4969 Tt 4969 Tt $400 billion $513 billion $673 billion 4265 Tt 4258 Tt 4247 Tt $3 billion -$16 billion

-$42 billion -704 Tt -711 Tt -722 Tt Percent change in cost 0.76% -3.10% -5.86% Percent change in CO2 emissions -14.16% -14.31% -14.53% Initial CO2 emissions Final cost Final CO2 emissions Change in cost Change in CO2 emissions 70.00% 60.00% 50.00% 40.00% 30.00%

20.00% 10.00% 0.00% IEA, Alternative Policy Scenario Projections Low Tax ($14.02/kWh) Medium Tax ($40.65/kWh) High Tax ($77.92/kWh) Coal 63.70% 59.20% 59.09% 58.93% Gas 5.74% 0.00% 0.00% 0.00% Hydro 17.08%

27.62% 27.71% 27.84% Nuclear 6.17% 8.38% 8.37% 8.38% Wind 2.78% 3.70% 3.74% 3.74% Solar 0.79% 1.10% 1.09% 1.12% Scenario 2 Table 5 Scenario 2: China with the Introduction of Clean Coal Technologies Low Tax ($14.02/t CO2)

Initial cost Medium Tax ($40.65/t CO2) High Tax ($77.92/t CO2) $480 billion $499 billion $526 billion 706 Tt 706 Tt 706 Tt $474 billion $487 billion $504 billion 454 Tt 454 Tt 452 Tt $6 billion -$12 billion -$22 billion Change in CO2 emissions -253 Tt

-253 Tt -255 Tt Percent change in cost -1.26% -2.32% -4.10% Percent change in CO2 emissions -35.80% -35.79% -36.08% Initial CO2 emissions Final cost Final CO2 emissions Change in cost 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00%

0.00% IEA, Alternative Policy Scenario Projections Low Tax ($14.02/kWh) Medium Tax ($40.65/kWh) High Tax ($77.92/kWh) Coal 63.70% 59.39% 59.40% 59.08% Gas 5.74% 0.00% 0.00% 0.00% Hydro 17.08% 27.51% 27.46% 27.73%

Nuclear 6.17% 8.25% 8.27% 8.36% Wind 2.78% 3.76% 3.76% 3.72% Solar 0.79% 1.09% 1.11% 1.10% Scenario 3 Table 6 Scenario 3: India with Traditional Coal Technology Low Tax ($14.02/t CO2) Initial cost Medium Tax ($40.65/t CO2)

High Tax ($77.92/t CO2) $121 billion $159 billion $198 billion 1399 Tt 1399 Tt 1399 Tt $158 billion $183 billion $166 billion 949 Tt 934 Tt 940 Tt $37 billion $24 billion -$32 billion Change in CO2 emissions -450 Tt -465 Tt -459 Tt

Percent change in cost 30.66% 15.37% -15.99% Percent change in CO2 emissions -32.20% -33.24% -32.82% Initial CO2 emissions Final cost Final CO2 emissions Change in cost 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% IEA, Alternative Policy Low Tax ($14.02/kWh) Scenario Projections

Medium Tax ($40.65/kWh) High Tax ($77.92/kWh) Coal 54.71% 40.28% 39.64% 39.90% Gas 10.67% 0.00% 0.00% 0.00% Biomass 3.43% 7.68% 7.69% 7.57% Hydro 15.97% 25.98%

26.28% 26.34% Nuclear 7.90% 13.13% 13.41% 13.24% Wind 5.38% 8.50% 8.64% 8.65% Solar 0.65% 4.41% 4.34% 4.31% Scenario 4 Table 7 Scenario 4: India with the Introduction of Clean Coal Technologies Low Tax ($14.02/t CO2) Initial cost

Medium Tax ($40.65/t CO2) High Tax ($77.92/t CO2) $144 billion $151 billion $161 billion 264 Tt 264 Tt 264 Tt $174 billion $176 billion $182 billion 123 Tt 123 Tt 124 Tt $30 billion $25 billion $22 billion Change in CO2 emissions -141 Tt -142 Tt

-140 Tt Percent change in cost 20.87% 16.80% 13.48% Percent change in CO2 emissions -53.29% -53.66% -53.02% Initial CO2 emissions Final cost Final CO2 emissions Change in cost 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% IEA, Alternative Policy Scenario Projections

Low Tax ($14.02/kWh) Medium Tax ($40.65/kWh) High Tax ($77.92/kWh) Clean Coal 54.71% 40.61% 39.78% 40.53% Gas 10.67% 0.00% 0.00% 0.00% Biomass 3.43% 7.67% 7.55% 7.56% Hydro 15.97%

25.66% 26.37% 25.87% Nuclear 7.90% 13.19% 13.41% 13.26% Wind 5.38% 8.52% 8.70% 8.41% Solar 0.65% 4.34% 4.19% 4.38% Conclusions Both countries are capable of meeting their Energy Demand in Original ways that

Reset significantly reduce negative environmental impact and externalities Distribution These changes in Infrastructure can be made financially appealing if the social cost of CO2 Emissions is internalized through a modest Carbon Tax in China, particularly if Clean Coal is developed as an option Due to current limitations in domestic resources and technology, it seems that changing Infrastructures in India is more costly, and a larger Carbon Tax may be necessary to effectively internalize the social costs and provide incentives to change; however, their potential to grow seems promising and perhaps renewable options will become less costly with time Nuclear is the most cost competitive energy source and the most promising source to mitigate carbon emissions in the near future in both countries

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