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China Turns to Coal for Oil, Perhaps Unwisely

New Tang Dynasty Television Created: September 13, 2012 Last Updated: September 22, 2012
Related articles: China » Business & Economy
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Chinese coal miners load coal into trucks at the Changyuan Mine in southwest China's Sichuan Province, on Dec. 10, 2009. China has large amounts of coal, but very little in the way of oil. (AFP/AFP/Getty Images)

Chinese coal miners load coal into trucks at the Changyuan Mine in southwest China's Sichuan Province, on Dec. 10, 2009. China has large amounts of coal, but very little in the way of oil. (AFP/AFP/Getty Images)

China lacks oil and its recent economic downturn puts pressure on officials hungry for projects that appear to increase GDP. These seem to be the reasons why the Chinese regime reversed course at the beginning of 2012 and began investing heavily in turning coal into liquid fuel.

Coal to liquid (CTL) projects are controversial around the world. They involve high environmental risks, create excessive wastewater, and are also economically risky. Many countries have banned CTL projects.

China aborted most of the CTL projects back in 2008, due to excessive use of coal in the chemical industry. From 2006 onward it had already caused a water crisis in Western China.

“There is no infinite supply of water resources. It’s bound to cause a water supply crisis. In return, it pollutes water resources and the atmospheric environment,” Sichuan-based senior engineer Fan Xiao told NTD Television.

China’s has vast amounts of coal but lacks oil. Soaring oil prices and dependency on foreign countries make the regime feel the country’s shortage of oil more acutely.

Yet, critics say there is more to it than that. The regime’s tendency to invest and approve such large-scale projects is not just based on the actual demand but rather on short-term benefits, such as fiscal revenue for local authorities, and a wish to boost the GDP figure.

The regime’s tendency to invest and approve such large-scale projects is based on short-term benefits.

“This project shows a lot of problems. Firstly, it’s greatly subsidized by the government, and has such high water usage and immature technology. If it is invested in heavily, it’s very likely to be a huge waste,” said Xie Tian, assistant professor of marketing at University of South Carolina–Aiken.

“So it cannot really be commercialized, and would probably never cover its cost. That would be a huge financial hole. In my view, China’s economic downturn and stagnation has put too much pressure on the regime. … Once the project looks favorable, it will rush hastily to launch it.”

Currently, a 2 million-ton CTL project is awaiting approval, and is expected to get the green light soon. Furthermore, there are other coal-to-chemical projects awaiting approval, with an estimated total investment of 700 billion yuan (US$110 billion), according to China Business Journal.

“It also poses potential risks for the economy, as energy can be easily affected by market fluctuation. For example, the price of coal has slumped in the last year. So in the long run, heavy financial cost will be hidden inside these projects,” said Fan Xiao.

These projects are located in less populated parts of China, such as Inner Mongolia and Xinjiang.

Environmental activist Chen Yunfei sees the projects moving ahead without input from the public or experts.

“It is another portfolio, without seeking public opinion, nor real expert assessment. It is another portfolio that is divided up among local authorities and interest groups,” said Chen Yunfei.

Greenpeace International and the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences released a report “Thirsty Coal: A Water Crisis Exacerbated,” on Aug. 14.

It is estimated that in China’s official 12th Five-Year Plan (2011–2015), there will be “16 large-scale coal power bases, predominantly in western areas of the country.” The report estimates that these projects will have a demand for water that is nine times that of Beijing’s daily water supply in 2012.

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