| Americans, the world's largest polluters, | | | | |
| consumed almost four tons of coal per person | | | | There are negotiations for 60 CDM projects |
| in 2006. Every ton of coal burned sends more | | | | currently underway. Of the twenty approved by |
| than two tons of carbon dioxide into the | | | | the state government, most are coalbed |
| atmosphere. | | | | methane recovery projects. |
| | | | |
| By 2009, experts believe China will overtake | | | | China hopes to double the sale of the |
| the United States as the world's largest | | | | country's carbon credits. The next five years |
| emitter of carbon dioxide. | | | | could show intensified activity in carbon |
| | | | trading as Japan and Europe rush to the 2012 |
| According to the country's National Reform | | | | deadline for meeting their emission |
| and Development Commission (NDRC), China will | | | | reductions targets. Using the present rate of |
| produce 1.45 trillion kWh of electricity in | | | | China's market share as a yardstick, this |
| the first half of 2007. About 75 percent of | | | | could mean more than US$7 billion in 'foreign |
| the China's energy is generated by coal. By | | | | aid' in 2007. |
| 2050, to serve China's growing population, | | | | |
| the country is expected to add the sum total | | | | Financial institutions are scrambling to deal |
| of Canada's generating capacity every four | | | | with the trading action. Fortis Bank, a |
| years! | | | | Belgian Dutch financial group, which has |
| | | | carbon trading desks in Europe and the United |
| While China hopes to rely more upon nuclear, | | | | States, plans to expand its Hong-Kong trading |
| coal is continues taking its toll until the | | | | desk this year to capitalize upon the 'easy |
| country solves its energy quandary. | | | | pickings' of methane projects. Fortis ranks |
| | | | 18th on Fortune's Global 500 list with 2006 |
| On Tuesday, China's state environmental | | | | revenues of more than US$112.3 billion. |
| watchdog reported that more than 62 percent | | | | |
| of the country's cities suffer from air | | | | Fortis' Asian carbon market director Shane |
| pollution. Thirty-nine cities were placed on | | | | Spurway said, "Methane will probably be one |
| the State Environmental Protection | | | | of the most popular projects in the next |
| Administration's 'Black List," because they | | | | three to four years." |
| suffered severe air pollution. | | | | |
| | | | While degasifying China's coal mines helps |
| Seven of those cities are located in China's | | | | save lives, the financiers aren't attracted |
| northern Shanxi province, the country's | | | | to methane projects for humanitarian reasons. |
| largest coal supplier. Coal-fired power | | | | Because methane gas is far more potent a |
| plants are reportedly the major culprit. Many | | | | greenhouse gas than carbon dioxide, every ton |
| were given preferential pricing terms to | | | | of methane gas captured and utilized is the |
| install sulfur removal systems. Some took the | | | | financial trading equivalent of twenty tons |
| pricing, but skipped the systems. | | | | of CO2. |
| | | | |
| China's runaway pollution has become an | | | | As a result, we believe China's coalbed |
| international problem. | | | | methane gas should become a very valuable |
| | | | commodity and attract widespread foreign |
| In early April, an American satellite spotted | | | | capital to those companies developing CBM in |
| a dense yellow cloud of gases, chemical and | | | | China. We also suspect that foreign-owned CBM |
| desert sands floating across Seoul (Korea) - | | | | companies developing these projects could |
| emissions from China's coal-fired | | | | become beneficiaries of carbon trading |
| smokestacks. This weekend, the Korean | | | | credits - potentially adding cash to their |
| government retaliated by launching Greenbelt | | | | revenue streams. |
| Plantation Project. The Korean forestry | | | | |
| service plans to plant 1.5 million trees in | | | | Until now, coalbed methane projects have |
| Mongolia to help reduce sandstorms wafting | | | | lagged in development. The CER mechanism in |
| across the Yellow Sea, which bring its | | | | the Kyoto Protocol shoots them to the top of |
| residents respiratory illnesses. | | | | the list. Carbon traders make money so the |
| | | | CBM projects will become easier to finance. |
| It is not that China is ignoring the problem, | | | | They neither require the capital-intensive |
| but that the country's breakneck GDP growth | | | | component of nuclear energy power plants nor |
| rate is not only impacting global commodity | | | | the gamble of an offshore natural gas |
| prices (oil, copper, nickel, uranium, etc), | | | | discovery. |
| but could also be accelerating the effects of | | | | |
| abrupt climate change and global warming. | | | | Kyoto's CERs and China's CBM projects appear |
| | | | to be a banker's dream project, for at least |
| Just Bad Weather? | | | | the next few years as the world's richest |
| | | | nations rush to capitalize upon those carbon |
| One can politely compartmentalize the | | | | trading credits. |
| disrelated weather events which occurred over | | | | |
| the past seven days and call those a | | | | China's Guizhou Province |
| coincidence, or one can imagine the horrors | | | | |
| Dr. James Lovelock has warned could occur as | | | | China hopes to reduce greenhouse gas |
| this century unfolds, as he told us a year | | | | emissions by phasing out many obsolete |
| ago. | | | | thermal power plants and replacing them with |
| | | | small-scale natural gas or coalbed methane |
| A week ago, Cyclone Gonu was recorded as the | | | | electric power plants. Holding one of the |
| strongest tropical storm since 1945 in the | | | | world's top coal reserves, and the world's |
| Arabic Gulf region. It peaked as a Category 5 | | | | largest producer and consumer of coal, China |
| along the coastline of the Gulf of Oman. At | | | | relies upon coal for its energy. The |
| the time, many worried it might disrupt oil | | | | country's top experts know coal better than |
| exports from the Middle East. It was the | | | | any other energy source. |
| first cyclone in recorded history to enter | | | | |
| the Gulf of Oman. Eastern Australia was | | | | Consequently, China's turning to CBM gas as |
| battered by heavy rains and suffered major | | | | one means of reducing air pollution and |
| flooding and landslides this past weekend. So | | | | continuing to power its double-digit GDP |
| great was the impact that some compared it to | | | | growth is a natural extension for its |
| 1989's earthquake, near the same location. | | | | scientists, miners and environmentalists. |
| | | | |
| There have been other firsts over the past | | | | After researching Shanxi province, which |
| few years. In 2004, Cyclone Catrina became | | | | hosts one-third of China's coal reserves, we |
| the first cyclone to form in the South | | | | began studying comparable coal provinces and |
| Atlantic and also hit Brazil. In 2005, | | | | regions to find which areas had prolific CBM |
| Hurricane Vince became the first cyclone to | | | | reserves. Guizhou province stood out. It is |
| hit the Iberian Peninsula. In 2006, super | | | | also about 400 miles northwest of Hong Kong. |
| typhoon Chanchu formed in the South China | | | | |
| Sea, hitting China, Taiwan, the Philippines | | | | In the course of researching the U.S. |
| and Taiwan. | | | | Environmental Protection Agency's Coalbed |
| | | | Methane Outreach Program, we were fortunate |
| Many have concluded these could be early | | | | to uncover an analysis released in late 2005 |
| warning signs of much greater catastrophes | | | | jointly published by the China Coal |
| expected as sea waters further warm up. | | | | Information Institute and the US EPA. |
| | | | |
| China Aiming for Solutions | | | | "Guizhou province has the largest coal |
| | | | reserve in southern China as well as rich CBM |
| Electricity growth has been the global driver | | | | resources. The CBM reserve in Guizhou is |
| toward more nuclear and more environmentally | | | | 3.1KB m3, accounting for 22 percent of the |
| friendly methods of power generation. For | | | | total in China." |
| example, the U.S. Department of Energy (DOE) | | | | |
| forecasts an additional 90 gigawatts of | | | | Guizhou ranks second behind Shanxi province. |
| electricity would be required over the next | | | | |
| twenty-five years in the United States. To | | | | The report continued, "The CBM resources in |
| generate this new capacity, the DOE | | | | Guizhou are not only rich but of high quality |
| calculated it would take 151 coal-powered | | | | as well, with the CBM reserve 29KB m3 in the |
| plants, 100 mid-sized nuclear plants or | | | | methane-rich areas of over 8 m3 methane per |
| 60,000 wind turbines. | | | | ton coal, accounting for 94 percent of the |
| | | | total amount of local CBM resources." |
| China's problem is magnified to accommodate | | | | |
| its higher energy intensity per unit of GDP | | | | This government report also noted the plan |
| growth. Not to mention its whirlwind growth. | | | | was utilize the 'local rich CBM resources on |
| | | | a large scale.' |
| While we discussed several coal-replacement | | | | |
| developments in our recent publication, | | | | As a result, we anticipate Guizhou province |
| "Investing in China's Energy Crisis," one has | | | | may be one of the targets of the certified |
| piqued our interest as more easily | | | | emission reduction credits. The high quality |
| implemented. And it is also one where China | | | | and abundant CBM reserves could help develop |
| has focused. | | | | the small-scale CBM plants now operational or |
| | | | under construction to the east and north. The |
| Kyoto Protocol Drives CBM Projects | | | | regional population is equivalent to more |
| | | | than 80 percent of the U.S. population. |
| Clean coal technology is being rapidly | | | | |
| advanced in China because of the Clean | | | | In April, China announced Guizhou province |
| Development Mechanism (CDM), which is an | | | | would utilize 100 million square meters of |
| integral component of the Kyoto Protocol and | | | | CBM this year. Later that month, the NDRC |
| which China signed in 1998 and approved in | | | | announced it would encourage coal mine |
| 2002. The CDM allows developing countries to | | | | investors to exploit CBM. In May, a new |
| sell their 'certified emission reductions' | | | | preferential policy to promote CBM |
| (CERs) to the wealthier nations. | | | | exploitation was announced. |
| | | | |
| By trading CERs, China has developed an | | | | To our knowledge, only one foreign-owned |
| additional revenue stream to fund local | | | | company holds properties in Guizhou province. |
| emission reduction projects. According to the | | | | Pacific Asia China Energy is presently |
| World Bank, China obtained 62.5 percent of | | | | developing its Boatian-Qingshan property in |
| the total UN-certified carbon credits in | | | | the Longtan coal formation in this province. |
| 2006. This amounted to US$3 billion. | | | | |
| | | | In summary, we don't believe the high-pitched |
| One such project benefiting from the CER | | | | excitement for the next few years will be |
| mechanism is the Jincheng coalbed methane | | | | about China's nuclear power plants. Certainly |
| (CBM) power plant, which is scheduled to | | | | there will be growth in China's nuclear, and |
| begin operation this August. At 120,000 kw, | | | | over the next decade, nuclear could represent |
| it will be the largest of its kind in Asia. | | | | a higher level of electrical capacity. And |
| Annually, the power plant is expected to | | | | China has announced it plans to build a |
| transform 180 million cubic meters of CBM gas | | | | strategic uranium reserve. But, the country |
| into 730 million kWh of electricity. | | | | has also limited the amount of molybdenum it |
| | | | exports (effective earlier this month). Of |
| The power plant is attached to the Sihe coal | | | | course, this should drive those metal prices |
| mine from which the intense greenhouse gas | | | | higher. |
| will now be used to provide electricity. | | | | |
| Jincheng Anthracite Mining Group, which owns | | | | However through 2012, China's coal mines and |
| the mine and the power plant, received US$150 | | | | the methane contained in those mines is more |
| million in funding in exchange for certified | | | | likely to be a major energy driver in |
| emission reduction credits. | | | | attracting foreign capital. After all, carbon |
| | | | trading credits can't be taken lightly. The |
| On June 1st, Jiangxi province's first coalbed | | | | CERs are attracting foreign investment, |
| methane (CBM)-fired power station was | | | | bringing the country new technologies and |
| successfully connected to a power grid in | | | | gifting the Chinese government billions of |
| this southern Chinese province. It had gone | | | | dollars for trying to reduce their air |
| through two months of trial operations. This | | | | pollution. |
| CBM plant could become a model for similar | | | | |
| plants in other Chinese provinces. | | | | COPYRIGHT © 2007 by StockInterview. |