Analysis of the Current Situation and Development of China’s Chemical Industry—A Discussion on Energy Consumption and Energy Efficiency

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Analysis of the Current Situation and Development of China’s Chemical Industry (5): On Energy Consumption and Energy Efficiency – Hehe, hee (7968 bytes) 2005-05-12 The chemical industry is the sector with the highest energy intensity (the energy required per unit of output), followed by metallurgical machinery. China’s chemical industry and overall technology are inferior to those of Western powers, and its energy efficiency is lower; generally speaking, this is clearly a fact. But I often hear claims such as that China’s energy consumption per unit of GDP is ten to eight times higher than that of other countries, meaning that our production processes consume energy ten to eight times more than those in other countries. As a result, productivity, technological level, competitiveness, and so on are ten or eight times worse than those of others, and so on. It is often said that China imported over 100 million tons of oil last year; China’s energy and raw material supplies are under control by the developed countries, which is why China’s diplomacy must be weak and ineffective, and so on. There are also arguments based on moral considerations, suggesting that China consumes too much of the world’s food, energy, and raw materials, which belong to other countries, and thus poses a fundamental and real threat to those countries (such as the United States and Japan). Actually, it’s not that great! It is right to be prepared for potential dangers, but it’s not good to exaggerate things blindly and act without knowing what’s going on. Let’s instead conduct a detailed analysis and make a quantitative comparison using data. Table 1: Primary energy consumption (100 million tons of standard coal)/self-sufficiency rate (%), and energy consumption composition (%) / Region, Population (million). Primary energy consumption/Self-sufficiency rate: Agricultural energy use, Industrial energy use, Transportation energy use, Residential energy use. World: 6300, 170; United States: 290, 41//74%, 1.2%, 30%, 33%, 36%; China: 1300, 18//92%, 3%, 55%, 15%, 27%; Japan: 127, 9.2//0%, 1.5%, 46%, 24%, 38%; India: 1080, 5.8; Germany: 82, 6.0//65%, 1%, 35%, 34%, 30%; Brazil: 176, 3.6, 7%, 38%, 27%, 28%; South Korea: 44, 3.5; Taiwan: 22.6, 1.7. Table 1 (compiled from data provided by the U.S. Department of Energy, Japanese statistical agencies, and Chinese statistical authorities) shows the world’s and several other regions’ primary energy consumption in 2004 (such as crude oil and coal), as well as the composition of end-use energy consumption (energy that is produced from primary energy sources, such as electricity and gasoline). It can be seen that the United States remains the world’s largest energy consumer and energy importer to this day. Obviously, it is also the world’s largest emitter of greenhouse gases. In fact, the United States is rich in energy, but it remains visionary by focusing on conserving its own resources while exploiting those of others. The United States has a population of less than one-fourth that of China, yet its energy consumption is twice that of China’s (China estimates it at 1.97 billion tons of standard coal, which is slightly higher than the figures cited by the United States). Per capita, each American consumes ten times as much energy as a Chinese person. By the same calculation, Japan’s per capita energy consumption is 5 times that of China. If imported energy is taken into account, Japan relies on imports for 100% of its energy needs; the United States imports 26% of the energy it consumes, while China only imports 8% of the energy it needs. In absolute terms, this amount is only 1/7 of what the United States imports. China’s per capita energy consumption cannot be compared to that of the United States, Japan, and other countries; it is even half of the world average. To say that China’s import of energy resources poses a threat to the world – is that ridiculous? ”. Of course, the claim that 8% of China’s energy consumption requires imports, and that this means China is at the mercy of the United States which can block energy supplies at will and force China to submit, doesn’t seem very convincing; it’s likely just an attempt to scare people. Of course, 8% of energy is not a small figure, and there is indeed a trend toward further increases. In addition, China relies more on foreign sources for raw materials, so appropriate measures need to be taken in response to this. It is also appropriate to strengthen military power to protect energy sources and trade routes. “\"Be prepared for potential dangers in times of peace\" is a traditional Chinese principle. Of course, there is no intention of seeking to dominate the world or provoke others; it’s simply a desire to become richer and stronger, to lead a better life, and to have enough energy and raw materials to match China’s population size, so as not to have to remain workers forever. It’s not excessive to say that this is an inalienable natural right of the Chinese people. It would be quite difficult to ask the Chinese to agree to stop developing and to cease striving for advancement. Table 2 GDP (trillions of USD), composition (%), apparent energy intensity (kg of standard coal per dollar of GDP value) Comparison **/Region GDP (exchange rate) GDP (purchasing power) Primary industry Secondary industry Tertiary industry Energy intensity World 36.5 55 0.47(0.31) United States 11.7 11.7 0.9% 20% 79% 0.35(0.35) China 1.6 7.26 14% 53% 33% 1.25(0.25) Japan 4.3 3.75 1.5% 29% 69.5% 0.21(0.25) India 0.6 3.32 24% 28% 48% 1.0(0.17) Germany 2.4 2.36 1% 31% 68% 0.25(0.25) Brazil 0.49 1.49 10% 39% 51% 0.74(0.23) South Korea 0.605 0.93 3.2% 41% 56% 0.58(0.38) Taiwan 0.29 0.58 1.7 31% 67% 0.59(0.3) The energy intensity figure in parentheses is based on purchasing power parity calculations. Table 2 shows the actual or estimated GDP and its components for several countries or regions in 2004 (Japan’s fiscal year for 2004 has not yet ended). The GDP figures based on exchange rates come from the World Bank, while those based on purchasing power parity come from the CIA. According to Table 2, China’s energy consumption intensity could be among the highest among the major countries and regions in the world, or it could also be relatively low. For example, China’s energy intensity can be five times that of Japan when calculated using exchange rates, or it can be the same as Japan’s when calculated using purchasing power parity. It should be noted that a generic GDP/energy consumption figure doesn’t say much, as the composition of GDP varies. Within the same sector, the energy consumption intensity of the tertiary industry is often less than 1/10 that of the secondary industry; therefore, it makes more sense to make comparisons based on the energy consumption patterns within the same type of industry. For example, when comparing apparent industrial energy consumption using exchange rates, China’s figure is likely more than three times that of Japan, and more than twice that of the United States. The nominal agricultural energy intensity indicator is slightly higher than that of Japan. Exchange rate GDP and purchasing power parity GDP are very popular concepts these days, and some people or authorities hold almost superstitious views toward them. In fact, exchange rates often change. In Japan, for example, its exchange rate against the dollar has risen by almost three times since 1978, while during the same period the Chinese yuan has lost about four times as much value against the dollar. Moreover, the inflation rates in China, Japan, and the United States also differ. It’s not even appropriate to use this ratio within the same **, let alone when comparing different **s. GDP based on purchasing power parity has undergone some adjustments, but it remains a highly controversial concept. The data derived from it are merely nominal and apparent figures, lacking much practical value for direct comparison; they are simply data that can lead to significant misunderstandings, so there’s no need to place too much trust in them. If comparing energy consumption, it is advisable to directly compare specific products; for example, consider the energy consumption figures for producing the same chemical products. Ethylene is a representative chemical product. I saw the data from 2002: to produce one ton of ethylene, China consumed about 60% more energy than Japan, and about 40% more energy than Europe. I remember it was similar when producing one ton of steel. Because that is a comparison among large enterprises; if many smaller and less advanced enterprises in China are taken into account, the overall estimate is that China’s industrial energy consumption intensity is likely nearly twice that of Japan, and about 50% higher than that of Europe and the United States. This should be a result that is relatively close. Due to its complete dependence on imported energy, and learning from the two oil crises, Japan has made great efforts to improve energy efficiency, achieving the highest levels in the world. In fact, China has also seen considerable improvement over the past couple of decades, with fairly significant achievements. But there is still a big gap; more effort should be put in this area. For example, if efforts are made over about five years to increase energy efficiency by 10% from the current level, China may not need to increase its energy imports; it can maintain the current level and avoid reaching 300 million tons of oil equivalent by 2010, as some have predicted. Furthermore, it should also be noted that energy consumption is just one factor in the composition of product costs. Among basic chemicals, energy consumption accounts for a high proportion of costs, but in areas such as fine chemicals and pharmaceuticals, energy consumption is not a significant factor. To compare the competitiveness of products, energy consumption is one factor; however, judging competitiveness solely based on energy usage levels is incomplete. It is also necessary to take into account factors such as investment efficiency, knowledge and technology, human resources, storage and transportation, and so on, by conducting a comprehensive input-output analysis. China has an advantage in labor-intensive products. However, China has a clear disadvantage in knowledge-intensive products. A detailed analysis of all these aspects is necessary to draw sound conclusions, so as to leverage strengths and address weaknesses, taking measures to compensate for the latter. So, in my opinion: first, honestly admit the gap; don’t try to cover it up or pretend everything is fine. One must work hard to catch up in reality, and it’s even better to be able to surpass others effectively (of course, this can’t be achieved overnight). Second, it is necessary to acknowledge the gaps realistically without exaggeration; measures taken as a result of distorted and exaggerated assessments will also be distorted. For example, this might lead to the conclusion that catching up is impossible and thus giving up, which is also not the right approach. China’s energy prices are too low. Oil and electricity prices are about 1/2 to 2/3 of those in the United States, and even lower compared to Europe and Japan. For primary products such as energy, it is appropriate for them to reach international average levels; whereas processed products tend to exhibit larger differences in value. Of course, China’s income level is disproportionately lower than that of the United States; how could its residents enjoy the same energy prices? Therefore, given that it is not possible to increase income quickly, appropriate measures should be taken on a case-by-case basis: for example, electricity used by residents could be priced more cheaply, while industrial electricity use should see price increases, or some form of subsidy could be provided for domestic use, which might help improve energy efficiency. Of course, prices for water and electricity should still be determined by the market. At present, **the prices that are controlled are driven more by governmental considerations such as curbing inflation through price indices, which is not very conducive to improving efficiency in usage. The level of energy utilization can only be improved gradually; it is necessary to focus on both increasing supply and reducing consumption, and efforts are important in terms of technology, education, and habit formation. Persistent energy conservation will surely lead to a significant improvement in efficiency over the long term.