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Peak coal is moving closer too

Those following the issue have known for years that peak oil was very close, but coal was always thought to be another issue entirely. Official estimates, made many years ago however, talked about 300 years' worth of coal being left which to most of us is synonymous with "eons." Neither we, nor our children, nor grandchildren, nor our great-grandchildren can expect to be around that long.

However, in recent decades, there were a number of developments that are now raising questions about the centuries-of-coal-left estimates. The most spectacular of these developments came after World War II when the Chinese got their act together and began to grow their economy, and did they ever grow it! We all know that economic growth takes prodigious amounts of energy, and while China did have quite a bit of oil, they had huge amounts of coal; something over 180 billion tons of the stuff is left according to recent Chinese estimates. This was second only to the U.S. and Russia who are currently estimated by BP to have more than 200 billion tons each. As we have come to learn, these numbers are always rather suspect for there is good quality coal and bad quality coal. There is cheap and easy-to-get coal and expensive hard-to-get coal. As with oil, it is the rate at which you can exploit it that counts - not the theoretical reserves.

To make a long story short, right after their revolution in 1949 the Chinese started digging and digging. The results were spectacular. From an annual production of somewhere around 100 million tons in 1950, production climbed to over 3 billion tons this year -- nearly half the world's coal production. It was this prodigious amount of energy coupled with a fair amount of domestic oil and, in recent years, large oil imports that has allowed China to grow at rates in the vicinity of 10 percent each year and to become the world's largest consumer of energy.

Now this worked well for a time. The Chinese made stuff and the rest of the world consumed the stuff. There were a couple of nagging problems, however, such as the amount of carbon going into the air and the issue of sustainability. Can Beijing, which is now producing and burning roughly half of the world's coal, go on increasing production by 10 percent a year much longer? The answer has to be "of course not." Adding an additional 300 million + tons of coal production each year would put China at 6 billion tons of annual production well before end of the coming decade. It is doubtful if their geology would let them dig up than much and that their atmosphere could absorb that much carbon.


Something has got to give, and it most likely will be much higher prices for all forms of energy.

Another problem with digging up all that coal is that you have to move it someplace unless you are really into mine mouth electricity generation. Now coal is obviously rather heavy stuff, unlike say transistors, so it requires large numbers of trains (currently on the order of 45,000 trainloads a month), lots of trucks and even some barges to move it where it is needed. It should not come as a surprise then that after being a coal exporter for many years China is starting to import larger amounts of coal. In 2009, China imported 109 million tons. Coal is currently being imported at around 17 million tons a month or a rate of 200 million tons a year --not much in comparison with 3 billion tons annual consumption, but double what came in last year.

Recently however, China's official news agency reported that Beijing is thinking about "capping" coal production at 3.6-3.8 billion tons during the next five years. If this turns out to be the case, then China has another two of three years of increasing production from domestic sources. From then on their 10 percent or so annual economic growth will have to come from somewhere else such as increased efficiency, increased coal imports, natural gas, oil imports, nuclear, or renewables - most likely hydro.

The major coal exporting nations -- the U.S., FSU, Australia, Indonesia, and South Africa -- are currently shipping around 900 million tons each year. Actually this is up quite a bit from the 500 million tons that was being exported a decade or so ago. The big increases in recent years have come from Australia, Indonesia and the Former Soviet Union.

So what does all this mean for global energy demand and energy prices? First of all there is not much growth left in oil exports. Any significant increase in Chinese demand for energy is likely to send prices into the stratosphere and lead to severe economic problems. Renewables, outside of hydro, do not really produce much energy on the scale we are talking about. While the Chinese recently announced a number of new hydro dams, these take many years to complete. Likewise, nuclear power is slow to come online.

So we are left with natural gas and coal as major sources of energy that could be imported in larger quantities in the next few years. The Chinese are already bringing in more gas from Russia and Central Asia, and will likely be a major importer of LNG one of these days.

It is difficult to see how China, with domestic coal consumption capped, can continue to grow without major increases in coal exports from other countries. Just three years of 10 percent growth in Chinese coal demand would eat up all of 900 million tons of coal that are currently being exported. While other sources of energy can make up some of this shortfall, this will come gradually. Something has got to give, and it most likely will be much higher prices for all forms of energy.

If what we are witnessing is the actual peaking of China's domestic coal production - which is half the world's production -- then this event could turn out to be as serious as the peaking of oil.


Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

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