Coal cleaning a viable strategy for reduced carbon

EnergyPolicy33(2005)525–542Coalcleaning:aviablestrategyforreducedcarbonemissionsandimprovedenvironmentinChina?SolveigGlomsr^da,*,WeiTaoyuanbaStatisticsNorway,P.O.Box8131Dep.N-0033,Oslo0033,NorwaybNationalBureauofStatistics,75YuetanNanjie,SanliheBeijing100826,ChinaAbstractChinaisadominantenergyconsumeringlobalcontextandcurrentenergyforecastsemphasisethatChina’sfutureenergyconsumptionalsowillrelyheavilyoncoal.ThecoaluseisthemajorsourceofthegreenhousegasCO2andparticlescausingserioushealthdamage.ThispaperlooksintothequestionifcoalwashingmightworkaslowcoststrategyforbothCO2andparticleemissionreductions.Coalwashingremovesdirtandrockfromrawcoal,resultinginacoalproductwithhigherthermalenergyandlessairpollutants.Coalcleaningcapacityhassofarnotbeendevelopedinlinewiththemarketpotential.InthispaperanemergingmarketforcleanedcoalisstudiedwithinaCGEmodelforChina.Themacroapproachcatchestherepercussionsofcoalcleaningthroughincreasedenergyefficiency,lowercoaltransportationcostsandcrowdingouteffectofinvestmentsincoalwashingplants.Coalcleaningstimulateseconomicgrowthandreducesparticleemissions,buttotalenergyuse,coaluseandCO2emissionsincreasethroughareboundeffectsupportedbythevastreserveofunderemployedlabourers.Acarbontaxonfossilfuelcombustionhasalimitedeffectontotalemissions.Thereasonisacoalleakagetotaxexemptedprocessingindustries.r2003ElsevierLtd.Allrightsreserved.Keywords:Coal;China;Carbontax;CGE1.IntroductionAbout70percentofcurrentenergyconsumptioninChinaiscoveredbycoal,andfutureenergyuseisalsoexpectedtorelyheavilyoncoal(ZhouandZhou,1999;IEA,1999).Unfortunatelycoalcombustionisavehicleoftwomajorenvironmentalproblemsthroughemis-sionsofCO2andparticulatemattertotheatmosphere.Theformerpollutantisofgreatconcernintheglobalgreenhousegasaccount,whilethelattercontributessignificantlytodomestichealthproblemsindenselypopulatedareas.Coalcleaninghasbeenlaunchedasastrategyforimprovingbothenergyefficiencyandenvironmentalquality.Inaconventionalcoalcleaningprocess,particulatematteriswashedout,increasingtheenergycontentofthefinalproductwhilediminishingparticleemissions.Asaconsequencemoreheatvalueisgeneratedandlessparticulatematteremittedtotheatmospherepertonnecarbonburnt.Thosetwobenefitsareobtainedatacost,andaquestioniswhetherthebenefitsarebigenoughtomakecoalcleaningworth-while.TheChinesegovernmentregardscoalwashingasanimportantelementinthecurrentstrategyforenergysupplyandenergytransportationsystems,asempha-sisedintheNinthFiveYearPlandocumentonCleancoaltechnologiesofChina(SDPC,1997).However,thedevelopmentofcoalwashingcapacityhassofarbeensluggish.During1993–1996thecapacityofnewcoalwashingplantsincreasedlessthancoalminingcapacity(IEA,1999).Theimplementationmaystillbehamperedbythelackofproperincentives.Marketreformscouldmakethecoalsectorbreakthecyclewhereproducersclaimthatcleanedcoaldemandistoolowwhileconsumerscomplainaboutunreliablesupply(WorldBank,1997).Coalcleaninghasthepotentialtoimprovetheenvironment,buttheenvironmentalbenefitsareingeneralexternaltothecoalconsumers.Apolicyforreducingairpollutionshouldsomehowimprovetheincentivestoproduceandusecleanedcoal.AchangeinARTICLEINPRESS*Correspondingauthor.Tel.:[phone];fax:[phone].E-mailaddresses:[e-mail](S.Glomsr^d),[e-mail](WeiTaoyuan).0301-4215/$-seefrontmatterr2003ElsevierLtd.Allrightsreserved.doi:10.1016/j.enpol.2003.08.019incentivescouldtakeplacethroughataxoncarbonorparticleemissions.Suchemissiontaxeswouldfallmoreheavilyonrawcoalthancleanedcoalandthusencourageaswitchtowashedcoal.Aswitchtocleanercoalwouldhavesignificanteffectontransportationdemand.RawcoalcontainsalargeamountofwastethatnowistransportedalloverChina.Itisestimatedthat70milliontonnesdirtandrockaremovedalongwiththehighqualitycoal(Xuetal.1997,citedinIEA,1999).ThemajorityofcoalminesarelocatedintheNorthandNorth-westofChina,whilecoastalcitiesandprovincesdominatethedemand.Consequently,therawcoalloadonthetransportationsystemishuge.Thecoaltransportationcurrentlyoccupiesabout45percentoftotalrailwaycapacity(IEA,1999).Underthecleaningprocessabout25percentofthecoalweightisremoved.Sincethermalenergycontentisreducedlessthanweightinthecoalwashingprocess,thereisanetreductionintransporta-tiondemandofabout20percentperunitthermalenergy.Theuserofcleanedcoalshouldbefullyrewardedforliftingaburdenfromthenationaltransportationsystemthatcurrentlyrunsundermaximumload.Asitisnow,thereispricecontrolandanimplicitsubsidyoftransportationservices.Therawcoalpurchaserpricecontainsahighershareoftransportationcostsperunitheatvaluethanthecleancoalpriceandthusincorpo-ratesahigherimplicitsubsidyperunitenergydelivered.Therawcoaluserwillkeepthisbenefit,whilethosewhoswitchtowashedcoalseeabenefitforegone.Thetransportationelementintheuserpriceissignificant,upto70percentofdeliveryprices(WorldBank,1997),andtransportationcostdistortionsmightbeafactorthathassignificantimpactonthemarketsharesofrawcoalandcleanedcoal.Toincreasethesupplyofcleanedcoal,morecapitalandlabourhastobeallocatedtocoalwashing.Whilelabourisinsurplus,therequestforcapitalwillimpose