Literature on Economic Growth, Environmental Sustainability & Renewable Energy

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government want to present a challenge to the US. The author notes that “despite some concerns about Chinese oil investments in Latin America in the United States, the actual volume of Chinese investments is small, accounting for only 6.5% of total Chinese overseas petroleum investment”, which is concentrated in Central Asia, Africa and the Middle East, and unevenly distributed (for instance, in Latin America, in Venezuela) (Kong 2010).

Kong makes an interesting point by arguing that, due to the “strong industry, weak government” pattern that since the 1970s has existed in the PRC –after the failure of the central government’s attempt to re-structure its energy governance architecture in 2008, the Chinese government has very limited control over the excessively-autonomous NOCs and that, at times, the “reckless” behavior of the NOCs has been a cause of concern for the Chinese Ministry of Foreign Affairs. This author points out that, being late comers to the global stage, the NOCs are active in regions such as Asia, Africa and Latin America, where they are perceived as suffering from “unprincipled behavior”

(towards the environment, transparency, or community development), as well as bribery practices, and as “representing China’s neo-mercantilism and neo-colonialism”, with the underlying logic being that because they are state-owned, they are perceived to represent the state.

Kong also points out that the global expansion of the NOCs –like, for instance, in Latin America– will be like “a symphony without a conductor”: they will compete as much as they collaborate among themselves”, with “collaboration” being driven by necessity and “coordination” will be rare. The author points out that the NOCs will gradually acquire the know-how that is primarily possessed by leading international oil companies, such as deep water drilling. In this regard, this study underscores that Petrobras, the Brazilian NOC, is widely considered to the world leader in ultra deep water drilling, having set the Brazilian record of drilling depth in 2005 with “a sloped well that reached 6,915 meters beyond the bottom of the sea,”²⁰² in the Santos Basin. This study highlights that, as it can be seen, a good number of factors –domestic imperatives, energy cooperation prospects (Pan, Che and Li 2011²⁰³), developmental incentives, favourable international environment –or, at least, perceived as such)– seem to converge to push NOCs to expand in South America.

1.2.2.3. Literature on Economic Growth, Environmental Sustainability & Renewable Energy

The interconnections between China’s energy security, sustainable economic growth and social development and environmental protection have received considerable scholarly attention, with Wang pointing out that these are some of the “issue-oriented”

202 “Our History-2005” – Petrobras website http://www.petrobras.com/en/about-us/our-history/

203 Xiping Pan, Changbo Che, Fubing Li, “A Forecast of Energy Collaboration Between China and the Latin America Region [Wo guo yu Lamei diqu guojia nengyuan hezuo zhanwang]”, in China Mining Magazine [Zhongguo Kuangye] 20, no. 5 (May 2011): 13-15.

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functional focuses that China’s “new grand strategy” should take into serious consideration.²⁰⁴ Along the same line, the implications of environmental problems caused by the PRC’s high carbon dioxide emissions on China’s national security and economic development –such as the deterioration of air quality, soil degradation, water shortages, instable agricultural production and desertification have been examined by Tsai and Hung (2008²⁰⁵ and 2012²⁰⁶). It is also noteworthy that, according to Viola et al. and in terms of environment and climate change, China and the US are –together with the EU–

“superpowers” –which, combined, account for 47% of the global carbon emissions, while Brazil would be a “bog power” and Argentina a “middle” power.²⁰⁷

Regarding the benefits of clean energy sources (such as biofuels), this study suggests that the transference of Brazilian technology for the production of cellulosic ethanol and flex-fuel²⁰⁸ engines in China is a possibility that deserves to be considered, since Brazilian and Argentine liquid biofuels production could respond to some of the Chinese transportation sector’s needs.²⁰⁹ In this regard, Sun notes that Sino-Latin American energy cooperation offers more opportunities than obstacles to all parties (Sun 2009²¹⁰ and 2011).

The close links between biofuels, environmental sustainability and rising oil (and food) prices are examined by Fava Neves, who argues that China will need to expand biofuel production and usage towards a cleaner environment. As these biofuels can be produced in Brazil –and, this study argues, also in Argentina, given that both countries are worldwide top producers and exporters– Neves emphasizes that Brazil can help China

204 Wang, “China’s Search for a Grand Strategy”, 74-75.

205 Tung-Chie Tsai and Ming-Te Hung, “Meiguo Quanqui Huanjing Zhengce zhi Guojia Liyi Denxi:

Jianlun Mei-Zhong Shuangbian Hudong (Analysis for the National Interest in US Global Environment Policy and the interaction between US and China),” in Prospect and Exploration 6, No. 6 (2008): 69-82.

206 Tung-Chie Tsai and Ming-Te Hung, “Dilemma of Choice: China’s Response to Climate Change,” in Revista Brasileira de Política Internacional, 55 (Special Issue2012.): 104-124.

http://www.scielo.br/scielo.php?pid=S0034-73292012000300007&script=sci_arttext

207 Eduardo Viola, M. Franchini, and T. Lemos Ribeiro, Sistema Internacional de Hegemonia Conservadora: Governança Global e Democracia na Era da Crise Climática (São Paulo: Annablumme, 2013).

208 Flexible fuel vehicles (FFVs) are designed to run on gasoline or a blend of up to 85% ethanol (E85) in the US, but in Brazil –the world’s second largest producer of ethanol fuel and the world's largest exporter–

most cars have engines that are “total flex” (E100), capable of running on any blend of gasoline and ethanol.

In Argentina, the world’s largest exporter of soybean biodiesel and mixes 7% (E7) of the fuel with regular diesel. See: “Flexible fuel vehicles” – US Department of Energy.

http://www.fueleconomy.gov/feg/flextech.shtml

209 ECLAC, Renewable Energy Sources in Latin America and the Caribbean: Situation and Policy Proposals (Santiago, Chile: ECLAC, 2004): 33-37.

http://www.eclac.org/publicaciones/xml/1/14981/Lcl2132i_s.pdf

210 Sun, “Oil and Gas Cooperation between China and Latin America: opportunities, obstacles and countermeasures [Zhongguo yu Lamei Youqi de Jiyu, Zhangai he Duice]”, 72-77, 83.

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alleviate its environmental concerns by being the most important partner to supply biofuels to China (Neves 2012²¹¹).

As regards the problematic environmental situation in China, Neves quotes Aston’s observation that less than 5% of the Chinese urban population have access to air with European safety standards. (Aston 2009). Neves notes that, in China, 65% of total pollutants comes from auto emissions, and notes that, according to Liu, the PRC had 65 million cars running in 2008 and is expected to have 150 million by 2020, consuming 250 million tons of gas/year (Liu 2009²¹²).

As it is further examined throughout Chapters 1 to 5 of this study, biofuels are a renewable, environmentally-friendly, less polluting energy resource that contribute to reduce greenhouse gasses emissions. In this regard, Neves argues that Brazil is a net producer and exporter of sugar cane-based ethanol, the “most efficient biofuel”, which is used as E100 and E25 (100% ethanol cars and a blend of 25% ethanol in gasoline). This is explored in further detail in Chapter 4.

As aforementioned, Neves emphasizes that Brazil can help China alleviate its environmental concerns. The Brazilian ethanol program is an important reason that explains that the country has one of the cleanest energy matrixes in the world: 90 percent of all Brazilian new cars are flex fuel, and of the fuel consumed in the country, ethanol has 52 percent against 48 percent of gasoline. By 2015, 80 percent of the internal market of fuels will be ethanol, produced in a sustainable way, from sugar cane. The area used to supply 52 percent of ethanol corresponds to only 1% of the arable land as of 2012.

Therefore, it is clear that biofuels offer interesting opportunities to add ethanol in Chinese gasoline (E5-E15 percent), contributing to a strong reduction of pollution in China (where 65% of total pollutants comes from auto emissions). As explained in Chapter 3 of this study, ethanol production is dominated by the Chinese government, which has made it mandatory to blend 10% of ethanol with petrol (E-10) only in certain cities and in certain provinces (all of which are major grain producers), but not all. For the purposes of this study, it is worth noting that these are “pilot projects” that might be implemented at the national level in the future, as pointed out by a number of interviewees who, nevertheless, considered premature to make a forecast.

According to an October 2012 Policy Research Working Paper produced by the Environment and Energy Team of the Development Research Group at the World Bank, entitled “Development of Biofuels in China”²¹³, among these cities are three prefecture-level cities in the North-Western province of Henan (河南), namely Zhengzhou (郑州, or

211 Marcos Fava Neves, “Review: The food business, environment and the role of China and Brazil building a ‘food bridge’”, in Emerald Insight Journal (January 2010).

http://english.unica.com.br/opiniao/show.asp?msgCode={960C93B8-615B-4F1F-9E4B-20B94D984289}

212 Xinlian Liu, “In the name of green”, Beijing Review, May 21, 2009.

http://www.bjreview.com.cn/print/txt/2009-05/17/content_196490.htm

213 Shiyan Chang, Lili Zhao, Govinda R. Timilsina and Xiliand Zhang, “Development of Biofuels in China”, Policy Research Working Paper 624 (Washington, DC: World Bank, 2012): 4-5.

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鄭州, capital of the province, a prefecture-level city that has been defined as one of China’s “emerging megalopolises”)²¹⁴, Luoyang (洛阳, or洛陽), and Nanyang (南阳, or 南陽) and two cities of the North-eastern province of Heilongjiang (黑龙江省, or 黑龍江 省, one of the richest provinces in China in terms of energy, mining and agricultural resources) the capital, Harbin (哈尔滨, or 哈爾濱, a sub-provincial city) and Zhaodong (肇东, or 肇東, a county-level city).

Fava Neves points out the significant rise that oil prices have had experienced in recent year, highlighting the impacting production and transport costs and noting that oil is not only used for transportation but also in several other industries, such as plastics, that have increased consumption. If oil price remains stable (around US$ 70-80 a barrel), and especially if prices go up again, biofuels projects have better possibilities to gain economic incentives, increasing pressure for land in the case of corn and other grains.

As regards the food-security and energy-security concerns, Neves presents evidence against the argument that attacks biofuels based on such concern, pointing out that biofuels can be totally produced in a sustainable way. Based on the analysis of case of Brazil, the author notes that ethanol has been produced for more than 35 years, in 3.5 million hectares of cane, using only 1% of Brazil’s arable land and supplying 52% of fuel transport consumption, with no impact on food production. In particular, the State of Sao Paulo (the major area of sugar cane growth) in the last ten years shows that it is possible to combine food production and biofuels together. This study notes that this combination would be possible in Brazil and in Argentina, but unlikely in China.

He emphasizes that the global development of biofuels should give priority to crops that have better yields for biofuels and do not compete with food chain. He highlights that the energy balance of sugar cane-based Brazilian ethanol is almost seven times better than ethanol produced from corn, like in the US. (Neves et al. 2009²¹⁵) Another great opportunity for cooperation among these countries is to have common investments: Brazil lacks resources for investment, and it is in this regard that China may help Brazil by investing in logistics, which are still a huge concern, mostly in grain production areas, resulting in increases in the cost of commodities. There are investment opportunities in roads, ports, airports, storage capacity, pipelines for ethanol, and several

214 In July 2012, a report by the Economist Intelligence Unit pointed out that “China will see its number of megalopolises grow from 3 in 2000 to 13 in 2020.” Zhengzhou was included in the list as one of the “13 emerging megacities or megalopolises in China.” For the purposes of this research, it is important to highlight that this justifies in part the focus being paid to the energy needs that the transportation sector in China is already facing and which it will only further deepen in the next few years, and the role that oil and biofuels could play with regard to it. See: “Supersized cities: China’s 13 megalopolises”, The Economist, July 2012.

https://www.eiu.com/public/topical_report.aspx?campaignid=Megalopolis2012

215 Marcos Fava Neves, Mairun Junqueira Alves Pinto and Marco Antonio Conejero, “Transnational companies investments in Brazilian agribusiness and agriculture: the case of sugar cane United Nations Conference on Trade and Development UNCTAD”, World Investment Report 2009 (Geneva: UNCTAD, 2009)

www.unctad.org/Templates/Page.asp?intItemID¼1465&lang=1

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other investments in infrastructure. In short, Neves points out that, besides having funds to invest, China also has technology, scale and expertise that are both attractive and useful for Brazilian development. As this study notes, that would be a truly win-win situation.

In her study about the renewable energy (可再生能源) industry in China and the 2005 Renewable Energy Law (amended in 2009)²¹⁶, Lee points out that it is a

“fascinating” research area, mainly because China has become the largest greenhouse gas emitter in the world and hence the largest contributor to climate change in the global commons, while at the same time China is a world leader in production and export of renewable energy products such as “wind turbines, solar photovoltaic cells, solar water heating equipment, and hydropower know-how” (Lee 2012²¹⁷). The author highlights the strong interest that there is in China in the exploration and support of new sources of energy, of which “renewables is a key sector.” Lee points out that renewable energy can make a valuable contribution to alleviate many of its problems, most notably energy security and environmental pollution (with the 10^th FYP mentioning the “reduction of major urban and rural pollutants”), shifting from a heavy-industry intensive economy towards what this study has referred to as a “low-carbon” economy. The author notes that, nevertheless, it is “not a panacea for all of China’s woes.”

In this regard, this study points out that biofuels are conspicuously absent from the renewable energy listed by Lee, and which includes wind, solar, hydropower, biomass, geothermal and ocean energy. Certainly, the main reason is that food security prevails over energy security – and highlighting that both Argentina and Brazil could use this to their advantage, especially following the earlier arguments of Fava Neves about biofuels not representing an energy security threat to food security previously discussed.

Furthermore, Brazilian and Argentine biofuel exports would be possible when China’s domestic problems for biofuel production are taken into consideration: in this regard, Lee points out that the 2005 Renewable Energy Law had specifically encouraged ethanol production, but that in 2006 and 2008 ethanol production had been restricted by the government due to problems with the production of biofuel from food feedstock. Lee notes that, at the time of writing (2012), they had been cleared.

The author also argues that renewable energy sector’s vulnerability to external market forces beyond the control of the Chinese central government reduces its attractiveness and desirability undesirable, noting that, notwithstanding, in recent years Chinese authorities have been dedicated to promoting the development of new energy sources and determining renewable energy target through different pieces of legislation:

216 “China: Renewable Energy Law Amended” – Global Legal Monitor – US Library of Congress – December 31, 2009.

http://www.loc.gov/lawweb/servlet/lloc_news?disp3_l205401752_text

217 Hung Wai Lee, Analyzing the Influence of Major Actors in China’s Renewable Energy Policy Process as a Means of Predicting Future Chinese Renewable Energy Policy Trends (Michigan: University of Michigan, 2012)

http://deepblue.lib.umich.edu/bitstream/handle/2027.42/90860/MICHLHW%20Masters%20Thesis%20Fin al%20Copy.pdf?sequence=1

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among them, Lee examines first level policies (basic laws, 法律) such as Renewable Energy Law (REL) or the Five-Year Plans (中国五年计划, or 中國五年計劃 ) , as well as plans of lower level –such as the “Medium and Long Term Development Plan for Renewable Energy (可再生能源中长期发展规划)”.²¹⁸ The author succinctly analyzes second level policies (administrative regulations, 行政法规 or行政法規 ), such as the Golden Sun Program of 2009 and, finally, third level policies, which include two sub-types (departmental regulations, 部门规章, or 部門規章 ) and local regulations (地方规 章, or 地方規章 ). In her analysis, Lee examines the REL –approved on February 28, 2005, by the PRC’s State Council (中华人民共和国国务院, or中華人民共和國國務院, abbreviated to 國務院 ) under the National People’s Congress (NPC, 全国人民代表大 会 ,or 全國人民代表大會) and on effect since January 1, 2006– pointing out that –as a comprehensive “umbrella law” that focuses on the development and promotion of renewable energy, defined in Article 2 as “Renewable energy as specified by the law refers to non-fossil types of energy, such as wind, solar, hydro, biomass, geothermal, and ocean energy”–²¹⁹ the law is essentially a mandate by the NPC to provincial governments to increase renewable energy purchases by developing location-specific financial instruments such as feed-in tariffs and quotas. According to the REL, the target for 2020 is to obtain 15% of total energy from non-fossil fuels (Lee 2012²²⁰).

This would mean that, in order for the renewable energy targets to be met in 2020 taking 2006 as the base year, China’s domestic ethanol production should be multiplied by 10, while biodiesel production would have to increase 4 times. As further explained in Chapter 3, several studies demonstrate the difficulties in meeting the targets, since the REL was considered to be lacking in details and therefore difficult to implement. In addition to that, in December 2009 an amendment to the REL was adopted by the Standing Committee of the NPC. This amendment aims to “support the country's emerging renewable energy sector” and makes special mention of power/electricity sector.

At this point, it is worth noting that –as examined in Chapter 4– in August 2010, the Brazilian NOC Petrobras entered a Joint Development Agreement with American bioenergy KL Energy Corporation (KLE), for the development of cellulosic ethanol using sugar-cane and to jointly optimize KLE’s proprietary cellulosic ethanol process technology for sugarcane bagasse feedstock for bioelectricity²²¹ –in June 2013, I attended

218 “《二 00 七可再生能源中长期发展规划》(2007 Medium and Long Term Development Plan)”–

National Development and Reform Commission (NDRC, 国家发展和改革委员会) http://www.sdpc.gov.cn/zcfb/zcfbtz/2007tongzhi/W020070904607346044110.pdf

219 “全国人民代表大会常务委员会关于修改《中华人民共和国可再生能源法》的决定 (The Standing

Committee of the National People's Congress’ Decision on Amending “China’s Renewable Energy Law”)”–Central People’s Government of the People’s Republic of China–中华人民共和国中央人民政府 http://www.gov.cn/flfg/2009-12/26/content_1497462.htm

220 Lee, Analyzing the Influence of Major Actors in China’s Renewable Energy Policy Process as a Means of Predicting Future Chinese Renewable Energy Policy Trends.

221 “Petrobras e KL Energy assinam parceria para produção de etanol celulósico” – Portal Brasil – August 24, 2010.

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a seminar on this topic in the Ribeirão Preto campus of the University of São Paulo, Brazil, at which I had the opportunity to interview the state’s Secretary of Energy, M.

Lautenschlager, and representatives from the Ministry of Development, Industry and Foreign Trade about this topic. As further explained in Chapter 4, the interviewees’

answers further contribute to strengthen the argument that biofuels from Brazil and Argentina should be added to the energy resources exports that they send to the PRC, which would be beneficial to all three parties involved, and –by extension– to the CCP.

在文檔中 中國的能源政策與南南合作? 比較分析中巴及中阿能源政策。 - 政大學術集成 (頁 67-73)