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JenniferJennifer L.L. TurnerTurner

ManagingManaging EditorsEditors

RobertRobert BattenBatten

LuanLuan DongDong

aassistantssistant EditorsEditors

SusanSusan ChanChan ShifflettShifflett DavidDavid TylerTyler GibsonGibson EllaElla GenasciGenasci SmithSmith

ProductionProduction EditorsEditors

KathyKathy ButterfieldButterfield

LuanLuan DongDong

rErEssEEarcharch aassistantsssistants

AbiAbi Barnes,Barnes, CatherineCatherine Beck,Beck, KatieKatie Lebling,Lebling, JakeJake Reznick,Reznick, TaraTara SunSun Vanacore,Vanacore, JoyceJoyce WenfangWenfang Wang,Wang, YuanchenYuanchen Yang,Yang, LikangjinLikangjin ZhengZheng

FRONT COVER DESIGN: This new cover design was created by Luan Dong and Kathy Butterfield to capture the special water-energy theme of this issue of the China Environment Series.

PHOTO BELOW: Some members of the China Water-Energy Team (China WET) stand at the banks of the Yellow River in Wuhai City coal base in Inner Mongolia. The Woodrow Wilson Center’s China Environment Forum and the Chinese NGO Greenovation Hub created this team of five U.S. and four Chinese water and energy experts to participate in an exchange in China to discuss challenges and possible solutions for addressing China’s water- energy confrontations. In Beijing the China WET members gave two public presentations at Peking University and Beijing Energy and Environment Roundtable, and seven closed presentations at the Development Research Center of the State Council, Institute of Public and Environmental Affairs, Natural Resources and Defense Council, Syntao Co., Ltd, Institute for Geographic Sciences and Natural Resources Research of Chinese Academy of Sciences, Energy Research Institute of the National Development and Reform Commission, and the Chinese Academy of Environmental Planning. After meeting with policymakers, business leaders, NGO professionals, and students in Beijing, the team traveled to Wuhai City, Inner Mongolia and Yinchuan City, Ningxia Province to see two coal base complexes in action. In recent years, many small- and medium-sized coal power plants have been subsumed by large state-owned enterprises such as the Shenhua Group. Mining, processing, and industry all happen within close proximity on a grand scale. Condensed within the cities are open pit mines, coal-fired power plants, and coal-to-chemical plants. See more photos documenting China WET exchange on page five. The China Water-Energy Team exchange was part of the Choke Point: China initiative created by the Wilson Center and Circle of Blue. The exchange was supported by the China Sustainable Energy Program, Skoll Global Threats Fund, USAID, and Vermont Law School.







This issue of The China environmenT series made possible by supporT from: The views of

This issue of The China environmenT series made possible by supporT from:

The China environmenT series made possible by supporT from: The views of the authors expressed in
The China environmenT series made possible by supporT from: The views of the authors expressed in
The China environmenT series made possible by supporT from: The views of the authors expressed in

The views of the authors expressed in this publication do not necessarily reflect the views of the funders.




F or seventeen years, the Woodrow Wilson Center’s China Environment Forum (CEF) has created projects, workshops, and exchanges that bring together U.S., Chinese, and other Asian environmental policy experts to explore the most imperative environmental and sustainable development issues in China and to examine

opportunities for business, governmental, and nongovernmental communities to collaboratively address these issues. The networks built and knowledge gathered through meetings, publications, and research activities have established CEF as one of the most reliable sources for China-environment information and given CEF the capacity to undertake long-term and specialized projects on topics such as energy development in China, environmental justice, Japan-China-US clean water network, municipal financing for environmental infrastructure, river basin governance, environmental health, water conflict resolution mechanisms, food safety, and environmental activism and green journalism. Our current initiatives are:

Choke Point: China—a multimedia and convening initiative uncovering how energy is impacting water in China.

Cooperative Competitors—research and exchanges on U.S.-China clean energy cooperation and,

Complex Connections—meetings and research examining environmental impact of Chinese investment overseas.

The China Environment Forum meetings, publications, and research exchanges over the past two years have been supported by generous grants from the Skoll Global Threats Fund, Hewlett Foundation, Rockefeller Brothers Fund, blue moon fund, U.S. Agency for International Development, Vermont Law School, the Walt Disney Company, and ClimateWorks Foundation. Jennifer L. Turner has directed the China Environment Forum since 1999 and Susan Chan Shifflett began as the project’s associate in December 2012. The China Environment Forum is a project under the Wilson Center’s Global Sustainability and Resilience Program.

China EnvironmEnt SEriES 2012/2013





Jennifer Turner




Untapped Potential: Energy Savings and Climate Benefits from Strengthening Water Use Efficiency in China’s Building and Industrial Sector Michael Davidson, Gretchen Greene & Mingming Liu




Pinch of Salt: Why China’s Brute Force Push Toward Desalination May Leave


the World Better Off David Cohen-Tanugi




Revolution on the Horizon: The Potential of Shale Gas Development in


China and its Impact on Water Resources Peter V. Marsters



Choke Point: On the Global Frontlines of the Water-Food-Energy Crisis Jennifer Turner, Andrew Maddocks, Luan Dong, Susan Chan Shifflett, David Tyler Gibson & Katie Lebling



Sustainable Coffee Growing in Yunnan David Tyler Gibson



Quenching China’s Thirst for Renewable Power: Water Footprint of Solar, Wind, and Hydro Development Nina Zheng & David Fridley



Lowering the Water Footprint of Solar PV Production in China Jodie Roussell



Inner Mongolia: Coal Heaven, Water Hell Troy Sternberg, Caitlin Werrell & Francesco Femia

WoodroW Wilson international Center for sCholars




China’s Hydropower Sector Meets the Limits of Growth Peter Bosshard & Katy Yan



Science, Controversy and Climate Change Journalism in China Sam Geall



Exploring Solutions for Sustainable Development and Water Conservation in Sichuan Province Li Zhang & Yayue Peng



Market Transformation for Urban Energy Efficiency in China Sha Yu, Meredydd Evans, Benchi Guo & Jianmin Zhang



Clear Benefits: Quantifying Non-Energy Benefits of a Carbon Reduction Initiative for a Glassware Company Sheri Willoughby, Stephan Guo, Maja Dahlgren, Thomas Schaefer & Hongming Jia



Making the Grade: Performance Targets and Industrial Energy Policy Tucker Van Aken



How China’s Cities Can Chart the Course for the Planet’s Low Carbon Future Warren Karlenzig & Daniel Zhu



In the Public Interest: New Litigation Tool for Cleaning Up China’s Polluted Waterways Jingjing Liu


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Compensation in the Shadow of the Law at Yangzonghai: Legal Reform, Interested Actors, and Pollution in Yunnan’s Lake Leah Larson-Rabin

China EnvironmEnt SEriES 2012/2013

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Guizhou’s First Public Interest Environmental Litigation: Guiyang Lake and Dam Administrative Bureau vs. Guizhou Tianfeng Chemical Co., Ltd. Cai Ming




Risks of Intensified Development of Hydropower in Southwestern China Su Liu



Nuclear Power Prospects in a Post-Tsunami East Asia Tom Drennen & Darrin Magee



Sacrificing the Planet’s Arteries to Save Her Lungs? Peter Bosshard



The New Potential for Reigning in China’s Corporate Environmental Polluters Adina Matisoff



China’s Trials in its Overseas Oil Investments Susana Moreira



The Environmental Cost of “Clean” Energy: China’s Renewable Energy Goals Contribute to Lead Pollution Perry Gottesfeld



Training the Next Generation of Environmental Advocates in China: The U.S.- China Partnership for Environmental Law Jingjing Liu


90 |

The Stewards of the Most Heavy-Metal Polluted River in China: Green Hunan Luan Dong

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Burning With Anger: A Chinese NGO and Citizen Opposition to Incinerators in Beijing Chang Cheng



Permanent River Protection: An Option for China? Kristen McDonald



Life Above 4,000 Meters: Sowing Green Seeds of Mount Everest Liu Rongkun


by Jennifer L. Turner (吴岚), Editor

WoodroW Wilson international Center for sCholars

O ver the past year China’s

dismal air quality has garnered

considerable attention—

particularly in January 2013,

when pollution levels in Beijing and many other northern cities crashed beyond the air quality indexes. The grey smog that enveloped Beijing for weeks was caused predominantly by small particulate matter (PM 2.5 ) from coal and cars. This “Airpocalypse” sparked sharp criticism from the Chinese news media and

netizens and even Chinese environmental health researchers chimed in with sobering statistics on the growing number of people who die prematurely each year in China due to poor air quality. The government’s policy responses have been rapid and numerous. In December 2012, the National People’s Congress issued a law to require regional multi-pollutant air quality plans and new emission targets in 113 cities. To give the new law more muscle and clarity, in September 2013 the State Council issued a Pollution Action Plan. It is very unusual for the government to announce a plan that does not coincide with normal five- year planning cycle, but the extreme pollution clearly demanded decisive new steps. This plan requires Beijing, Shanghai and Guangdong to reduce fine particle density by 25, 20 and 15 percent, in the respective cities by 2017. Moreover, a list of good and poor performing cities will be published monthly. These steps to more aggressively address coal emissions open up more opportunities for U.S.-China clean energy cooperation—not just formal bilateral collaboration under the Clean Energy Research Centers, but also for top-notch U.S. environmental NGO efforts, such as Natural Resources Defense Council’s coal campaign and the Energy Foundation’s Sustainable Cities initiative. In our Cooperative Competitors work at the China Environment Forum—an initiative supported by the blue moon fund and Rockefeller Brothers Fund—we are advancing U.S.-China

dialogues focused on clean energy cooperation. Our Choke Point: China work has continued its deep dive into coal-energy nexus issues in China through our partnership with Circle of Blue. Since 2010 we have jointly produced 21 feature stories and dozens of infographics, photos, and blog posts that have for the first time explored how energy development is impacting vulnerable water resources in China. As part of our initiative, we created a China Water-Energy Team with 9 U.S. and Chinese water and energy experts, who participated in dialogues in Beijing in August 2013 to discuss priorities for China to address its growing water-energy confrontations. Local Chinese NGO Greenovation Hub was our partner in this exchange, which was generously supported by the Skoll Global Threats Fund, the China Sustainable Energy Program, USAID, and Vermont Law School. We will publish a China Water-Energy Roadmap in the fall of 2013.

a peek inside This issue

To highlight our growing engagement in “Choke Point” issues, this year’s China Environment Series opens with a Special Review of Water-Energy Nexus Challenges in China. Michael Davidson, Gretchen Green and Meng Jingjing kick off this review with an encyclopedic (in a good way!) survey of the untapped potential of saving energy through improving water use efficiency. Peter Marsters, one of my former assistants, draws on his year as a Fulbright Fellow in Sichuan Province to reflect on the water challenges in China’s shale gas revolution. David Tyler Gibson explores the water-energy-food tangle surrounding coffee production and hydropower in Yunnan, while two stellar energy researchers from Lawrence Berkeley National Laboratory— Nina Zheng and David Fridley—ponder the oft overlooked water footprint of wind, solar, and hydropower in China. The boxes in this review section cover desalination (David

China EnvironmEnt SEriES 2012/2013

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Cohen-Tanugi); solar PV production (Jodie Roussel); and coal gasification in Inner Mongolia (Troy Sternberg, Caitlin Werrell and Francesco Femia). To highlight the major role cities play in driving water-energy confrontations, my team at CEF (Luan Dong, Susan Chan Shifflett, David Tyler Gibson, and Katie Lebling) and Andrew Maddocks created a neat infographic on the urban Choke Point challenges. This year’s commentaries covered a broad range of issues with some sprinkling of Choke Point issues as well, such as Peter Bosshard and Katy Yan’s piece on China’s hydropower sector hitting limits. A commentary authored by staff from the World Wildlife Fund (Sheri Willoughby), IKEA (Stephen Guo, Maja Dahlgren & Thomas Schaefer), and a Chinese glass manufacturer (Hongming Jia) presents a promising case of the non-energy benefits of a carbon reduction initiative at a glassware company in Shanxi Province. Cities were a popular topic with Sha Yu, Meredydd Evans, Benchi Guo and Jianmin Zhang examining market transformation for urban energy efficiency in China and Warren Karlenzig and Daniel Zhu discussing how Chinese cities could become low-carbon leaders in the world. Shifting out of the cities, Li Zhang and Yayue Peng highlight the value of Conservation International’s ecosystem service and freshwater initiative for biodiversity in Sichuan Province. Three commentaries hone in on different aspects of good governance— Tucker Van Aken looks at promising changes in industrial energy performance targets for local cadres and Jingjing Liu reflects on recent developments in water pollution public interest litigation. Finally, Sam Geall explores whether Chinese media reports tend to confuse or enlighten the public regarding climate change. Two commentaries were placed in their own Focus on China’s Troubled Lakes section of the publication. First, Leah Larson- Rabin relates a story on the struggles in

developing legal reforms to control pollution in Yunnan’s lakes. Next, Cai Ming, head judge at the Environmental Law Court in Qingzhen Guizhou, documents the first environmental public interest case that was successfully adjudicated in his court. Scattered throughout the issue are short, but rich Feature Boxes, so please don’t ignore them! Energy was a popular topic with two feature boxes examining China’s hydropower development overseas (Peter Bosshard) and within China (Su Liu); Shannon Selerowski highlights the growing problems of lead pollution from batteries for wind power and electric bicycles while Darrin Magee and Tom Drennen reflect on the challenges facing nuclear power in China. Susana Moreira looks at China’s overseas oil investments and Adina Matisoff examines the impact of environmental disclosures in the Hong Kong Stock Exchange on Chinese overseas investment. Jingjing Liu crafted a lengthy box on all the great environmental governance training and capacity building work that Vermont Law School has been carrying out in China. Our Spotlights on NGO Activism in China introduce the relatively new, but dynamic grassroots group Green Hunan (Luan Dong); the advocacy work on incinerators by Friends of Nature (Chang Cheng); and environmental protection efforts by the Pendeba Society of Qomolangma National Nature Preserve (Liu Rongkun). Long-time contributor Kristen McDonald from Pacific Environment writes compellingly about the need for permanent river protection strategies for China.

my Team

CES is a labor of love and over the past year we at CEF have not always had as much time for love and editing as we would have liked. Our office is always happily busy with

WoodroW Wilson international Center for sCholars

projects, meetings and fielding information requests, but I did sometimes find quiet moments to read and edit this publication during the many delays on the DC Metro Red line. While commuting it is always good to make lemonade out of transportation lemons. So while belated, we did get this issue out and I am eternally grateful to my authors for their patience and to the research interns and assistants who helped pull this issue together. Robert Batten’s organizing ability helped me in the final sweep to clean up the texts and purge papers of any hint of passive voice. Luan Dong did the triple duty of assisting in editing, design and layout of this publication. Kathy Butterfield, our intrepid designer at the Wilson Center has a fabulous eye for design and sense of humor. The other heavy lifters in editing and writing deserve more songs of praise than I have space for here, but a big shout out to Abi Barnes, Katie Beck, Katie Lebling, Susan Chan Shifflett, Ella Genasci Smith, Tara Sun Vanacore, Yuanchen Yang, and Likangjin Zheng.

I wish to thank Rockefeller Brothers Fund, Vermont Law School, and USAID for supporting this and related publications over the past two years. Besides the China Environment Series, these funders have supported our work in producing online research briefs and infographics that we know many of you in our network have been clicking on and reading. Speaking of people who click and read—I would be remiss if I forgot the most crucial members of the CEF team—look in the mirror. You are likely one of the 5,000+ people in the CEF mafia, a growing network of environmental and energy professionals who are working on policies, projects, research, and campaigns in China or you aspire to work on these issues. The network is the lifeblood of this program and I am very grateful as I move into my 15th year as director of the China Environment Forum that many of you are active participants in our work as speakers, authors, audience members, bloggers, reviewers, and re-tweeters. 加油!

China EnvironmEnt SEriES 2012/2013

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China EnvironmEnt SEriES 2012/2013 CES | ForEword 1 4 6 5 5
China EnvironmEnt SEriES 2012/2013 CES | ForEword 1 4 6 5 5

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WoodroW Wilson international Center for sCholars 2 3 highlighTs from The China WaTer-energy Team exChange in

highlighTs from The China WaTer-energy Team exChange in beijing

1 CEF Program Associate Susan Chan Shifflett (far left) poses with the Greenovation Hub Beijing team in their office.

2 In a talk to a packed hall at Beijing University, Yang Fuqiang of the Natural Resources and Defense Council shows a map of China’s most water-stressed regions.

3 Keith Schneider (Senior Editor, Circle of Blue) discusses the water- energy choke points at the Chinese Academy of Sciences.

4 Jia Shaofeng of the Chinese Academy of Sciences and Pam Bush of the Delaware River Commission exchange perspectives on water-shale gas issues.

5 Jia Yangwen (Department of Water Resources, China Institute of Water Resources and Hydropower) speaks to business leaders on the risk of water-energy confrontations.

6 Jennifer Turner and Lo Sze Ping (CEO, Greenovation Hub) flank prominent Chinese environmental activist Ma Jun after visiting the Institute of Public and Environmental Affairs.

Photo credit: Susan Chan Shifflett.







speCial revieW

of WaTer-energy nexus Challenges in China

China EnvironmEnt SEriES 2012/2013

CES | SpECial REviEw of watER-EnERgy nExuS ChallEngES in China


Energy Savings and Climate Benefits from

Strengthening Water Use Efficiency in

China’s Building and Industrial Sector

by Michael Davidson, Gretchen Greene & Mingming Liu

O ver the past four decades China

has undergone a seemingly

unstoppable economic boom.

The country’s need for energy

to fuel this growth has increasingly come at

a high cost to China’s water resources. With soaring pollution levels and water resources equivalent to a quarter of the world’s average, ensuring a stable freshwater supply presents

a significant challenge to China’s rapid

urbanization and industrial development. At the same time, curbing rising energy consumption and greenhouse gas emissions has become a national priority. For the last twenty years, China’s policies have recognized the need to use existing water resources more efficiently, but bureaucratic turf struggles, low water prices, and unclear water rights have often limited effective implementation of water conservation and pollution control regulations and laws. Indeed, water conservation offices have been established in almost every sector and every city to promote efficient water use. Water resource management is highlighted numerous times in the 12th Five-Year Plan, which emphasizes price reform and water-

saving technologies. To be most successful, however, China’s energy and water policies must not operate in isolation, but must instead recognize that for a water-scarce country like China, water and energy resources are inextricably linked. Improving water use efficiency in China could not only extend the use of this scarce and critical resource, but also save energy and reduce greenhouse gas emissions. Lessons in water efficiency can come from many sources. In this paper, we first analyze the water-energy nexus in China, highlighting the similar challenges faced by southern California and northern China. After outlining the dual benefits of water efficiency solutions in China’s building sector and textile industry, we conclude with recommendations for successfully integrating water and energy strategies into national policy priorities.

China’s WaTer and energy hunger

Water use and energy use are inextricably linked. Energy is embedded in each stage of the water-use cycle — extraction, purification, distribution, treatment and disposal or re-use.

China EnvironmEnt SEriES 2012/2013

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Conversely, energy production often requires tremendous amounts of water. For example, the coal lifecycle is very water intense — from mining and washing coal to cooling power plants. These stages of coal extraction and production also cause considerable pollution that reduces the availability of usable water. Few, if any, countries have prioritized data collection and policies to deal with the growing confrontations between water and energy. This “watergy” gap needs to be filled, particularly in China where the water footprint of energy development and the energy footprint of water are large and growing. China’s water-energy choke points are particularly acute in the arid north where lack of water hinders coal mining. The need for water is also great in north China’s grain belt, where at least 40 percent of the water needed for crops must be pumped from diminishing ground water resources, a process that uses considerable amounts of energy. For decades Beijing has benefited from numerous emergency water transfers to quench its thirst. Now to help secure a more permanent source of water, the Chinese government commissioned the construction of the South-North Water Transfer Project (SNWTP), a massive energy- intensive water diversion project to move

water from the Yangtze River to cities and coal fields in the dry north. Water treatment plants to handle wastewater disposal, purification and re-use are also energy-intensive—and the costs for non-treatment are even greater. Lack of water conservation can ultimately create significant energy burdens. Water and energy are both in short supply in China and separate ministries and different laws regulate each of these vital resource sectors. Few Chinese researchers have focused on the interplay of water and coal or the growing energy footprint of moving and cleaning water. A greater awareness of the water-energy nexus could help catalyze stronger water conservation and water pollution control policies, as well as lessen the water footprint of energy development.

no brakes on China’s rising energy demand

Since China adopted its reform and opening policy in 1978, its economy has grown around 10 percent annually, becoming the second largest in the world in 2010. During the same period, primary energy consumption increased sixfold, reaching 3,250 million tons of coal-equivalent (tce) in 2010, as shown


45 40 35 30 25 20 15 10 5 0 1978 1980 1985 1990 1991
Energy Consumption (100million TCE)
GDP (Tillion RMB)
GDP Growth Rate
Energy Consumption Growth Rate
Source: National Bureau of Statistics (1979-2011).









WoodroW Wilson international Center for sCholars

in Figure 1. China currently relies on coal to meet over 70 percent of its primary energy consumption needs, which according to one estimate causes environmental and human health damages equivalent to 7 percent of annual GDP (Greenpeace, 2008).

roots of the energy boom Influenced by the worldwide energy crisis in the 1970s, and facing high energy demand domestically, China began to focus on energy conservation in the early 1980s. Central

authorities prioritized energy conservation was in the national development plan, and central and local


issued policies

and established



Although total

energy use continued to rise, the programs were successful at lowering China’s energy intensity (energy consumed per unit GDP) throughout the 1980s and 1990s. Following a leveling off of China’s total energy use in the 1990s, expansion of energy- intensive industries and growing household consumption led to a sharp increase in energy consumption beginning around 2002. During the 10 th Five-Year Plan period (2001-2005), China’s energy consumption grew faster than its GDP for the first time in over a decade. In 2006, China issued its 11 th Five-Year Plan (2006-2010) that called for reducing nationwide energy intensity by 20 percent by 2010 from a base year of 2005, for a projected reduction of 600 million tce (State Council, 2006). China identified energy efficiency as the most cost- effective way to meet the 20 percent target, and initiated a suite of programs supporting mandatory reduction targets in provinces and in the top 1,000 energy-consuming enterprises. These programs included comprehensive

efficiency standards by sector, energy efficiency investment targets for utilities, more stringent efficiency standards and labeling for buildings, and other investments in low-carbon efforts. By the end of 2010, energy intensity had fallen 19.1 percent. The average 11.2 percent annual GDP growth rate during this period was accompanied by an average annual energy consumption growth of only 6.6 percent (NDRC, 2011). Over the same time period, energy intensity in the United States and the European Union fell by 7.75 percent and 7.81 percent, respectively. Compared to industrialized countries, China’s 2010 energy

During The 10 Th Five-Year Plan PerioD (2001-2005), China’S energY ConSumPTion grew FaSTer Than iTS gDP For The FirST Time in over a DeCaDe.

intensity (0.900 tce per $1,000, 2005 constant dollars) was almost four times the United States (0.243) and five times the EU rate (0.170) (IEA,


In March 2011, China laid out targets for the current 12 th Five-Year Plan (2011-2015), including an average annual GDP growth target of 7 percent per year, a half percent below the 11 th Five-Year Plan’s annual growth target, and 4 percent below the 11.2 percent annual growth rate that was actually realized during the previous five years (State Council, 2011). Premier Wen Jiabao highlighted the importance of improving environmental protection and pursuing sustainable development when explaining the government’s decision to reduce its economic growth target. While Premier Wen did not talk in terms of the water-energy nexus, controlling economic growth will entail reducing the use of coal, which would lower the energy sector’s water footprint. By 2015, the Chinese government aims to reduce energy intensity from the 2005 levels

CES | SpECial REviEW

by another 16 percent and carbon intensity (carbon dioxide emissions per unit GDP) by 17 percent. Officials have coupled these efforts with a goal to increase the proportion of non-fossil fuel energy to 11.4 percent of total energy consumption by 2015 and 15 percent by 2020. These targets are consistent with China’s international commitments made during the Copenhagen climate conference, but there is still room for more ambitious goals and deeper cuts (Cohen-Tanugi, 2010). If China continues to consume energy at the same rate as it has over the last five years, by 2050 its primary energy consumption will reach an astronomical 27 billion tce, almost double the total global energy consumption in 2008 (ERI, 2009). Taking into account the expected gradual decline in the growth rate as per capita consumption levels off and the continuation of current energy policies, the China Energy Group at Lawrence Berkeley National Laboratory projects 5.48 billion tce of consumption in 2050 (LBNL, 2011).

a Thirsty nation facing Water scarcity Challenges Like energy, water is critical to economic development. China’s total annual water use

increased 9 percent from 2000 to 2010 (549.76 to 599 billion m 3 ), owing largely to increases in industrial and domestic water applications (NBS, 2011a). (See Figure 2). The total amount of water resources in China has remained roughly constant over the last decade, around 2,700 billion m 3 . Agricultural water use, which currently accounts for more than 60 percent of the total, remained relatively constant over this period. However, water used by industry and households has been steadily increasing. According to the 2011 No.1 Central Document, which reflects government priorities for the year, China aims at capping its annual water use at 670 billion m 3 in 2020, about an 11 percent increase from the 2010 level (State Council, 2010). Central to the water challenge is the uneven distribution of water resources, as many developed regions in China are in water-scarce areas. In northern China, for example, water availability is only 700 m 3 /person. Moreover, in the Huabei Basin, which includes Beijing, water availability was only 308 m 3 /person in 2009—well below the international standards for water scarcity 1 of 1,000 m 3 /person (NBS,


China’s rapid economic growth is

FIgURE 2. TOTAl wATER USE ANd bREAkdOwN IN CHINA (2000-2010) 700 581.87 591 592.52 599
FIgURE 2. TOTAl wATER USE ANd bREAkdOwN IN CHINA (2000-2010)
Ecological Protection
China EnvironmEnt SEriES 2012/2013
Unit: billion m3

Source: NBS (2001-2011).

WoodroW Wilson international Center for sCholars

hampered by a critical shortage of water. The government estimates that 400 of China’s 668 cities with populations over 100,000 suffer from water shortages. Of the total water supply, only 812 billion m 3 (29 percent) is usable, while per capita renewable water resources stood at 2,112 m 3 in 2009, a third of the world average (NDRC, 2007a; World Bank, 2012). Climate change also threatens to disrupt China’s precipitation patterns, exacerbate water scarcity in northern China, and lower water flows in the south (NDRC, 2007b). Besides climate change, inefficient water use in all sectors of the economy and increasing water pollution are compounding water scarcity in China. Industry in China uses 5 to 10 times more water per unit output (depending on the product) than in developed nations (NDRC, 2005). The 12 th Five-Year Plan begins to address this wastage by setting a 30 percent water recycling goal for industries. Water loss in agriculture, which uses 60-65 percent of all water in China, is also significant: irrigation of crops in China can lose up to 45 percent of the water (Xinhua, 2006). Moreover, runoff from overuse of fertilizers and pesticides has pushed agriculture to the top water polluting sector in China. In 2007, 43 percent of chemical oxygen

demand (COD), a major water pollution indicator, was from agricultural sources (MEP et al., 2010). Municipal waste and untreated industrial waste combined with agricultural runoff have left the country with nearly 30 percent of its waterways undrinkable. Figure 3 compares total water resources, water use, and GDP of individual provinces and municipalities in China. A number of cities are consuming water well beyond the local supplies. For example, Beijing provides 3.3 percent of China’s GDP, but has only 0.09 percent of China’s water reserves, a disparity of almost a factor of 40. In contrast, Shandong’s ratio of GDP to available water reserves is about 8. While cities in China’s arid north are facing severe water shortages, cities in the more water-rich south lack access to sufficient clean water—a trend not reflected in this figure. Massive, energy-intensive water transfer projects, such as the South-North Water Transfer Project, are underway to alleviate this imbalance between water demand and supply. The project’s first two pipelines will transport 28 billion m 3 annually, ten times the volume of the next largest transfer project in the world, the California state water project. Costing $62 billion USD, the central and eastern canals



Source: NBS (2010).

CES | SpECial REviEW


China EnvironmEnt SEriES 2012/2013
China EnvironmEnt SEriES 2012/2013

China’s $62 billion USD water diversion project from the Yangtze River to the north will be ten times as large as the world’s current largest transfer project, the California state water project.

WoodroW Wilson international Center for sCholars

will each snake over 1,200 km of countryside from the southern Yangtze River to population centers in the north like Beijing and Tianjin. (See Figure 4). The 11 th Five-Year Plan set a 30 percent reduction target for water use per unit of industrial value-added output (a measure of the water intensity of China’s economic activity) from a base year of 2005. Chinese government figures indicate that the achieved reduction was 37.8 percent, lowering industrial water use from 169 m 3 /10,000 RMB in 2005 to 105 m 3 /10,000 RMB in 2010 (NBS, 2011a). Over the same period, total emissions of COD, fell by 12.5 percent, surpassing the 10 percent COD reduction target under the 11 th Five-Year Plan. The 12 th Five-Year Plan sets an additional 30 percent reduction target for industrial water use efficiency compared to 2010 levels, an additional 8 percent reduction in COD, and a new 10 percent reduction in the water pollutant ammonia nitrogen. Such targets are vital as industrial water use and wastewater emissions continue to increase.

The overlooked WaTer-energy nexus realiTy in China

Accessing energy resources requires substantial amounts of water. No energy technology has a net-zero water foot print, although there is significant variance in the quantity of water consumed for electricity generation depending on the primary energy source. On the flip side of the water-energy nexus, energy is required for the extraction, purification, transportation, distribution and heating of water and for the treatment and disposal or reuse of wastewater. Without significant expenditures of energy, much of the world’s population would not have access to potable water. Shining a light on all facets of the water-energy nexus will be crucial in catalyzing research and policies to promote sufficiently aggressive energy and water conservation.

how Thirsty is China’s energy sector? The main sources of energy in China’s electricity are coal and hydroelectric power,

Photo 1. Shuozhou Coal Fired Power Plant in Shanxi Province, China. One coal plant uses
Photo 1. Shuozhou Coal Fired Power Plant in Shanxi Province, China. One coal plant uses over a billion liters of water a day. Photo creidt:
Wikipedia Commons.

China EnvironmEnt SEriES 2012/2013

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and to a lesser extent nuclear. (See Figure 5). Together these three energy sources provide 95 percent of China’s electricity.

Thermal Power Coal is China’s largest source of energy, accounting for 70 percent of total energy consumption (NBS). It is also used for around 77 percent of electricity production, generating 3.2 trillion kilowatt-hours (kWh) in 2010 (CEC, 2011). China produced 3.7 billion metric tons of coal in 2009, which was 44 percent of global production (EIA, 2010). Between production and use, the coal industry is also the largest industrial user of water in China, responsible for 20 percent of all water withdrawals (Schneider, 2011b). Water is needed to extract, wash, transport, and burn coal, and to control coal ash. At the plant, water is heated to almost 600 degrees Celsius in order to drive a turbine, and additional freshwater is used to cool down the steam before re- injection. According to researchers at Sandia National Laboratories, a typical 500-megawatt coal-fired plant in the U.S. burns 250 tons of coal per hour and uses 1.1 billion liters of water per day—400 billion liters per year— for cooling (Crane-Murdoch, 2010). To boost energy and water efficiency nearly all new coal- fired power plants use air cooling.

Hydropower China leads the world in hydroelectric power, generating 690 billion kWh in 2010 (16.2 percent of total electricity supply) with an installed capacity of 213 gigawatts (GW) (CEC, 2011). The 12 th Five-Year Plan for Renewable Energy prioritizes dams by targeting 60 new medium and large dams. Thus, hydropower is still rapidly expanding, increasing on average 11.1 percent of installed capacity annually over the past five years, and with more room to grow through at least 2020. 542 GW of hydro resources are exploitable according to Chinese government estimates (Wang, Li, Du, 2011).


Coal Hydro Nuclear Natural Gas Wind Others Source: NBS, CE. Coal accounted for 77% of
Natural Gas
Source: NBS, CE.
Coal accounted for 77% of China’s 4.2 trillion kWh of electricity
used in 2010.

Hydropower is China’s second largest energy resource after coal. The Three Gorges Dam, fully completed in July 2012 at 22.5 GW, is the single largest power plant in China with an annual generating potential of approximately 100 billion kWh, roughly 2 percent of the country’s electricity demand (China Three Gorges Corp., 2012). (See Photo 2). Hydroelectric power is directly linked to water availability, and is impacted by seasonal variations in river flow in addition to extreme water shortages. Each liter decrease of water upstream is one less liter that can be converted into power at the dam. At their peak, recent droughts in China have caused up to a 20 percent decline in generation capacity (Kurtenbach, 2011). Dams hurt water ecosystems by reducing flows needed for fish species while reservoirs are a major source of water loss due to evaporation.

Nuclear Power Nuclear power generated 75 billion kWh of China’s electricity in 2011, 1.8 percent of the country’s total (CEC, 2011). China’s most recent official plan (published in 2007) projects 40 GW of nuclear capacity by 2020. Unofficially, however, the Chinese government has signaled its intention to build up to 80 GW of nuclear

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Photo 2. Three Gorges Dam. China leads the world in exploitable hydropower with 542 gigawatts.
Photo 2. Three Gorges Dam. China leads the world in exploitable hydropower with 542 gigawatts. Photo credit: Wikipedia Commons.

power by 2020, from the current 10.8 GW. If those plants are built, nuclear power will meet five percent of the country’s energy needs by 2020 (World Nuclear Association, 2011a). Nuclear power plants use an enormous amount of water for cooling; hence, most are usually built in proximity to a lake, river, or ocean. All of China’s 14 operating plants are on the eastern coastline. Similar to coal plants, water usage varies significantly by plant design. Where water is abundant, power plants prefer open-loop cooling (also known as once-through), although it discharges heated water back into the water supply. Plants can use closed-loop cooling where water is less abundant, but results in higher water losses due to evaporation. The total water withdrawals depend on the thermal efficiency, but on average, for every unit of heat converted to electricity two additional units are carried away by the water (World Nuclear Association, 2011b). Over the next decade, China will

continue to rely upon once-through designs, while closed-loop cooling is projected to become more prevalent following 2020. (See Table 1)

Renewable Energy, Oil and Natural Gas Other energy sources use water in various ways, from hydraulic fracturing for natural gas extraction to pressurized water injection for enhanced oil recovery. Among renewables, concentrated solar thermal has the largest water footprint, where water is heated and compressed to generate electricity—though this still requires 10-20 times less water than nuclear plants (Bull, 2009). Photovoltaic solar and wind turbines use minimal amounts of water during operation, though the latter may have a larger impact in terms of manufacturing steel for wind towers. Untreated pollution emissions from solar panel production have become a growing concern in China as well. [Editor’s Note: See commentaries in this issue

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Cooling Type















Source: Data for the internal NRDC nuclear geo-information system was compiled by Tom Cochran. Database design was done by Jerome Simons, Scoville Fellow, NRDC.

of CES for more detailed discussion of the water issues related to shale gas (Marsters) and renewables (Zheng & Fridley) in China].

Water as China’s unrecognized energy intensive sector? Water is increasingly an energy-intensive sector, as governments need to move and clean ever larger quantities of water to supply the growing thirst of modern agriculture and booming cities and industries. (See Box 1 for California examples). Besides transporting water across mountains and even countries to satisfy demand in areas with falling groundwater tables and reduced rainfall, countries around the world are using larger amounts of energy to treat and reuse local wastewater. Conflicts between water and energy priorities are very significant in China where coal resources in the arid north cannot be fully developed without additional water supplies. To meet rising demand for water to tap coal and supply cities in the north, China is embarking on massive development of energy intensive water transfer projects, including the 3,000-kilometer South-North Water Transfer Project (SNWTP). The ambitious SNWTP includes the construction of three canals diverting water from the Yangtze River to the north. The eastern canal will begin delivering water in 2013 and after some logistical delays the central canal will come online in 2014. The most challenging canal will require drilling through mountains in China’s far west. Despite

increasing dryness in China’s southwest, this expensive western canal remains a priority because it would bring water to as of yet untapped coal reserves in Xinjiang (Schneider,

2011a). Another ambitious plan to quench

coal’s thirst is a proposed pipeline delivering desalinated water from the Bohai Sea over 600 km to the coal fields in Inner Mongolia (Schneider, 2011b). These pipelines drive up the energy costs associated with providing each liter of water, which in turn should drive up water prices and promote conservation. According to most Chinese water analysts, water prices still remain too low and do not yet promote aggressive water-saving by industrial and domestic consumers. The United States also has pursued energy intensive water transfers, such as the California state water project, which pumps 2.8 billion

m 3 of water annually a distance of 715 km and up almost 700 meters over a mountain range to reach population centers in the south. This gravity-defying water transfer consumes up to 20 times more energy compared to using local groundwater (Beckman, et al., 2009). To date, the authors have been unable to locate estimates for the energy footprint of the South-North Water Transfer Project, but it is a calculation that could help Chinese policymakers view water supply infrastructure as a high-energy consuming industry and a sector requiring stringent energy conservation targets. Moreover, policymakers and energy managers need to calculate the energy cost of using water transfers to tap coal supplies as another environmental cost of coal use.

California and Northern China:

Delivering Water to Large Population Centers in Arid Regions Northern China and California face similar challenges of water scarcity. (See

Figure 6). China’s arid north and northwest

is like California’s south, and both have large

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bOx 1. energy down the drain: The heavy Toll of delivering municipal freshwater in California

Globally, the energy consumed for delivering water is more than 940 million tons of coal-equivalent (mtce), which is 7 percent of total world energy consumption (Hoffman, 2004). California—similar to northern China in terms of extreme water scarcity—devotes even more energy to the task. For San Diego County, approximately 5,600 watt-hours per cubic meter (Wh/m 3 ) of electricity is used in the various stages of the life of a ton of water (1 m 3 of water weighs one metric ton or 1.1 short tons). Source and Conveyance. Where surface water is unavailable, groundwater must be pumped up from below the surface at great economic cost. For example, in parts of the Central Coast of California, water is raised 60 meters at a cost of 240 Wh/m 3 . A less- energy intense solution might include using recycled water. Desalination, a last resort in water scarce areas, consumes extraordinary amounts of energy, up to 4,400 Wh/m 3 for one proposed plant in San Diego. Freshwater must frequently be pumped from natural sources over mountains to urban centers, sometimes thousands of kilometers of away. The California state water project uses 2433 Wh/m 3 to pump water up over a 700-meter-high mountain range and down to southern California. Treatment. Groundwater and surface water generally require some purification before use. In many groundwater systems in the U.S., simple disinfection is sufficient. However, surface water treatments are becoming increasingly costly. The bulk of a treatment plant’s energy goes to pumping the treated water. Roughly 10% of the average 360 Wh/m 3 direct electricity requirements of a surface water plant is used for treatment. distribution. Transporting water from centralized plants to homes is also fairly energy- intensive, with estimates for southern California ranging from 150-350 Wh/m 3 . A significant portion of this treated water – typically from 6 to 15% – is lost due to leaks in the system. End use. Heating and pressurizing water where it’s used, whether at a home or office building, or in a textile mill, can be the largest user of energy in the whole water supply chain. In the whole of San Diego County, 3,200 Wh/m 3 (56%) of electricity is used for end- use applications. wastewater Treatment. There is wide variance in the energy consumption used treating wastewater, depending on the size and technology of the plant and also on the quality standards required. One survey of San Diego treatment plants gave a range of 650- 1,050 Wh/m 3 , but this water was only used for ecological or agricultural purposes. More complete treatment options will be even more energy-intensive.

Source: “Energy Down the Drain” (Cohen, Nelson, & Wolff, 2004).

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precipitation range (mm)
< 50
50 - 100
- 200
- 400
- 600
- 800
- 1000
- 1200
- 1600
- 2000
> 2000
Source: China Institute of Water Resources
and Hydropower Research
Retrieved 1 June 2011, from: http://sdinfo.chinawater.net.cn/
California average annual
precipitation (1971-2000)
precipitation range (mm)
76 - 100
- 200
- 400
- 600
- 800
- 1000
- 1200
- 1600
- 2000

population centers, significant agricultural production and energy-intensive industries. Both regions must transport water thousands of kilometers to satisfy demand. Overall the United States uses 4 percent of the power generated for water supply

and treatment (Beckman et al., 2009). The percentage is much higher in drier regions where water is the largest single user of energy. In California, for example, the state water project supplies around 6 percent of the state’s water and consumes 2-3 percent (5 billion

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kWh/year) of the state’s electricity (Cohen et al., 2004). Figure 4 compares massive water diversion projects in California and China. In total, 20 percent of California’s electricity use and over 30 percent of the non-power plant natural gas use is associated with water use, from extraction to treatment (House, 2006).

The Overlooked Energy Footprint of China’s Water Given the relative scarcity of water in China, the water sector requires tremendous amounts of energy. Studies are scarce in China on the water-energy nexus, but there is most likely a big difference in energy cost between the most energy-intensive and least energy- intensive water, as there is in California, where the state water transfer project uses considerably more energy than pumping local groundwater. Water transfer projects currently in use, under construction or under serious consideration in China include large-scale desalination projects, 2 the SNWTP, and the proposed Bohai sea pipeline (Schneider, 2011b). If completed, all three canals of the SNWTP will move 45 billion cubic meters of water per year, about two-thirds the discharge of the Missouri River, the longest river in the United States (Xinhua, 2012; USGS, 1990). The eastern portion of the SNWTP must raise the


Water supply 20% Electricity
Water supply

Source: House, 2006.

Water supply 30% Natural Gas
Water supply
Natural Gas

water 45 meters, which could use upwards of 3 billion kWh of electricity annually (Schneider, 2011c). (See map in Figure 4.). Based on data from China’s National Bureau of Statistics, the country-wide average energy intensity of non-agricultural water production and supply in 2007 can be estimated at 101 watt-hours per cubic meter (Wh/m 3 ), an increase of 27 percent from 1997 (Holst, 2008). Nationwide the annual energy cost of production and supply of water in 2007 was 80.2 million tce (NBS, 2009), about 30 percent more than Beijing’s 62.9 million tce total energy consumption in the same year (Energy Statistical Yearbook, 2010).

Conserving energy Through WaTer effiCienCy in China’s indusTries

While total agricultural water use has remained relatively stable over the last decade in China, industry and household water use have increased both absolutely and as a proportion of total water use. Industrial use in China increased from 20.72 percent (113.9 billion m3) in 2000 to 23.55 percent (141 billion m3) in 2010; and household water consumption increased from 10.46 percent (57.5 billion m3) in 2000 to 12.9 percent (77 billion m3) in 2010. China’s industrial sector is 5 to 10 times more water-intensive than the world average, as measured by water use per unit industrial value-added output. In response, China has set a national water use intensity target and carried out a series of measures to conserve water and improve the efficiency of the largest water users, accounting for about 60 percent of all industrial water use (MIIT, 2010). These measures include:

Establishing a national quota standard 3 for water use in water-intensive industries such as: thermal power, petrochemical, iron & steel, textile, papermaking, chemical, and food industries to push more aggressive water conservation. Compiling a preferred equipment

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(product) category for water conservation technologies, and encouraging the development of water efficiency industries. Implementing a certification and labeling program for water conserving products, and including water conserving products on government procurement lists. Developing a differential pricing system that imposes higher water prices on enterprises with high water use and pollution, and provides preferential prices for enterprises with greater water efficiency and lower or no water pollution. Recently, the Chinese government has focused on four industries to promote water- saving technologies—iron & steel, textiles, paper-making, and food fermentation. In this paper, we will focus on the textile industry, which is not only one of the most water intense, but also a major polluter of waterways in China.

China’s Textile industry China’s 50,000 textile mills generated $229 billion in trade volume in 2010, up 25

percent from the previous year (NBS, 2011b). According to surveys measuring natural resource use across all industries, textile dyeing and finishing mills rank at the top. Dyeing and finishing one ton of fabric can result in the pollution of up to 200 cubic meters of water from a suite of harmful chemicals, reducing local water availability and raising the cost of water treatment. The mills also consume tremendous amounts of energy to create hot water and steam (Greer, Keane, & Lin, 2010). In early 2006, China issued the 11th Five- Year Plan for constructing a water conservation- oriented society, in which it set a target for the textile industry to reduce water use per industrial value-added by 20 percent from 191 m 3 /10,000 RMB in 2005 to 153 m 3 /10,000 RMB in 2010 (NDRC, 2007a). To reach the 11 th Five- Year Plan target, the government in May 2010, released an industrial water use quota standard to promote advanced technologies and phase out outdated production methods and equipment (MIIT, 2010). The 12 th Five-Year Plan for the textile industry does not report on



Percentage Resources Saved


Payback Period

Leak detection, preventive maintenance, improved cleaning

Water: 2-5%


Energy: 1.5-5%


<1 month

Reuse cooling water:

Energy: 1.6-1.8%


From singeing From air compressor system From preshrink

Water: 2-5%

Water: 2%


<1 month

Water: 1%


Water: 2-3%


Reuse condensate

Energy: 0.8-3.2%


1 month-1 year

Reuse process water:


From bleaching

Water: 4%


<1 month

From mercerizing

Water: 3%

Recover heat from hot rinse water

Energy: 2-12%


2-4 months

Prescreen coal

Energy: 3%




Maintain steam traps



<1 month

Insulate pipes, valves and flanges

Energy: 0.01-0.5%


<1 month

Recover heat from smokestacks

Energy: 1%




Optimize compressed air system

Electricity: 0.3-3%


<1 month

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the progress of the 11 th Five-Year Plan target, but does set a new target of reducing water usage per industrial value-added by 30 percent from 2010 to 2015 (MIIT, 2012). To address the rapidly increasing global presence of this industry, the Beijing and U.S. offices of the Natural Resources Defense Council (NRDC) and a group of apparel retailer and brand partners have spearheaded the Responsible Sourcing Initiative to curb pollution while saving the industry money. The initiative conducted a review of more than a dozen textile mills, looking specifically to:

manufacturing efficiency. Table 2 sets forth these best practices—many of which demonstrate the dual nature of water- and energy-saving technologies. Taken together, the Ten Best Practices described in Table 2 can save approximately 25 percent of the water and 30 percent of the energy used in a typical cotton fabric dyeing mill in China—all with initiatives that recoup costs in less than eight months. Furthermore, these practical, low-cost improvement measures, especially those focused on factory infrastructure improvements (such as improving the production of steam and

Identify the highest water and energy- water heating and recovering and recycling

process water) are relatively easy to implement compared to process optimization methods

Match high savings potentials with low- (Greer et al., 2010).

A fundamental best practice is for textile mills to install meters to track water, steam and electricity consumption both overall and at the process and equipment levels. A majority of mills in China could easily adopt this simple and inexpensive measure to help identify waste and save water and energy simultaneously. Other best practices, such as reuse of cooling water, condensating, and processing water, can save 1 to 4 percent of water use and have a relatively short payback period. China could apply these practices to other industries with

This resulted in ten simple, cost-saving opportunities to reduce water, energy, and chemical use via improvements in

Educate and implement the low-cost technology and management options across the entire industry.

Present results in an easily understood format that is compelling for businesses; and,

using dyeing and finishing processes, and the accompanying savings potentials;

cost technology options, optimizing for an 8-month payback period;


ENERgy USE OF CHINA’S bUIldINg ANd INFRASTRUCTURE SECTORS 54% all other energy uses 25% operation of

54% all other energy usesENERgy USE OF CHINA’S bUIldINg ANd INFRASTRUCTURE SECTORS 25% operation of commercial and residential buildings 21%

25% operation of commercial and residential buildingsANd INFRASTRUCTURE SECTORS 54% all other energy uses 21% construction of buildings The construction and operation

21% construction of buildingsuses 25% operation of commercial and residential buildings The construction and operation of buildings and

The construction and operation of buildings and infrastructure accounts for almost half of all energy use in China.

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large water intakes and process effluents, such as the paper and pulp industry. Other possible improvements include (Greer et al., 2010):

Process optimization: Modifying the pretreatment, dyeing and finishing processes themselves so they use less water, energy and chemicals. Process optimization requires improved discipline and standardization, which can be more difficult for some textile mills. Good housekeeping: Some simple behavioral changes can reduce waste and cost in many textile mills, and require little or no investment. These are promising and generally easy opportunities to increase process efficiencies, though the resulting savings are sometimes difficult to quantify.

urgenCy for energy and WaTer effiCienCy in building ConsTruCTion and operaTions

Constructing and operating buildings is extremely energy-intensive, and China’s rapid growth of floor space has led central policymakers to target the construction sector as one of the most important energy intensity reduction efforts in the medium-term. Without

more acute as floor space continues to expand. In 2009 alone, 2.5 billion m 2 of floor space was added (NBS, 2010). Building construction and operation also consume an increasingly large fraction of China’s scarce water resources. Domestic water use (commercial and residential buildings) reached 76.7 million m 3 , or 12.9 percent of the country’s total, in 2010 (NBS, 2011a). This number is expected to reach 16 percent by 2030 (Wang, 2009). This growing “gulp” of China’s water by buildings poses challenges for cities still struggling to expand wastewater treatment rates. The Chinese government reported that the 11 th Five-Year Plan helped raise the percentage of municipal wastewater from 56 (in 2006) to 75

percent (in 2010). Keeping treatment rates high is a challenge as cities are expanding rapidly. At least 200 cities still have no treatment facilities at all and many cities turn off their facilities in times of energy shortages. In terms of improving overall water and energy resource efficiency, building operation and use present a number of challenges. China lacks market incentives to adopt and manufacture new water-saving technologies, such as new fixtures. Urban water recycling, already in operation for two decades in Beijing, has traditionally

been costly and municipal agencies face many difficulties in incorporating

the necessary infrastructure. Finally, the sheer number of ministries involved has stymied integrated thinking in areas such as low-impact development approaches in green building design that could lower energy and water use.

The oPeraTion oF China’S builDingS aCCounTS For a quarTer oF ToTal energY uSe oF The CounTrY.

including the energy used in new building construction, the operation of China’s buildings accounts for a quarter of total energy use of the country, which is larger than the cement, iron and steel sectors combined (Fung, et al., 2008). Energy use when constructing buildings and infrastructure (i.e., embedded energy) has risen in China over the last decade, reaching 589 million tce or 21 percent of total energy use in 2007 (Fu, 2010). (See Figure 8.) This energy footprint of buildings is becoming even

Water Conservation and Water efficiency regulations for buildings China’s national water efficiency regulations for buildings predate and are in many respects more stringent than comparable energy

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efficiency regulations. The National Program for Water-Saving (2001-2010) established a number of programs and institutions, which were codified in the Water-Saving Technology Policy, jointly released by five ministries including the National Development and Reform Commission (NDRC, 2005). These include:

Water conservation offices. In each city, a local water conservation office sets policies for local water management and conservation in buildings and industries, and sets water quotas for public buildings and big water users such as factories and schools. Officials in Beijing and Shanghai revise these quotas biannually. Water-efficient product standards. Many current product standards for appliances, fixtures and equipment in buildings such as those for water recycling technology were adopted in 2002 (MOC, 2002). The standard for 6-liter toilets was made mandatory nationwide in 2008. Public facility water-saving technology adoption. Public facilities (i.e., government and school buildings) must meet stricter standards for water-saving technology; a main focus of which has been on water-cooled air conditioning systems. The recently released standard for water-saving in public buildings is now mandatory for new construction. The water source for landscape irrigation now cannot be municipal water or groundwater (MOHURD, 2010). Green building codes and labels. China adopted a nationwide Green Building Standard in 2006. The strictest rating dictates water efficiency improvements of 8 percent in residential and 25 percent in public buildings; and “unconventional water” use (which includes recycling, rainwater harvesting, and seawater) should be no less than 30 percent of total water use in residential and 60 percent in public buildings (MOC, 2006). Pilots for water-saving communities. The 2002 amendments to China’s National Water


wATER USE IN RESIdENTIAl ANd COMMERCIAl bUIldINgS IN CHINA 23% toilet 12% lavatory 20% kitchen 30%

23% toiletwATER USE IN RESIdENTIAl ANd COMMERCIAl bUIldINgS IN CHINA 12% lavatory 20% kitchen 30% bath 15%

12% lavatoryIN RESIdENTIAl ANd COMMERCIAl bUIldINgS IN CHINA 23% toilet 20% kitchen 30% bath 15% all other

20% kitchenANd COMMERCIAl bUIldINgS IN CHINA 23% toilet 12% lavatory 30% bath 15% all other uses 65%

30% bathbUIldINgS IN CHINA 23% toilet 12% lavatory 20% kitchen 15% all other uses 65% toilet 30%

15% all other usesIN CHINA 23% toilet 12% lavatory 20% kitchen 30% bath 65% toilet 30% lavatory 5% kitchen

65% toilet 30% lavatory 5% kitchen Source: NRDC calculations based on (MOC, 2003). Toilet-flushing uses
65% toilet
30% lavatory
5% kitchen
Source: NRDC calculations based on (MOC, 2003).
Toilet-flushing uses almost two-thirds of a commercial building’s
indoor water in China.

Law called for considering water impacts in land-use and urban growth decisions, and set guidelines for pilot cities (NPC, 2002). The 2006 Green Building Standard also covers the water permeability of the building’s exterior. Cities and local governments have not always fully implemented these programs and institutions or integrated them into building energy-saving policies, regulations and standards. The largest challenge is fragmented governance—energy-saving and water-saving policies are carried out by different ministries and with different objectives. The Chinese government developed water use regulations for buildings primarily in response to water scarcity and water pollution concerns, with little consideration of the heavy energy costs of transporting, heating and treating urban

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bOx 2. Water-strapped beijing learns to reuse

Beijing’s grey water recycling system is another example of achieving energy savings while improving water efficiency. Wastewater once moderately treated, can be reused in a variety of ways, termed grey water applications. On-site, grey water can be redirected to toilets and landscaping, and off-site it can cool power plants. Initiated in 1987, Beijing’s grey water recycling program now has nine central facilities and over 1000 distributed systems, recycling around 700 million m3, or 19% of the city’s total water consumption, annually (Beijing Water Authority, 2011). The municipal government intends to achieve 98% wastewater treatment in the city center by 2015 (Schneider, 2011, May 3). In addition to a large network of grey water infrastructure, all institutes, schools and hotels larger than 30,000 m2 and new residential developments larger than 50,000 m2 are required to install grey water reclamation systems on-site. Electricity consumption of five such distributed water recycling systems ranged from 720 - 1500 watt-hours per cubic meter (Wh/m3) (Mels, Guo, Zhang, Li, Wang, Liu, Okke, 2006). In terms of supplying freshwater to northern China, this is less energy-intense than what can be expected from the South-to-North Water Diversion Project. However, problems remain. Weng et al. estimated that schools less than 45,000 m2 could not operate these systems profitably, and this was after over-estimating the value of recycled water based on Beijing freshwater rates (Weng, Chen, 2010). Mels et al.’s financial analysis highlighted a large variability in return on investment, ranging anywhere from 2 to 13 years, largely due to the variance in the price of municipal water. These uncertainties, coupled with high operational costs and poor management, have caused some building operators to stop operation of grey water systems (Xiao, Van Dijk, 2008).

water. Conversely, the national building energy efficiency standard effective in 2008, primarily focused on space heating/cooling and lighting in residential and public buildings, ignoring the significant energy costs of heating water, which accounts for around 20 percent of an office building’s energy use in northern China (State Council, 2007; Fung et al., 2008).

saving Water in low-impact and high-efficiency green buildings Green buildings must address a suite of water-consuming uses in order to be successful. In residences, toilet flushing accounts for almost a quarter of all water use.

For commercial buildings, this rises to two- thirds. (See Figure 9). Hot water uses are also significant: bathing accounts for 30 percent of residential indoor water use. By comparison, in the United States, the top four water-using residential indoor appliances are toilets (27%); clothes washers (22%); showerheads (17%); and faucets (16%) (Cohen et al., 2004). Efficient hot water appliances generally incur a higher cost to deploy, but when energy- savings are taken into account, the improvements pay for themselves. In terms of end-use energy, cold water appliances have a much smaller footprint, but lifecycle analyses have shown that the energy costs can still be great. For example,

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one study in water-stressed southern California indicates that San Diego County could save up to 13 percent on water-delivery energy costs through end-use water efficiency improvements alone (Cohen et al., 2004). Such savings in arid northern Chinese cities could mark a big step in promoting water and energy security for ever- expanding urban areas. China’s first LEED Gold-certified building, the ACCORD 21 Building occupied by the Ministry of Science and Technology, is at the cutting edge of resource efficiency. Completed in 2004, the building cuts energy use by 74 percent, water use by 40 percent and wastewater generation by 60 percent. 4 These efficiencies were accomplished using a suite of energy-saving appliances and special design features such as increased natural ventilation and a green roof that simultaneously cools the building in the summer and collects rainwater for reuse (Fung et al., 2008). Beijing (see Box 2) has begun piloting a number of water reuse initiatives, but Chinese urban planners and building managers also need to examine the broader water footprint of buildings. Specifically, while building construction and operations use considerable amounts of water, it is in fact land use and


it is in fact land use and FIgURE 10. CHICAgO CITy HAll Source: Wikipedia Commons. Green,

Source: Wikipedia Commons.

Green, or living, roofs perform valuable water filtration, storm water control, and building insulation functions.

landscaping on the grounds that represent the largest water footprint of buildings. A concept pioneered in water-scarce southern California—low-impact development— gives buildings a number of low-cost options to conserve water and reduce energy load through smart landscaping and land use. The central goal of such development is to preserve the pre-development hydrology of an area. Capturing and reusing storm water runoff, for example, avoids the need for additional energy- intensive water treatment facilities; prevents unnecessary loss through leaky infrastructure; and reduces heating and cooling costs (Stoner, et al., 2009). Characteristic technologies for low-impact development include:

Green/living roofs: Incorporating vegetation on the building exterior slows heavy runoff while simultaneously filtering wastewater for possible reuse in landscaping. (See Figure


Appropriate erosion control during construction: Preserving the quality of the land during building construction helps prevent erosion due to water runoff later on.

Reducing and improving permeability of concrete surfaces: New technologies and smart planning can allow nature to safely absorb water, reducing the burden on storm water capture infrastructure, and preventing overflow pollution from combined sewer systems. 5

Green building design is intimately linked to environmentally sound urban planning. Preventing sprawl and incorporating green infrastructure are basic tenets of creating sustainable cities. The U.S. Environmental Protection Agency has recently launched a new strategic agenda on green infrastructure, partnering with ten cities with demonstrated success in this area. Examples of green infrastructure include concentrating housing to decrease impermeable roadways; restoring

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and preserving natural wetlands for filtration and runoff collection; and installing separate sanitary sewer systems that are independent of storm water collection systems, thereby preventing sewage overflows during heavy rainfall (EPA, 2011). Such lessons will be vital for China to emulate as it continues the world’s fastest build out of cities.

inCorporaTing WaTer and energy goals inTo The TWelfTh five-year plan

In China’s 12 th Five-Year Plan, the central government has again set ambitious goals for economic development and energy and water conservation. The challenge at all levels of government on how to meet those goals can begin to be addressed through five recommendations we offer:

1. Incorporate water-energy connections

inpolicydesign.Integratingwaterandenergy policy will allow a more comprehensive evaluation of joint opportunities for efficiency. As we have shown in this paper, many smart water technologies are also smart energy technologies. Effective measures to meet energy reduction goals may be overlooked because they are considered as water efficiency measures, handled by separate ministries and under different laws. This is particularly relevant in the 12 th Five-Year Plan given its numerous potentially overlapping energy and water targets. Tsinghua University and NRDC are currently collaborating on an analysis of these targets and opportunities for greater coherence.

2. Learn from international experience.

China has proven very adept at incorporating international lessons in its national economic policymaking. Similarly, its options for

solving water and energy scarcity problems

have precedents in other countries with similar climate and environmental conditions. To highlight one concern, some Chinese scientists worry that the South-to- North Water Transfer Project will destroy the ecology of the southern rivers. California faced a similar challenge when diverting water to build the city of Los Angeles in 1913. The Owens Valley waterway has only recently begun restoration to the original ecosystem, at a cost of $39 million (Sahagun, 2011).

3. Enhance the role of the market

through water price reform and smart incentives. A water price portfolio that takes into account time, season, and end-use can discourage waste, promote efficiency, and increase the attractiveness of retrofits and new investments. Incentive policies that encourage the development of energy service companies 6 are already underway in China, and the 12 th Five- Year Plan emphasized enhancing market mechanisms. Applying these lessons to the water sector could yield numerous dividends. For example, the government could separate utilities’ profits from the quantity of water sold—known as decoupling. Without a profit motive to sell customers more water, and instead focusing on better service, decoupling is a good way to engage these powerful stakeholders in promoting water efficiency. Numerous successful examples in the United States involving the power and natural gas sectors can provide invaluable lessons to Chinese policymakers interested in pursuing these types of pricing reform.

4. Expand textile mill program to other

industries in China. The recommendation

here is twofold:

a. Deepen Existing Programs Within a Single Facility. In addition to the NRDC’s

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Responsible Sourcing Initiative’s Ten Best Practices, there are several other upgrades that textile mills could employ. These include cold pad batch dyeing and pretreatment, and heat recovery from setting machines. Other solutions with longer pay-back periods could also be considered if small-scale lending options and government incentives were strengthened.

b. Transfer Proven Solutions to Other Industries. NRDC’s Ten Best Practices provide a model for capturing low-cost efficiency improvements in the textile

industry. As detailed above, by focusing on short pay-back periods and on presenting

a strong business case, the industry

has the tools necessary to make these

improvements. Other industries could

benefit as well from such a thorough review.

By looking at 4 to 5 facilities in-depth, an

easily understandable investment schedule could be created to encourage scale-up adoption in small- to medium-size facilities in other manufacturing sectors.

5. Accelerate and broaden green

buildings work. One high-return to water investment in green buildings would be

in controlling storm water runoff and

sewer overflows thereby saving on water treatment costs and end-use applications such as landscaping. Incorporating green roofs and other low-impact development principles could help to ease northern China’s water crisis. Two promising types of water work in green buildings would be:

a. Expand Existing Programs and Implement Codes and Standards. Utilizing the green buildings standard and several municipal-level pilots, water-saving appliance adoption would likely increase. Expanding building retrofits is also a

ripe target, and can be accomplished by improving access to capital and benchmarking a building’s water and energy usage.

b. Broaden Green Buildings Scope to Include Green Infrastructure and Smart Growth. Building improvements should be placed in the larger context of the infrastructure and urban growth plan upon which they rely. Roads, sewers and public lighting, for example, are infrastructural elements that influence how resource- intensive a given building is. Smarter growth patterns should take advantage of the successes of green buildings design and development in China.

final ThoughTs

Water is becoming increasingly scarce in China due to rapid industrialization and energy production growth. The energy costs of providing this water cannot be met sustainably without substantially rethinking the connection between water and energy infrastructure and policy. Implementing water efficiency and conservation measures in key sectors in China—such as the textile industry and in buildings—can help alleviate both water scarcity and energy growth challenges. These low-cost solutions provide simple, yet effective tools in helping China reduce the strain on limited natural resources and “green” China’s supply chain, imperative steps to help protect the health and welfare of China’s citizens, environment, and economy.

michael Davidson is a masters Candidate and pre-doctoral student in the Technology and Policy Program of the engineering Systems Division at the massachusetts institute of Technology. Prior to miT, he was the uS-China Climate Policy Coordinator

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at the natural resources Defense Council in washington, DC, spearheading several bi-lateral projects on clean energy policy. Previously, he was a Fulbright Scholar to Tsinghua university in beijing and a graduate of Case western reserve university with degrees in Physics, mathematics, and Japanese Studies. he can be reached at: michd@mit.edu.

gretchen greene is an attorney at ropes & gray and a mathematician with national and international experience in energy, environment and transportation. her experience as a scientist, lawyer and policy analyst includes water and energy policy in beijing and air and climate litigation in D.C for the natural resources Defense Council, transportation and energy policy in Costa rica, research assistance for a consortium of small island nations at the CoP15 climate negotiations, tribal energy economic development for the u.S. Department of Justice’s office of Tribal Justice and energy, environment and transportation projects as a mathematician at the u.S. Department of energy’s lawrence livermore national lab. She has advanced degrees in mathematics from uCla and a J.D. from Yale law School. She can be reached at:


mingming liu is a policy analyst at the natural resources Defense Council in beijing, China, working with the Demand Side management technical center on promoting energy efficiency and DSm programs in industrial sectors. before joining nrDC, she held a postdoctoral position at Tsinghua university and focused on energy and economic analysis and climate change. She can be reached at:



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1. The UNDP, UNEP, the World Bank and World Resources Institute define water scarcity as 1000m3/ person per year.

2. The Chinese government plans to increase its desalination from 600,000 tons a day currently to 2.5 to 3 million tons a day by 2020. See: http://



nexus/. Producing one ton (one cubic meter) of desalinated water requires up to 4 kWh of electricity.

3. See for example, GB/T18916.1-2002 for thermal power, GB/T18916.2-2002 for iron & steel, and GB/ T18916.3-2002 for petroleum processing. Among others, industries included should have their water- intake meet the standard.

4. The energy and water baselines for these figures are different. The energy baseline for presenting energy efficiency improvements is the performance of building in the 1980s. The water use baseline comes from the water use quota by local Water Conservation Offices, which may change year by year.

5. In older cities, excess storm water flows into the same pipes used for sewage, which sometimes triggers an overflow – dumping untreated waste into waterways.

6. Energy service companies (ESCOs) are enterprises that absorb some of the risk of energy efficiency upgrades by performing audits and assisting in implementation and monitoring on behalf of their clients, which could range from factories to schools.

imports/. State Council. (2006). The 11 th Five Year Plan for National

Economic and Social Development of People’s Republic of China. March. State Council. (2007). Regulation on Energy Efficiency of Civil Buildings. State Council. (2010). State Council Decision Regarding Accelerating Water Reform and Development (Chinese). Available: http://www.gov.cn/jrzg/2011-


State Council. (2011). The 12 th Five Year Plan for National Economic and Social Development of People’s Republic of China. March. Stoner, Nancy; Kloss, Christopher; & Calarusse, Crystal. (2009). Rooftop to Rivers: Green Strategies for Controlling Stormwater and Combined Sewer Overflows. Natural Resources Defense Council: New York. United States Geological Survey (USGS). (1990). Largest Rivers in the United States. [Online]. Available:


Wang Jing; Li Tong; & Du Yanfei. (2011, January 6). “Zhang Guobao: Strive to have non-fossil energy reach 11.4% of primary energy by end of 12 th Five- Year Plan.” Renmin Wang. [Online]. Available: http://


Wang Yi. (2009). “China’s water issues: Transition, governance and innovation.” In José Albiac & Ariel Dinar (Eds.), The management of water quality and irrigation technologies, (pp. 117-134). Earthscan Publications. Weng Jianwu; & Chen Yuansheng. (2010). “Suitability evaluation for the construction of decentralized wastewater reclamation facilities in Beijing.” Journal of Resources and Ecology, 1(3) 238-248. The World Bank. (2009). Addressing China’s Water Scarcity: Recommendations for Selected Water Resource Management Issues. The World Bank:

Washington, DC. The World Bank. (2012). World Development Indicators. [Online]. Available: http://data.worldbank.org. World Nuclear Association. (2011a). “Nuclear power in China.” World Nuclear Association. [Online]. Available: http://www.world-nuclear.org/info/inf63. html. World Nuclear Association. (2011b). “Cooling power

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Why China’s Brute Force Push Toward

Desalination May Leave the World Better Off

by David Cohen-Tanugi

I n the face of water shortages across the nation, China is betting on desalination technologies to tackle an arid future. The country’s first

industrial park dedicated to seawater treatment

technology was unveiled outside Hangzhou in 2011, revealing how desalination symbolizes both a water security option and a platform for economic competitiveness. Chinese officials project that within ten years the country will be getting as much as 3 million metric tons of daily fresh water from desalination. And even though the technology remains expensive and energy-intensive, the nation’s massive economies of scale, and the local governments’ willingness to pioneer new technologies, may help bring down the cost of desalination for the rest of the world.

megaprojeCTs for a mega-naTion

The idea of desalination—that is, removing salts and other impurities to make seawater or brackish water safe for drinking and crop irrigation—dates as far back as Aristotle. In practice, however, desalination is costly and requires vast amounts of energy. For example,

the Almería region in Southern Spain gets most of its fresh water from desalination, but the local desalination plant hogs over 30 percent of the region’s total power consumption. Because of this, desalination has only made sense for oil-rich countries like Saudi Arabia, or unusually wealthy ones like Singapore. China hardly fits either category. Nevertheless, Chinese policymakers are intent on expanding the role of desalination. In the current 12 th Five-Year Plan (2011- 2015), the State Council has called for a fourfold increase in seawater purification capacity by 2015. Meanwhile, the National Development and Reform Commission, China’s central planning agency, has hinted at a panoply of measures ranging from the creation of a new industrial alliance to financial incentives for domestic desalination technology firms. Officials also predict a tenfold increase in desalination projects over the next ten years. These policies come with a steep price tag:

each of the billion-dollar desalination facilities will produce water at roughly double the retail price in the area and multiple times the cost of water-saving measures, with local governments subsidizing the extra cost.

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Given its economics, desalination hardly seems like an attractive solution to increase water availability. But however confounding, China’s newfound interest in desalination fits a pattern. Just like the mammoth South-North Water Transfer Project, desalination is just the sort of undertaking the Chinese government seems to love: a megaproject that leverages massive amounts of engineering and resources in exchange for scale and international recognition. Indeed, China’s efforts in the energy sector show that when faced with world- record economic growth and rapid structural changes, Chinese decision-makers are more eager to focus on ‘hard’ supply options—the Three Gorges Dam is another prime example— than on ‘soft’ efficiency projects or programs to reduce demand. Though the government is intent on pushing ahead with desalination, environmentalists in China are concerned about the negative impacts that these large- scale projects might have in local areas, and worldwide. Highly concentrated brine can

new $2.2 billion plant in nearby Tangshan to begin supplying its own water-thirsty industries. Qingdao has ambitious plans for 10 desalination plants to supply its burgeoning water needs. And to the south, provinces like Zhejiang and Guangdong are also heavily investing in desalination facilities for industrial and residential water use.

a domesTiC markeT ready To aWaken

Wherever money, water security, and economic growth are at stake, protectionism looms. Without a doubt, China’s desalination story will show the same tensions over domestic competitiveness that have plagued the renewable energy field in past years. Until recently, the prospects for China’s domestic desalination industry looked rather scant. Shuangliang

Energy and CIMC, the two largest desalination companies in China, had virtually no desalination orders over the past years and focused on other niche markets like food and chemical processing. Even today, 60 percent of China’s desalination equipment is foreign-made. But

this may change very soon, as the new industrial park outside Hangzhou demonstrates that

the Chinese government regards desalination as an economic opportunity as much as an environmental one. In Beijing, policymakers are tailoring the nation’s desalination strategy to encourage the future dominance of Chinese firms. The Ministry of Science & Technology is aiming to ramp up the domestic share of the country’s key desalination equipment to 75 percent, in an industry that remains largely governed by European and Israeli firms. Financial analysts predict that the government will boost investments in desalination to over 14 billion RMB in the next ten years, and it is safe to assume that Chinese and foreign companies will spare no efforts to seize a share of the pie.

DeSalinaTion SYmbolizeS boTh

a waTer SeCuriTY oPTion anD

a PlaTForm For eConomiC ComPeTiTiveneSS.

permanently harm coastal vegetation and disturb local ocean salinity; not to mention desalination’s high carbon footprint: a large plant emits as much CO 2 each year as a couple hundred thousand cars on the road. It remains unclear how—or whether—these concerns will be addressed. Meanwhile, Chinese cities are pushing ahead. The northern city of Tianjin, which has been purifying seawater since the 1980s, is ramping up its desalination capacity as an alternative to diverted water from the south of the country. Beijing is eagerly awaiting a

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China’s desalinaTion plans: an opporTuniTy in disguise?

Despite economic and environmental hurdles, China’s desalination story may prove to be a boon for other countries. China boasts significant economies of scale and a taste for risk that could enable growth in next- generation water technologies, ultimately bringing down the cost of desalination for other water-challenged nations. The scale is certainly dizzying. Chinese officials have announced that by 2015, China may be producing up to 2.6 million tons of fresh water from desalination daily, a fourfold increase over current levels. By 2020, government sources predict as much as 3 million tons per day. In absolute numbers, this is less than the Middle East (Saudi Arabia alone was already desalinating this amount ten years ago), but China’s concern for domestic oil security makes it safe to assume that its leaders will place a stronger emphasis on energy-efficient solutions than their Arab counterparts. Thus far, China has done exactly that. Instead of relying on proven techniques,

Chinese desalination projects have been pioneering new technologies with lower costs and lower carbon footprints. For example, China has been experimenting with technologies from Norway and Arizona, such as advanced pressure exchange and forward osmosis. Shandong Province is also researching the cogeneration of nuclear power and desalination. By riding the emerging Chinese water market, these new technologies will invariably help make desalination incrementally more efficient and environmentally friendly for the rest of the world.

David Cohen-Tanugi is a Ph.D. candidate at miT in materials science & engineering. his research focuses on designing novel nano-materials for clean water technology. Prior to joining miT, David served as the China-uS climate and energy policy liaison for the nrDC in washington. he holds a degree in Physics from Princeton university and has traveled to and worked in China on numerous occasions. he can be reached at: dctanugi@mit.edu.

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The Potential of Shale Gas Development in

China and its Impacts on Water Resources

by Peter V. Marsters

Talkin’ abouT a gas revoluTion

T here has been considerable

controversy in the United States

surrounding the development of

shale gas. The country’s proved

shale reserves have been hailed by many as a domestic energy savior by adding another 100+ years to its natural gas supply, lowering energy costs, and strengthening the country’s energy independence. However, some environmentalists have called the U.S. shale gas revolution a catastrophe due to shale gas extraction’s use of millions of gallons of water, risk of severe pollution, and potentially limited climate benefits. Shale gas in the United States, it seems, has created a new energy revolution, and now China is also making headlines on the shale gas front. Surveys by the U.S. Energy Information Agency, private consultancies, and China’s Ministry of Land and Resources currently put China’s shale gas reserves as the world’s largest with recoverable resources estimated at 1,115 trillion cubic feet (Kuuskraa, Stevens, & Moodhe, 2013). These reserves are potentially

capable of producing enough energy to meet China’s natural gas needs for around 216 years at current consumption rates (Bluestein, Vidas, Rackley, Adams, & Hugman, 2012). At 2012 Chinese market prices, these reserves are worth a whopping 4.6 trillion U.S. dollars (“At the Wellhead,” 2012). This bountiful supply of shale could also help China lower its dependence on coal, promoting cleaner

skies and protecting citizen health, and lower greenhouse gas emissions. In short, shale could revolutionize China’s energy sector. This article, based on 10 months of fieldwork in Sichuan Province as part of

a U.S. Fulbright grant, offers a bottom-up

examination of the current state of shale gas

development in China and reflects on potential environmental effects as the industry grows

in size. In this article I first review the current

progress and hurdles to China’s shale gas development and then delve into the issues of

water supply and disposal.

CurrenT developmenT

While the potential growth of shale gas

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wells seems encouraging, the industry in China is still nascent and growing slowly—boasting only around 100 shale gas test wells in 2013 compared to over 100,000 in the United States. With China’s current demand for energy potentially reaching nearly 4,500 metric tons coal equivalent (mtce) by 2050—a near doubling of today’s energy demand of 2,250 mtce (Zhou, Fridley, McNeil, Zheng, Ke, & Levine, 2011)—shale and other unconventional gas reserves could be critical in meeting a significant portion of the country’s overall energy demand. Indeed, according to a report by the International Energy Agency, China will be the world’s fastest growing gas market, and the International Energy Agency (2012) predicts the country’s gas consumption will increase from 130 billion cubic meters (bcm) in 2011 to 273 bcm in 2017. Shale could be key to meeting this gas demand. In the meantime however, this demand will be met by imports and limited domestic conventional natural gas resources. China’s imports are expected to reach 77 bcm by 2020 (Berdikeeva, 2012) . Currently about half of China’s natural gas imports are LNG imports from Australia, Malaysia, Indonesia, and Qatar, and the other half comes from pipelines from Turkmenistan, Uzbekistan, and Kazakhstan (Energy Information Administration, 2012). For shale gas development, the National Energy Administration has set national targets within the 12th Five-Year Plan of 6.5 bcm of shale gas production by 2015 and 60-100 billion cubic meters by 2020. However, the first of the targets will not likely be met within the timeframe due to conditions on the ground. Nevertheless, these very ambitious targets set by the National Development and Reform Commission and the State Council signal the leadership’s faith in shale gas as key to revitalizing domestic gas resources and significantly reducing China’s dependence on gas imported from Central Asia and Australia. The ultimate goal of Chinese policymakers

and leading oil and gas companies is to create a shale gas industry on a scale akin to that of the United States. As of 2013, most of China’s mere 100 shale wells are vertical test wells, and foreign companies and governments have invested or are planning to invest several billion U.S. dollars into the industry (Chen, 2012). However, due to local geological, logistical, and political conditions, the ultimate potential of China’s shale gas reserves is still very much in question. Only around 24 of these wells have produced commercial gas which may imply that China will have difficulty meeting a 2015 target (“Will China Embrace,” 2012). Although this may seem like a poor success rate, it should also be taken with a grain of salt; industry officials have stated that 7 to 8 wells are needed just to get an initial idea of the overall resource potential. Additionally, there is a significant lack of third party oversight in the Chinese oil and gas industry, which, in practice, means many of the companies self-regulate. Owing to this lack of oversight, the development of shale gas could potentially have severe environmental and social consequences.

fraCking WiTh Chinese CharaCTerisTiCs

China’s shale gas industry is applying lessons learned from the U.S. experience to China’s unique geological and political environment. To this end, their methods have included everything from obtaining specific operational knowledge by allowing foreign companies to set up joint ventures with Chinese oil companies to employing incentives such as encouraging market competition, providing tax incentives, and raising natural gas prices. To kick-start the industry, the Ministry of Land and Resources (MLR) has identified and designated 180 areas as high-potential for shale gas development (“National shale gas resources potential,” 2012). MLR is parceling and auctioning off these areas to domestic Chinese

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bOx 1. primer on hydraulic fracturing and horizontal drilling

Hydraulic fracturing—often referred to as fracking—is the process of increasing the porosity of hydrocarbon rich shale source rocks. Most of these source rocks are oriented horizontally making them uneconomical to exploit with traditional vertical drilling. In the late 1990s, some U.S. companies combined the ability to drill horizontally with the process of hydraulically fracturing, which allowed for the economic extraction of hydrocarbons— primarily natural gas. The process follows these steps:

(1) A borehole is drilled along the length of the shale deposit. (2) Using explosives, the rock is cracked in what are called ‘frack stages.’ (3) Anywhere from 1 to 7 million gallons of fluid consisting of chemicals and solids used to prop open the cracks made by the explosions is pumped at high pressure down the wellbore creating further cracks and increasing the porosity of the shale to a point which hydrocarbons are able to flow out the wellbore. (4) Anywhere from 20 to 70 percent of this fluid is then returned along with the hydrocarbons.

Anywhere from 20 to 70 percent of this fluid is then returned along with the hydrocarbons.

Source: Briana Mordick, NRDC.

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bidders. From these areas, the shales of the Longmashi and the Qiongzhusi formations which lie beneath China’s southwestern provinces have received the most attention. The Chinese have chosen these areas because the geologies are promising for development, there is some pre-existing natural gas infrastructure, and water resources are relatively abundant. The Chinese government put these blocks up for auction to the domestic oil companies who, desiring operational experience, have elected to invite foreign companies to come in and provide both capital as well as operational knowledge. To assist this process, there has been some high-level U.S.-Chinese government cooperation on shale gas regulation, technical assistance, reserve estimates, training, and the like, as part of the Obama-Hu clean energy agreements of 2009. Notably, large Chinese and western oil companies have been at the lead in directing the substantive topics in these dialogues. Despite ambitious shale gas production targets, as of April 2013, there was essentially no commercial-scale production of shale gas. The challenges in development, which has been focused primarily in the southwest, arise from the complexities of developing logistics for a new industry, difficulties within local geologies, and the political economy of natural gas development in China. Shale gas in other areas, such as the Tarim Basin, will potentially face even more difficult geological and environmental challenges.

geologic Complications There have been significant challenges dealing with the geological composition of the shales in China because they are more geologically complex than those found in the United States. Developers are having trouble cracking the code for turning resource potential into economic production. This “code” is the combination of drilling in the correct location

and using proper fracturing methods. The depths of the shale in China are anywhere from 4 to 6 kilometers, which is deeper than

the U.S. average. Additionally, there are high concentrations of CO 2 , nitrogen, and hydrogen sulfide in China’s shale, which require different handling and refining steps as hydrogen sulfide

is highly corrosive and toxic (Che, 2011). While

these challenges are solvable, it will take Chinese drilling companies time to figure out what combination of fracking processes will yield the best results. Potential low yields will mean that China may have to drill more wells to obtain the same amount of gas. This is significant because

the greatest determinant of environmental

impact is the number and scope of wells. Additionally, a well drilled in areas with poorer quality shale may require more frack stages in order to yield the same amount of gas. It is too early to tell whether or not this success rate is indicative of shale quality or simply that the industry is relatively new. Notably, a large portion of shale in China is continental shale, originating from ancient lakes rather than marine sources. This type of shale has never been proven commercially viable anywhere. Such shale types which underlie the Eastern part of China mainly in Hunan, Hubei, Zhejiang, Jiangxi, and Henan, were a major component of the second round of shale auctions in 2012, and will see major investment from domestic private companies (Koh, 2012). However, the development of continental shales will require new methods and technology if they are ever to reach commercial rates of production. The success or failure of the development of continental shales will be

a major component of the future of shale gas

development in China. Notably, in an October 2012 auction, large portions of these continental shales were auctioned off to companies lacking

experience in oil and gas (Ma, 2012). China’s large state-owned companies conspicuously were not as interested in acquiring these shales.

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logistical difficulties The second major hurdle to bringing China’s shale to commercial scale is logistics. Many of these well sites are located in hilly rural areas, which often lack supporting infrastructure such as paved roads and pipelines, adding time and extra costs to construction and well development. In addition, some rural well areas have high population densities, which exacerbate environmental and social impacts and constrain well locations (Li, 2011). These issues have slowed China’s development of the shale gas industry and present significant hurdles for its future success.

political economy For now, both Chinese and international companies seem willing to invest a fair amount of initial capital in order to see if shale gas in China will be worth the investment. One of the main determinants of success for the shale gas industry will be the economic incentives for drilling, which will depend highly on how the gas is used. Currently, gas prices are at an average of 1.155 yuan (~$0.19) per cubic meter, which is generally considered quite low compared with international prices. In

the United States, current low gas prices are reducing the incentives for shale gas drilling. With lower prices and higher capital costs in China, it may be some time before the industry becomes economically self-sufficient. Significant natural gas price reforms are underway to increase incentives for shale gas drilling. For example, China’s Ministry of Finance announced in November 2012 that the central government will provide a subsidy of 0.40 yuan ($0.06) for each cubic meter of shale gas produced (Stanway & Wong, 2012). Moreover, pilot programs in Guangdong and Guangxi are seeking to tie the price of natural gas to imports of oil, which would significantly raise the price for upstream natural gas and help the economics of the shale industry in China “China Initiates Pilot Reforms,” 2012).

shale’s independence The development of shale gas has been a case of China’s internal conflicts of interest between increased market liberalization and continued state control of industry. One of the keys to the U.S. shale success has been the benefits of a marketplace that encourages rapid development and competition. The Chinese

China’s central government aims to produce 100 billion cubic meters (3.5 trillion cubic feet) of
China’s central government aims to produce 100 billion cubic meters (3.5 trillion cubic feet) of shale gas annually by the end of the
decade. Reaching this target would require more than 17,000 new shale gas wells, like the Wei-201H3 well pictured here, to be drilled
over the next eight years, assuming that each well would perform as well as the typical U.S. shale gas well. Photo credit: Circle of Blue.
China EnvironmEnt SEriES 2012/2013

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central government realizes shale’s huge energy potential and therefore has enacted some fairly novel policies for shale gas development. China hopes to emulate the success of the U.S. shale model via market reforms. The State Council recently approved shale gas as an ‘independent resource,’ which releases this form of energy exploration from the exclusive purview of the big state-owned oil companies, mainly CNPC, Sinopec, and CNOOC. The idea behind this policy was to set up a dynamic, competitive, and efficient market for shale gas. This decision has been controversial as it shifts a fair amount of power away from the national oil companies and thus away from the central government itself. This move, however, has received pushback from the large national oil companies who had hoped to keep things within state-owned enterprises control (Lu, 2012; Chen, 2012).

solvable problems Although challenges surrounding shale gas development in China will take time to solve, they are not insurmountable. Experts doubt that the 2015 targets can be met, but are bullish on the 2020 targets. Two years is too short of a timeframe to achieve a large-scale shale industry, yet the aggressive actions of the central government—significant production subsidies, encouragement of market-oriented policies, and aggressive goals within the Five- Year Plans—are impressive. If these efforts continue, there is a very good chance that in five to seven years there may be a large-scale shale industry in China. This shift would, however, have a significant impact on the nation’s water resources.

QuenChin’ shale’s ThirsT

The potential environmental damage of shale gas is huge, especially as it relates to water resources. Shale gas development requires significantly more water than

conventional oil and gas extraction techniques. Moreover, this form of energy development poses significant risks of surface and ground water contamination, methane leakage and migration, as well as far-reaching negative social impacts. The overall pollution impact is directly dependent on the care taken by operators, whose incentive to comply with regulations will require strong enforcement. Even assuming perfect regulation, the impact on water could be significant on a local scale due to risks inherent to oil and gas extraction.

Water use and Treatment The water demands of shale gas are intense, but temporary. In the United States, the fracking process requires several million gallons of water in a timeframe of about a week, depending on local geology and extraction processes. This water can be considered a hazardous substance and needs to be treated as such. After the fracking process is complete, anywhere from 30 to 70 percent of the water flows back to the surface and requires treatment and disposal. Most other issues—contamination of aquifers, catastrophic blowouts, methane leakage, site rehabilitation and restoration—are common challenges faced by conventional oil and gas development, but still require adequate oversight and regulation. It is very hard to obtain accurate, average water use data and flowback rates per well, as they both depend highly on local geologies, number of frack stages, and various other factors. This water, according to Chinese law, industries must treat water to discharge standards or dispose of it properly. Treatment methods include disposing the water deep into injection wells, using technology to treat the water to acceptable standards, and diluting and re-using. Regardless of process of treatment or disposal, fracking will likely be a significant strain on water infrastructure, especially in rural areas not accustomed to handling industrial wastewater.

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According to conversations with local drillers in Sichuan, the majority of this water is coming from surface sources such as reservoirs, due to sensitivities about groundwater in China. According to a conversation with

of development. This estimate is assuming production rates that are comparable to that of U.S. shales, which is by no means guaranteed. Assuming similar water requirements as U.S. wells, this number equals roughly several

shale snapshot in the sichuan basin


local shale manager, water is currently

hundred million gallons of water use per year

purchased from localities through negotiations

nationally. While this number is not large


oil companies and the price does not seem

when compared to other industrial demands,


be an economic hurdle. Because shale gas in

the intense, intermittent demand of shale

China is still in its nascent stages, the strains on

drilling—several million gallons over the span

local water supplies will become much more intense as the well count increases. The responsibility for the distribution

of a week or so—can cause severe disruption to local supplies and flows. Tables 1 and 2 show the overall water resources and water use in


local water supplies falls on county and

China in key shale provinces as well as what

provincial water resource departments, environmental protection departments, as well as land and resource departments. Chinese law requires operators to apply for withdrawal permits that state their water impact on a

project level rather than on an individual well basis. This permit is supposed to be prepared

water demand due to hydraulic fracturing might look like if China were to meet its 2015 production goals.

Marine shale deposits in the Sichuan Basin underlie Yunnan, Guizhou, Chongqing, and


conjunction with an environmental impact

Shanxi provinces, and water use in Sichuan

assessment (EIA).

Province can be seen as a good example of


Meeting the Chinese government’s target

the shale industry’s water use as a whole.


6.5 bcm of shale gas would require a rapid

Water and shale development are primarily

increase in the drilling of wells, with a majority

local issues and have very localized impacts.


them producing commercially viable gas.

Therefore, even taking a provincial-level

According to the author’s calculations, to meet this number, China is likely to need anywhere from 1,200 to 2,500 wells within the next five years depending on the timeframe

view may not be specific enough to assess the broader environmental impacts. To put water demand of shale into context, the 2010 total water industrial water use in


Available Water Resources


Water Use

















Sichuan Province














Xinjiang Autonomous Region







Shaanxi Province







Source: China Statistical Yearbook 2011.

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Total Gas Production (mmcm)






New Shale Gas Wells






Total Number of Shale Gas Wells






Annual Water Requirement (millions of gallons)






Source: China Statistical Yearbook 2011 and calculations by author assuming China’s wells would have a production rate of 4 million gallons/well, which is an average rate of wells in the Barnett Shale Play in the United States. For reference, residential use in Beijing is about 400 billion gallons per year and in 2016 shale’s water use could be roughly 1 percent of that.

Sichuan was 1.66 trillion gallons (National Bureau of Statistics of China, 2011). Large- scale shale use—for example a drilling rate of 1,000 wells/year—will require around 4 billion gallons, increasing demand by roughly 0.25 percent. In 2010, Sichuan’s available water supply was reported to be 67.9 trillion gallons. As most of the immediate development is predicted to be in this basin, we can assume the majority of the water demand will be found here, as well. Overall, water supply in the Sichuan basin is relatively abundant and will not be a limiting factor to shale gas development.

shale snapshot in the Tarim basin Water supplies will be a more significant limiting factor to shale gas development in the Tarim Basin in Xinjiang Autonomous Region— where in 2010 industrial water use was 295 billion gallons and overall water resources totaled 29.4 trillion gallons (National Bureau of Statistics, 2011). As shale development starts in the Tarim Basin, methods such as using propane or CO 2 to frac, while significantly more expensive than using water, may be more economically viable. Strikingly, there has yet to be a case anywhere in the world where water scarcity has stopped shale development. If the economics work, shale development proceeds.

shale snapshot in other basins Depending on the success of continental shale exploitation in China provinces such as Hunan, Hubei, Zhejiang, Jiangxi, and Henan may see similar impacts to that of Sichuan. It remains to be seen whether or not these reserves are economically exploitable. As an EIA stated in a 2011 assessment of Chinese shale, “these non-marine shale basins are likely to be clay- rich and thus less prospective” (Kuuskraa, Stevens, Leeuwen, & Moodhe, 2011).

Water Costs As in the United States, the direct cost of water does not seem to be a limiting factor; however water managers may eventually impose restrictions in order to ensure adequate water supplies for municipal and agricultural demands. The commercial water price in Sichuan is currently around 2.55 yuan/ton with seasonal and local variations (“Water price,” 2012). For a well with 11 frack stages, which requires around 3,000 cubic meters per frack stage, the total price of water for a single well would be around 13,000 U.S. dollars, meaning that the total cost of the water itself is negligible in cases where wells can cost up to 16 million U.S. dollars each (Tu, 2012). However, this price does not include the cost of transport and disposal which, depending on location, can be significant (Hefley, et al., 2011). Disposal,

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if done according to law, will be the most significant water cost for companies.

managing WasTeWaTer

The main concerns with shale development in regards to water pollution are ensuring wellbore integrity and adequate management of surface water. Poor quality cement used to line wells can lead to migration of wastewater and natural gas into aquifers and can even cause explosions. Currently in China, government regulators do require samples of the cement used in the well. This regulation is a very important factor in shale gas management; however, the larger problem is what to do with the wastewater that flows out of the well.

flowback Water As mentioned above, after water is injected to frack, anywhere from 20 to 70 percent is returned along with gas production. This water contains all the chemicals used to frack and can contain hazardous substances such as hydrochloric acid, diesel fuel, and citric acid, among others (“Chemical Use”). The exact composition of this water can vary depending on company and local shale conditions. Regardless of composition, Chinese law requires that industries treat or properly dispose of this water flowback. For China, flowback rates have varied from 18 to 70 percent per well (Du, 2012). Usually, the amount of water returned is an indicator for the quality of a well, with less flowback suggesting a more productive well. Less productive Chinese wells will mean higher flowback rates as well as more wells. Data suggests that China will require more water per well, and hence more water treatment per BTU produced (Energy Information Administration, 2012b). The storage of this water, which is usually done in large above ground pits, has huge potential for leakage into the environment if industries do not use the proper lining or are careless in handling the water. A core problem with water in shale gas is not

supply or disposal, but rather management of water use. The amount of water needed for shale gas extraction compared with other industrial and commercial uses is not significantly larger. However, if disposal and treatment are not managed correctly there can be extreme consequences in regards to polluting water resources. Effective management inherently relies on communication with and adaptation to on-the-ground realties, as well as effective laws coupled with adequate enforcement capacity; specifically the central government needs to grant local enforcement agencies sufficient independence and resources.

disposal Currently, shale gas drillers are disposing of the majority of frack flowback water in Sichuan in deep injection wells, which is common practice in the United States. However, in Sichuan the number of deep injection wells is limited, and there may be potential seismicity issues related to injecting wastewater (Airhart, 2012). Local wastewater treatment plants cannot handle the high salinity of returned frack water, especially if the frack water has been used multiple times on-site, and so specialized water treatment is necessary. Furthermore, limited water treatment infrastructure, namely this lack of disposal wells, could make water treatment and disposal a huge and potentially limiting factor in shale development in Sichuan in the long run. Companies specializing in such treatment have had their eyes on China as a potential emerging market. General Electric notably has established a new research center in Chengdu, predicting a large demand for wastewater treatment equipment as well as natural gas turbines and other equipment (Du, 2012). However, the level of demand for water treatment technology will be directly correlated to how much water drillers need to treat and how effectively environmental agencies enforce existing pollution control laws. Water pollution

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accidents by Chinese industries and mines have increasingly made headlines over the past few years, underscoring weaknesses of China’s environmental regulators.

laWs, regulaTions, and enforCemenT

As all eyes are on the current development of shale gas in China and the foreign companies involved, the industry is adopting and implementing best practices. For now, the environmental impact of shale operations in China is comparable to that of similar size operations in the United Sates. However, the potential massive increase in scale of development and the entrance of smaller, less- accountable, private companies into the market will mean that it will be harder to ensure safe development of shale resources in China. Rigorous and enforceable regulations need to be in place; however, some officials fear that adequate regulations may take 3 to 5 years to

publish and enact (Wang, 2012). Under China’s Water Pollution Control Law, the Ministry of Environmental Protection (MEP) serves as the country’s water pollution watchdog. However, MEP and its local Environmental Protection Bureaus (EPBs) do not possess administrative authority over underground developments. Moreover, in the face of shale gas pollution, local EPBs lack the financial and political resources to enforce the water and soil pollution control laws that are set by the central government. Every energy and industrial project in China requires an EIA before construction starts. These EIAs incorporate all water use as well as plans for dealing with the wastewater. Approval for these projects needs to come from the Ministry of Land and Resources, local Water Management Bureaus, and local EPBs. China’s EIA system, however, is not sufficiently rigorous and industries often complete construction of projects and “make up” EIAs afterwards. States such as Colorado and Pennsylvania in

China’s first three deep shale gas wells were drilled close to this once serene community
China’s first three deep shale gas wells were drilled close to this once serene community in Sichuan Province. According to reporting by
Circle of Blue and the Wilson Center’s China Environment Forum (Schneider 2012), the drilling activities have made significant impact on
local farmers’ lives. Liu Zhongqi, above, said that his fish “has gotten some sort of sores,” and his land is not producing as much. He called
local authorities about these conditions, but nobody would help. Photo credit: Circle of Blue.

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the United States and provinces such as Alberta in Canada have established relatively rigorous and comprehensive regulations that specifically target shale gas operations. China is looking to the United States as it forms its own domestic shale gas regulations. China’s problems in ensuring the safe development of the shale gas industry, however, are significantly different from those of the United States. Currently in China, there is no qualified or capable on-the-ground independent environmental enforcement capacity to oversee oil and gas extraction, particularly for shale. This gap in environmental regulatory effectiveness is at the heart of nearly all pollution and natural resource extraction problems in China. This enforcement gap will be the biggest hurdle to maintaining adequate environmental enforcement in the development of shale gas. Indeed, as with all environmental laws in China, there is a severe disconnect between the laws on the books and the practice on the ground. Because local officials are promoted based on economic performance, and local environmental regulators lack enforcement capacity, local governments have little incentive to obey many, if not all, of the environmental protection laws on the books (Wang, 2007). Technically, shale gas processes are subject to the following national level laws, among others:

potential for Change China’s approval of shale gas as an ‘independent mining resource’ gives it a different legal status from conventional oil and gas, making the industry subject to different environmental enforcement. It is within

Mineral Resources Law of the People’s this power shift that there lies significant

In addition to enforcement issues, there are also problems with the content of the legislation. Environmental laws in China often lack relevant research and central authorities implement them too quickly. As a result, many of these laws may sound substantive on the surface level but, in reality, lack the necessary elements of procedure that can link the laws to actual implementation (Wang, 2007). In many cases, the consequences of breaking the law are not a strong enough deterrent to alter the behavior of heavy polluters. For instance, the fines may not be enough to outweigh the company’s profits based on its current polluting track. The lack of proper implementation procedures, combined with insufficient legal penalties as deterrents, the government’s fear of a lagging economy, and the lack of public participation has allowed many environmental laws in China to remain ineffective.

Law of the People’s Republic of China on Prevention of Environmental Pollution Caused by Solid Waste

Republic of China

opportunity to help local EPBs bypass previous obstacles to enforcing existing environmental laws. This is an opportune time for the Ministry of Environmental Protection and Ministry of Water Resources to flex their political muscle

Environmental Protection Law of the People’s Republic of China

Law of the People’s Republic of China on Evaluation of Environmental Effects

Water Law of the People’s Republic of China over smaller private companies and to enforce

environmental rules for shale specifically. Previously, such a shift would not have been feasible due to the political power of the state- owned enterprises (SOEs).

Law of the People’s Republic of China on Prevention and Control of Water Pollution

Law of the People’s Republic of China on Water and Soil Conservation

Law of the People’s Republic of China on the Prevention and Control of Atmospheric Pollution

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final ThoughTs

The central government has an interest in developing shale gas quickly and sustainably, as the resource has broad economic, environmental, and energy security implications for China. But, the commercial scale of these shale gas resources will not be significant for several years to come, with most estimates forecasting commercial production ranging from 2015 to 2020. Once commercial shale production begins, however, it has the potential to radically change China’s energy landscape. If this increased supply of natural gas from shale can be used to replace a significant amount of coal, the carbon benefits could be significant. In China, the end use for natural gas is primarily in industry and the production of chemicals, thus, significant carbon benefits would not be seen until natural gas consumption is sufficient enough to begin to replace coal. However, if care is not taken in limiting the amount of methane released into the atmosphere in the shale gas extraction process, the climate benefits could be negligible when compared to using coal (Bradbury, et al.,


The consequences of shale gas development on water resources are potentially significant, especially in terms of surface and ground water contamination. This could have detrimental and wide-ranging effects on social stability as well as public health. The quality of operator care and quality of environmental policy enforcement will determine the ultimate scale of these impacts. As with most environmental issues in China, critical to the safe development of shale gas will be creating an independent third-party enforcement system that is not beholden to local GDP concerns or behemoth SOEs. With the independent classification of shale gas, there is an opportunity to bypass some of the old political power structures and develop a significant expansion of natural gas generating capacity in China, which—if

done well—could bode well for lowering CO 2 emissions in this energy hungry nation.

Peter v. marsters was a 2011-2012 Fulbright research Fellow based at Sichuan university in Chengdu working on the development of shale gas resources in China as they relate to water. Previously he was the China environment Forum program assistant at the woodrow wilson international Center for Scholars in washington D.C. in that capacity, he focused on the water-energy nexus, coal production and use, and water pollution. he is a 2009 graduate of bates College. in the fall of 2013 he begins a master’s Program at university of California berkeley’s energy and resources group. he may be contacted at petervailmarsters@gmail.com.


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on The Global FronT lines oF The WaTer-Food-enerGy Crisis

The water-food-energy choke point is forcing a new 21st-century reckoning.

Three colliding trends—declining freshwater reserves, uncertain grain supplies, and booming energy demand— are disrupting economies, governments, and environments around the world. Unlike food or energy, we cannot grow or easily produce more water. That is especially true in the era of climate change, when more severe droughts and floods tighten the food and energy choke points already caused by waste, pollution, and mismanagement of water.

Complex challenges demand integrated analyses and innovative solutions. Research teams from the Woodrow Wilson Center and Circle of Blue are reporting from China, Australia, the United States, India, and the other front lines of the world’s water-food-energy crisis. For instance, we were the first to report that China’s coal sector consumes nearly 20 percent of the country’s scarce water resources.

U.S. energy’s Water Footprint: A dramatic shift is occurring in energy U.S. energy’s Water Footprint: production as deeper droughts and fiercer storms lash the nation. One of production as deeper droughts and fiercer storms lash the nation. One of the most critical economic and environmental questions the U.S. must answer is how to develop new supplies of energylike shale gasand grain across a landscape where moisture is limited and confrontations over water are increasing.





China’s thirsty Coal: Coal’s water footprint, which saps China’s freshwater reserves and displaces agriculture, is likely to grow as coal consumption increases by 30 percent by 2020. Dwindling water supplies are the primary impediment to China’s soaring coal production, forming a choke point that threatens to upend the country’s impressive economic progress.

outsourcing Water-Intensive Industries: The confrontation over water,

food, and energy produces choke points that ripple around the globe. In Australia, foreign investments in coal and liquefied natural gas are disrupting irrigation in farming communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in temperate lands in Africa.

communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in
communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in
communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in
communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in
communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in
communities. Water scarcity has forced Saudi Arabia to shut down its wheat farms and invest in


of the world’s population lives in cities


increase in city dwellers by 2030, expanding global urban population to 4.9 billion


of energy produced globally is used by cities


of water used globally goes to cities

cities 28% of water used globally goes to c i t i e s Water uses

Water uses energy. Energy uses wa


Megacities lose more than 50% of their water due to mismanagement and poor infrastructure.t i e s Water uses energy. Energy uses wa CITIES NEED AL Saudi Arabia’s desalination

of their water due to mismanagement and poor infrastructure. Saudi Arabia’s desalination plants used 1.5 million

Saudi Arabia’s desalination plants used 1.5 million barrels of oil every day in 2010—or one-sixth of its output—to quench the thirst of its inland cities.of their water due to mismanagement and poor infrastructure. Electricity accounts for 80% of the cost

Electricity accounts for 80% of the cost of processing and distributing municipal water in the United States.of its output—to quench the thirst of its inland cities. WATER FO FO Agriculture is the


and distributing municipal water in the United States. WATER FO FO Agriculture is the most water-intensive


Agriculture is the most water-intensive sector, constituting 70% of freshwater withdrawals globally and up to
Agriculture is the most water-intensive sector, constituting 70% of freshwater withdrawals globally and up to

Agriculture is the most water-intensive sector, constituting 70% of freshwater withdrawals globally and up to 90% in developing countries.

Each year, 30% to 50% of global food production is wasted. The water footprint of this waste is 550 billion cubic meters, roughly equal to what China uses in a year.

The water-food-energy nexus


McKinsey; The New York Times; UNESCO; UN-Water Decade Programme on Advocacy and Communication; Water Footprint Network

Electric Power Research Institute, Inc.; Harvard International Review; IEA; Institution of Mechanical Engineers;

ter. Agriculture needs both.


Energy demand in China’s cities will more than double by 2030, accounting for roughly 20% of global energy consumption.ter. Agriculture needs both. L THREE. By 2030, cities in developing countries will account for 80%

accounting for roughly 20% of global energy consumption. By 2030, cities in developing countries will account

By 2030, cities in developing countries will account for 80% of the growth in global urban energy consumption.accounting for roughly 20% of global energy consumption. ENERGY OD OD Beef production requires 13 times


80% of the growth in global urban energy consumption. ENERGY OD OD Beef production requires 13


the growth in global urban energy consumption. ENERGY OD OD Beef production requires 13 times more

Beef production requires 13 times more water than that of wheat. By 2050, global meat consumption is likely to double, due in large part to rising affluence in cities.

is a city’s foundation.

Photo Credits: Cover, Top to Bottom: Heather Rousseau / Circle of Blue, Heather Rousseau / Circle of Blue, Aaron Jaffe / Circle of Blue, J. Carl Ganter / Circle of Blue. This Page, Top to Bottom: Anita Khemka / Photoink / Contact Press Images for Circle of Blue, Aaron Jaffe / Circle of Blue, J. Carl Ganter / Circle of Blue. Back Cover: J. Carl Ganter / Circle of Blue.

of Blue. Back Cover : J. Carl Ganter / Circle of Blue. delhi, India : Water

delhi, India: Water and the electricity to pump and move it are heavily subsidized for industry and agriculture in India, but the urban poor wait hours for a trickle of salty, smelly water to fill their buckets.

for a trickle of salty, smelly water to fill their buckets. new South Wales, australia: A

new South Wales, australia: A coal loader eats away at a mountain of black coal. In 2011, the coal mines, trains, and loading terminals here shipped about 114 million metric tons of coal.

here shipped about 114 million metric tons of coal. Chengdu, China : Water-intensive coal-to-chemical factories

Chengdu, China: Water-intensive coal-to-chemical factories supply China’s huge fertilizer demand. Organic farms, such as this one near Chengdu, help reduce the country’s severe agricultural runoff problem.

aboUt Us

The Wilson Center and Circle of Blue combine in-depth environmental research expertise, unparalleled networks, and first-rate multimedia reporting skills to generate strategic insights into the complex water-food-energy choke points.

The Wilson Center’s Jennifer Turner has established the China Environment Forum as one of the most reliable sources for information on China’s environment. She has testified before the U.S. Congress, led trainings for Chinese officials, and assisted international and Chinese NGOs and researchers in developing projects.

In 2012, Circle of Blue’s founder, J. Carl Ganter, won the Rockefeller Foundation’s Centennial Innovation Award in recognition of his innovative work on the water-food-energy crisis. He also serves as vice chairman of the World Economic Forum Global Agenda Council on Water Security.

In its first two years, Choke Point has informed policy, shifted business practices, catalyzed new governmental research, and convened thought leaders and the global media around the water-food-energy nexus. Choke Point: China is significantly influencing the work of Greenpeace China, China’s Ministry of Environmental Protection, and the World Economic Forum, among others.




Jennifer turner at jennifer.turner@wilsoncenter.org J. Carl ganter at carl.ganter@circleofblue.org

India’s common practice of pump-and-flood irrigation is draining aquifers and increasing electricity usage.

Upcoming global choke point initiatives

The China Water-Energy Team will map the policy, technical, and governance steps China must take to meet its pressing water-energy needs.

Choke Point: India investigates the water-food-energy nexus where resource mismanagement threatens stability, from Himalayan glaciers to Rajasthan’s deserts to Mumbai’s slums.

Choke Point: Cities examines the recklessly expanding water and energy footprints of growing urban areas around the world and identifies innovative solutions.

Choke Point: Index captures and analyzes “big data” across sectors, spots early trends, and informs further Global

Choke Point projects, in partnership with Lawrence Berkeley National Laboratory’s Institute for Globally Transformative Technologies, using the latest open source tools and scientific modeling.

Choke Point: Conflict Zones will tap aid agencies, journalists, and others working in conflict zones to better understand the relationships between resource scarcity, geopolitical conflict, and peacemaking.

resource scarcity, geopolitical conflict, and peacemaking. For the past 2 years, Choke Point has been supported

For the past 2 years, Choke Point has been supported by the China Sustainable Energy Program, Rockefeller Brothers Fund, the Skoll Global Threats Fund, USAID, and the Vermont Law School.

Sustainable Energy Program, Rockefeller Brothers Fund, the Skoll Global Threats Fund, USAID, and the Vermont Law

China EnvironmEnt SEriES 2012/2013

CES | SpECial REviEw of watER-EnERgy nExuS ChallEngES in China



by David Tyler Gibson

O n September 7, 2012, the largest of at least seven Mekong River hydroelectric power stations came online

in Pu’er, Yunnan—a southwestern province that is China’s most biodiverse. The Nuozhadu hydroelectric station, Asia’s tallest dam, turned on the first of its nine generating units that will eventually supply 23.9 billion kilowatts of electricity by 2014. Perhaps by chance, the dam is located at the epicenter of China’s coffee growing boom. Pu’er began turning into China’s coffee capital after a major price bubble temporarily collapsed the eponymous Pu’er tea market in 2008. The tea has rebounded recently, but coffee continues to thrive in Pu’er. The land acreage devoted to coffee cultivation in the province has doubled since then, and officials want to increase Yunnan’s coffee output fivefold by 2015 (“For all the Coffee,” 2012). But the confluence of the Pu’er area’s new dam, coffee boom, and a province-wide four-year drought are emblematic of China’s pressing confrontation between water, energy, and food. Such a confrontation could make the official coffee production target unreachable, as well

as impact other agriculture production in the province. Whether by coincidence or design, the reservoir created by the dam will undoubtedly serve as a source of water for agriculture, including expanding coffee industry in the area, perhaps even protecting it from the threat of drought that has plagued the rest of the province. Indeed, the Chinese government’s tool of choice in preparing for droughts has been investment in large infrastructure projects (Zhang, et al., 2012). The local government has been promoting the dam’s benefits as a source of irrigation for all types of farming, and encouraging the people displaced by the reservoir to enter the coffee growing industry. In effect, the dam has become an insurance policy for Pu’er’s thirsty and lucrative coffee investment. Or is it? The answer to that question ultimately depends on the urgency of China’s electricity needs and the water efficiency of the coffee industry. The industry’s water efficiency is a major focus of a Starbucks-Conservation International initiative called C.A.F.E Practices, created with the goal of sourcing ethically

China EnvironmEnt SEriES 2012/2013

CES | SpECial REviEW

and sustainably produced coffee. Water use efficiency measures in such supply chains have the potential to insulate multinational firms from the risks of choke point disruptions.

WaTer sCarCiTy: “The four d’s” of yunnan’s WaTer-energy- food Choke poinTs

In a striking example of China’s water- energy-food choke points, the confluence of four D’s, Drought, Dams, Development,

and Deforestation, threaten Yunnan’s water resources. Beginning in 2009, a devastating three-year drought that left 8 million people without water in 2010 has also wrought havoc

on the province’s agriculturally based economy.

Yunnan is a leading producer of China’s fresh flowers, tobacco, tea, sugar, and coffee, and

the drought halved yields for all of these crops (“Drought continues to wreak havoc,” 2010). In 2011, lake levels have dropped by over 70 cm

in Yunnan and Guangxi, while some 270 rivers

and 410 small reservoirs have completely dried

up in Yunnan alone (“Ms. Fang’s parched patch,”

2012). The drought also has caused a 47 percent

decrease in reserve hydropower capacity in the region, undermining the investments made in Yunnan’s 21 dams. 1 The drought is showing no signs of letting up in 2013. According to Liu Xiaokang of the Yunnan Green Environment Development Foundation,

an NGO in Kunming, climate change has been

a contributing factor in changing weather

patterns and the most affected areas of Yunnan are those with the fastest rate of development and most extensive deforestation (“Ms. Fang’s parched patch,” 2012). Water consumption in Yunnan’s agriculture, industry, and cities is growing and deforestation can decrease the soil’s ability to retain water through topsoil erosion and exposure to direct sunlight. Agriculture is an integral piece of the water- energy-food nexus and a major contributor to Yunnan’s water scarcity. Overuse of pesticides

and chemical fertilizer in China’s agriculture industry make it the country’s largest water polluter. Furthermore, this pollution exacerbates already existent water scarcity problems by rendering water unfit for further use. Agriculture in Yunnan requires greater- than-average amounts of water due to its karst topography, which is characterized by poor water retention (Circle of Blue & Woodrow Wilson Center 2007). Also exacerbating Yunnan’s water scarcity is rampant deforestation, driven in part by booming demand for arable land for rubber, pulp and wood. According to Xu Jianchu, an ecologist at the Kunming Institute of Botany, “natural forests are a key regulator of climate and hydrological processes” (Qiu 2010). Despite the ongoing logging ban and policies to promote slopeland reforestation, The Economist observed that in the Pu’er region, hillsides were being clear cut of trees to make way for coffee growing and tree plantations. The largest culprit behind Yunnan’s deforestation, however, has been the rise of eucalyptus and rubber tree cultivation in the province. Over the past fifteen years, China has become the largest exporter of rubber products in the world; therefore, domestic demand for the raw material has skyrocketed. In fact, China has been the world’s largest importer of raw rubber since 2003. China also has been trying to ramp up domestic production of rubber to meet demand. Since 1976, over 67 percent of Yunnan’s rainforests have been lost due to rubber plantations, which have significantly reduced the region’s biodiversity (Shen, 2008). Rubber trees have also depleted the area’s water resources because they act as a “water pump,” allowing for rapid evaporation of ground water via the tree itself (Tan, Zhang, Song, Liu, Deng, Tang, Deng, Zhou, Yang, Yu, Sun, and Liang,


According to an article in Nature, in the Ailao Mountains in northern Pu’er Prefecture, deforestation to accommodate massive

WoodroW Wilson international Center for sCholars

planting of eucalyptus trees in Yunnan has contributed to the province’s drought (Qiu, 2010). Driven by demand in the paper industry,

over 2 million hectares of the non-native trees have been planted in Yunnan, creating an ecological disaster (Chen, 2010). Called “the despot tree” by locals, eucalyptus trees have destroyed biodiversity in Yunnan as the paper industry cleared the forest to plant them; the eucalyptus trees have left the soil barren, and use more water than any other tree species due to their fast growth rate (Zhang 2012). “Such large-scale

deforestation removes the valuable ecological services natural forests provide,” says Liu Wenyao,

an ecologist at the Xishuangbanna Tropical Botanical Garden, a research institute under the Chinese Academy of Science in Menglun in southwestern Yunnan. “The impact of deforestation on hydrological processes becomes particularly acute during prolonged droughts” (Qiu, 2010). Such hydrological impacts are particularly relevant to Chinese coffee farmers, as many of them practice monoculture rather than cultivating shade-grown coffee.

in China, including Yunnan, have long lagged behind the coastal provinces in terms of economic development. The eastern provinces, which have benefitted from their 25-year head- start in economic development, are demanding more and more electricity as they grow. In fact, electricity shortages could strangle China’s still-booming coastal development. The grain belt in north-central China is rich in coal but lacks the water necessary to fully develop the industry while maintaining its wheat and corn output.

….The ConFluenCe oF Four D’S, DroughT, DamS, DeveloPmenT, anD

DeForeSTaTion, ThreaTen Yunnan’S

waTer reSourCeS.

Engineering Solutions Instead of addressing the sources of these water and energy imbalances through conservation and other demand management techniques, China’s policymakers are “feeding the beasts” by undertaking two huge infrastructure projects. The first is the South- North Water Transfer Project, the largest infrastructure project in the world, which will eventually transfer 35 billion cubic meters of water every year from China’s wet south to its dry north. 2 The second colossal project, the West- East Electricity Transfer Project—initiated in the Tenth Five-Year Plan (2000-2005)—was designed to bring investment and development to China’s lagging west while satisfying the growing electricity needs of the country’s eastern provinces. The project’s first component is continuing to expand the western provinces’ electricity-generating capacity, primarily through the construction of new coal bases and hydroelectric dams. The project’s second, ongoing component is the construction of three electricity-

China’s imbalances: putting yunnan in Context These confrontations in Yunnan are just a smaller piece in the larger story of the water- food-energy nexus in China. Broader national development and resource trends impact the choke points in Yunnan. In the western press has made much about China’s economic imbalances. The constant refrain of “its citizens save too much and don’t consume enough” and “it’s overly reliant upon exports and investment” have become cliché in western editorials on China. However, China’s development patterns and uneven distribution of water are creating other imbalances. The far western provinces

China EnvironmEnt SEriES 2012/2013


transmission corridors, which will connect newly built capacity in the north, central, and south to China’s electricity-hungry coast. (See Map 1). The Chinese planners expect that each of the corridors—which are essentially vast, regional, bundled networks of transmission lines—will exceed 40 gigawatts (GW) in capacity by 2020—a combined capacity equivalent to 60 Hoover Dams. Central planners tout the construction of the Pu’er’s Nuozhadu Dam as part of the backbone of the southern corridor, sending two-thirds of its electricity output to Guangdong—the leading province in export manufacturing (“Huaneng Nuozadu Power,” 2012). Some other notable facts about China’s West-East Electricity Transfer Project that underscore its importance to China’s energy security include:

The recipient eastern provinces of Beijing, Tianjin, Hebei, Shanghai, Zhejiang, Jiangsu, and Guangdong together consume nearly 40 percent of China’s electricity.

The Three Gorges Dam is an integral component in the central corridor, sending 35 percent of its electricity to the Yangtze River Delta—China’s second largest manufacturing region. The southern corridor also receives energy from the Three Gorges Dam, albeit only about 16 percent of the dam’s output.

The longest, single Ultra High Voltage Direct Current line in the world connects the Xiangjiaba Dam on the Yangtze River (between Yunnan and Sichuan provinces) to Shanghai. It is 2,071 km (1,287 miles) long and has a capacity of 6.4 GW. These lines are known for their efficient transmission of electricity.

Following the logic flowing from the two projects’ names, these two massive transfer projects have the potential to put significant strains on southwest China’s water resources.

With water flowing north and electricity from coal and hydropower flowing east, agriculture in the southwest could be increasingly stressed. While Yunnan’s rivers are only a modest part of the South-North Water Transfer Project, there are worries about the region’s ongoing three year drought. If the south and the north experience drought at the same time, and if Guangdong Province is still demanding power from Yunnan, agriculture could potentially be limited in accessing the reservoirs of hydroelectric dams for irrigation needs. In fact, Yunnan’s drought has already had impacts in Guangdong. In the summer of 2011, some factories in Guangdong Province were forced to cut power at different hours of the day for varying lengths of time because dams in Guizhou, Guangxi, and Yunnan were producing electricity far below capacity—some as low as 10 percent of normal daily output (Yang, 2011). In Pu’er, this drought-energy crunch could mean that supplying power to Guangdong Province takes priority over its other touted benefit as a source of agricultural irrigation. After all, the Nuozhadu Dam in Pu’er is targeted to send two-thirds of its electricity to Guangdong. Moreover, in early 2012, reserve hydropower capacity in the three provinces of the Southern corridor was already down 47 percent year-on-year, thanks to the ongoing drought (Ms. Fang’s Parched Patch,” 2012). All these signs do not bode well for farmers who may come to depend on reservoirs for water during the drought. Indeed, the looming water shortage in Yunnan Province has critical implications for Starbucks’ sustainable water use practices.

yunnan’s Coffee buzz

Although coffee cultivation is but a drop of water in terms of Yunnan’s overall agricultural production, the province constitutes China’s only significant coffee production region, accounting for 98 percent of the country’s

WoodroW Wilson international Center for sCholars

Electricity on the Move China’s Network of Transmission Lines Moving Coal Power and Hydropower Eastward
Electricity on the Move
China’s Network of Transmission Lines Moving
Coal Power and Hydropower Eastward
Northern Corridor
Mammoth energy infrastructure development is keeping
China’s economic engine running at a fast clip. Never-
theless, China’s urban and industrial centers on the east
coast still face energy shortages, in large part because
most wind, coal and hydropower plants are concentrat-
ed in the country’s inland provinces.
The Northern Corridor connects hydropower stations on
the Yellow River and coal bases in Inner Mongolia, Shanxi,
Shaanxi, Xinjiang, Qinghai, and Gansu provinces to Hebei
Province and two megacities: Beijing and Tianjin.
Central Corridor
Net Energy Importer
Net Energy Exporter
The West - East Electricity Transfer Project, initiated in
the Tenth Five-Year Plan (2000-2005), was designed to
bring investment and development to China’s lagging
west while satisfying the growing electricity needs of the
country’s eastern provinces. The project’s first phase has
been and is continuing to expand the western provinces’
electricity-generating capacity, primarily through the
construction of new coal bases and hydroelectric dams.
The Central Corridor connects hydropower stations in the
upper reaches of the Yangtze River in Qinghai, Sichuan,
Northern Yunnan, Chongqing, and Hubei (and will include
Tibet by 2020) to China’s Yangtze River Delta (YRD)
mega-region incorporating Zhejiang, Jiangsu, and Shang-
hai. These three provinces consume nearly 20 percent of
China’s electricity. The Three Gorges Dam is integral to
this Central Corridor, sending 35 percent of its electricity
to the YRD.
Southern Corridor
Hubei, Electricity Transfer
Hebei, Electricity Transfer
The project’s second, ongoing component is the
construction of three electricity-transmission corridors,
which are essentially three vast networks of electrical
transmission lines that connect newly built generation
capacity in the North, Central, and South to China’s
electricity-hungry coast (see arrows on map). Each of
the corridors is expected to exceed 40 gigawatts (GW)
in capacity by 2020—a combined capacity equivalent to
60 Hoover Dams. The seven recipient provinces —
Beijing, Tianjin, Hebei, Shanghai, Zhejiang, Jiangsu, and
Guangdong — together consume nearly 40 percent of
China’s electricity.
The Southern Corridor sends electricity to China’s manu-
facturing hub in Guangdong Province from new coal bases
in Guizhou, Guangxi, and Yunnan provinces and from
new hydropower stations in those provinces on the
Salween, Mekong, and other rivers. Most of the 60 new
medium and large dams targeted in the 12th Five-Year Plan
would be built in this region. The southern corridor also
receives energy from the Three Gorges Dam, albeit only
about 16 percent of the dam’s output.
Guizhou, Electricity Transfer
Shanghai, Electricity Transfer
Electricity Production (kWh/h)
Growth in electricity exports from China’s western
provinces brings energy security to the east coast, but
exacerbates water and food insecurity in western China’s
ecologically fragile ecosystems. Because China’s eastern
economic powerhouses rely on western-made electricity,
energy sectors in the western province stake priority
over residential and agricultural water users.
Yunnan, Electricity Transfer
Guangdong, Electricity Transfer
In other words, since so much of China’s GDP depends
heavily on electricity produced in its western provinces,
the energy sector trumps all other users when it comes
to water. China must address these vulnerabilities – or
choke points – to sustain its current growth.
Cartography by James Conkling and research by Tyler Gibson. Special thanks to
Zifei Yang for her help in finding the data, and Jennifer Turner and Katie Beck for
their valuable input. We also want to acknowledge the support of the funders of
CEF’s energy and water work—Vermont Law School, USAID, Skoll Global
Threats Fund, Rockefeller Brothers Fund and blue moon fund.
Source: China Energy Yearbook 2003, 2007, 2010; China Statistical
Yearbook 2011


China EnvironmEnt SEriES 2012/2013

CES | SpECial REviEW

coffee production, 70 percent of which is exported (“The Coffee Sector in China,” 2010). Coffee production in Yunnan (and in China

as a whole) began in earnest in the 1980s with

a joint project between Nestlé, the Chinese

government, and the UN Development Program. Since 1997, Nestlé has sourced all of its coffee for the Chinese market in Yunnan. Coffee production in the province has soared and currently, Pu’er produces 60 percent

of Yunnan’s coffee. Since 2008, land area in the Pu’er region used for coffee production has doubled from 14,000 hectares to 28,000 in

2011. That number is likely to double again by


Despite this remarkable growth, demand has still outstripped supply. Over the same period, coffee bean prices have doubled, rising from 16 yuan a kilo to 30 yuan a kilo (“For all the Coffee,” 2012). These high prices give farmers incentives to switch from tea to coffee cultivation, and to clear forested areas for its production. According to the local Pu’er Coffee Industry Development Office, a family with a hectare of coffee can earn more than $10,000 a year; triple the amount they would earn cultivating tea, and five times more than for maize or rice (“For all the Coffee,” 2012). Yunnan officials want coffee production to increase from 40,000 metric tons to 200,000 metric tons, a fivefold increase, by 2015 (“For all the Coffee,” 2012). In comparison, Vietnam produces 1.1 million metric tons of coffee each year. While certainly good for Chinese coffee drinkers, there are questions about the sustainability of Yunnan’s coffee boom. According to an article by Julie Craves, a scientist at the University of Michigan, most of the coffee grown in Yunnan is sun grown, as opposed to shade grown. Sun-grown coffee

requires heavier use of chemical fertilizers, and

it can be harmful to biodiversity. On the other

hand, shade-grown coffee is higher quality, does not require extra fertilizers. Thus, if the

bOx 2. starbucks in China at a glance

First opened in China in 1999.

Currently has over 500 stores in Mainland China; plans to have 1,500 by 2015 China and Asia Pacific retail sales accounts for only about 5% of Starbucks’ total revenue.

In early 2009, Starbucks introduced its “South of the Clouds”blend, which featured beans sourced from Yunnan.

Between 2007 and 2010, Starbucks’ purchases of Yunnan coffee beans increased twentyfold.

Sources: “Starbucks Celebrates” (2011) and Bardsley (2011).

coffee planting is done in a way that protects forest habitat, the biodiversity loss could be lower than traditional sun-grown coffee plantations. Notably, Starbucks only purchases shade-grown coffee, which underscores the potentially large environmental benefits of the company’s program to promote sustainable coffee farming in the province.

starbucks in China Starbucks is the face of the coffee boom in Yunnan. The company first opened coffee houses in Mainland China in 1999, but it was not until 2006 that Starbucks considered sourcing coffee beans from China. In 2009, the company rolled out its first line of coffee featuring beans from Yunnan, called “South of the Clouds” (a literal translation of the name Yunnan). Since then, Starbucks has been working with local governments, firms, and the Yunnan Academy of Agricultural Science (YAAS) to expand its coffee production, increase quality,

WoodroW Wilson international Center for sCholars

and improve sustainability. In 2010, Starbucks signed an agreement with YAAS and the Pu’er city government to establish its first coffee bean farm in the region. In addition, the agreement included plans for a coffee development center, a farmer support center, and coffee processing centers. In 2011, Starbucks set up a local joint venture (JV) with Ai Ni Group—an established coffee operator and agricultural company in Yunnan—to expand its coffee sourcing network in the region and to more fully implement “best practice” coffee processing methods. Starbucks will have operating control of the JV, which will purchase, process, and export coffee beans to the United States for roasting.

bOx 3. a Comparison of the Water footprint of China’s Coffee and Tea

In 2011, China’s coffee production was 40,000 tons.

By comparison, China produced 1.47 million tons of tea.

Using the average virtual water content of green coffee beans (17,627 m 3 /ton), China’s 2011 coffee water footprint was over 705 million m 3 .

The virtual water content of Chinese tea is 16,604 m 3 /ton, making tea’s water footprint 24.4 billion m 3 .

Sources: Chpagain and Hoekstra (2007) and Xin, Li, & Li


Coffee and Water Coffee is a surprisingly water-intensive product. Beyond brewing the ubiquitous drink, coffee producers need water to grow the coffee plants and process the beans. Coffee processing can require substantial volumes of water which produces coffee effluent—industrial wastewater that must be properly treated. 3 Because processors discard so much of the coffee plant during the processing phase, the virtual water content of coffee is much higher than one might expect. Dutch scientists estimated that it requires 140 liters of water to produce one cup of coffee (Kaye 2011). The same scientists calculated that on average, to produce one ton of roasted coffee bean requires 20,987 cubic meters of water. By comparison, one ton of tea requires 16,604 cubic meters of water to produce. Well aware of coffee’s water intensity and other problems associated with coffee cultivation in the developing world, Starbucks began implementing a set of environmental, social, and economic guidelines in 2004 to source ethically produced coffee globally. Called Coffee and Farm Equity (C.A.F.E) Practices, these standards include water- conservation measures in the growing and processing phases of production and require proper waste-water disposal techniques. While these standards cover 86 percent of Starbucks’ coffee, the extent these standards apply to Starbucks’ Chinese suppliers is unclear because Starbucks only introduced the program in 2011. Starbucks and Conservation International are currently working with Chinese suppliers to meet the basic C.A.F.E Practices. Eventually, Starbucks and CI’s goal is to achieve “preferred” or “strategic” status for all of their Chinese suppliers.

launChing The C.a.f.e. sTandards in pu’er Since Starbucks entered into Yunnan, it has been slowly encouraging its local suppliers

China EnvironmEnt SEriES 2012/2013

CES | SpECial REviEW

bOx 4. C.a.f.e. practices at a glance

Starbucks has worked with Conservation International since 1998 to develop and implement a set of environmental, social, and economic guidelines used to source coffee called the C.A.F.E. Practices (Coffee and Farm Equity). These practices were first launched in 2004, and now over 86 percent of Starbucks’ total coffee is certified by C.A.F.E. By 2015, Starbucks wants to source 100 percent of its coffee from Fair Trade, C.A.F.E., or other third-party verified suppliers. The program’s ultimate goal is to raise the bar on work and coffee-processing practices that“will serve to improve producer livelihoods and conserve the natural habitat necessary to maintain ecosystem services for communities, coffee production and nature conservation” (Semroc, Baer, Sonenshine, and Weikel. 2012). In environmental terms, the C.A.F.E standards offer a robust set of best practices divided into protection and conservation for water resources, soil, biological diversity, and overall ecosystem functions. Some of these C.A.F.E. requirements include:

A buffer zone between the cultivation area and any permanent bodies of water,

No application of agrochemicals within 10 m of any permanent body of water;

Maintaining coffee shade canopy;

Restrictions on certain classes of pesticides and all other pesticides are applied only after organic measures fail; and,

For coffee processing, the suggested best practices include water and energy usage tracking and managing wastewater to limit its impact.

There are over 108 indicators for environmental leadership. Suppliers are scored for each category of suggested best practices that they adopt based on these indicators. For example, for coffee growing, there are a total of forty points possible for environmental leadership; for coffee processing, there are twenty possible points. Overall, environmental leadership, economic accountability, and social responsibility create a total number of 60 to 100 possible points, depending on the supplier type (grower, processor, or both). By implementing these best practices, suppliers can earn a status rank: verified, preferred, or strategic. Verified means that the supplier’s practices have been independently verified, and they meet the bare minimum requirements: coffee quality, all economic accountability requirements, and 14 points in social responsibility for adequate wages and benefits and for having policies against child labor, forced labor, and discrimination. In other words, to achieve verified status, a supplier does not technically have to earn any points for environmental leadership (in practice, most suppliers earn at least a few points in this category). However, to earn preferred or strategic status, significant environmental leadership is required. To be granted preferred or strategic status, suppliers must earn 60 or 80 percent, respectively, of the possible environmental leadership indicators. These two ranks receive special perks: both preferred and strategic suppliers can forgo re-verification for three years (verified suppliers must re-verify every year), and strategic suppliers get a 5 cent per pound premium for their green coffee. These incentives play an important role in driving the yearly increase in the number of s