Environmental Engineering Reference
In-Depth Information
period, it can create enormous inancial hardship on power generation irms
because the NDRC only allows 70% of coal price increases to be passed along
to end-users through tarif increases. Although it is true that sudden dips in
the cost of coal can cause windfalls for these same irms, coal price volatil-
ity is occurring during an inlationary trend, which suggests that there will
be more losers than winners.
54
Indeed, a recent study of coal-ired power
plants in 10 Chinese provinces found that all the coal-ired plants examined
posted inancial losses during the irst three quarters of 2010.
55
In short,
price volatility incentivizes utilities to embrace forms of electricity genera-
tion that possess more predictable cost proiles. his enhances the appeal
of alternative technologies (particularly wind power and hydropower) that
exhibit more stable variable cost proiles.
he economic cost of externalities associated with electricity technology
also inluences energy market dynamics. Chiely, reliance on coal-ired elec-
tricity production has contributed to undesirable levels of atmospheric pol-
lution. Additionally, as mentioned earlier, transporting coal from supply to
demand centers in China congests rail networks, resulting in transport delays
and increased costs for other transportable products. In 2007, 1220.8 mil-
lion tons of coal was shipped an average of 607 km/ton along China's rail
arteries, comprising 46.7% of all goods shipped by rail in China.
56
However,
coal is not the only villain in the electricity sector. In hydropower too, mega
projects such as the hree Gorges Dam have produced extensive environ-
mental and social costs that the government is keen to avoid.
57
When there
were no economically viable technological alternatives to coal-ired electric-
ity and large-scale hydropower, bearing the cost of negative externalities
was considered unavoidable; however, this is all changing as costs for renew-
able and conventional energy converge.
Increasingly, international inancial incentives and disincentives also
inluence China's electricity market. he Clean Development Mechanism
(CDM), which allows fungible Certiied Emission Reduction (CER) credits to
be generated for approved alternative energy projects in developing nations,
has played an enabling role in the development of alternative energy proj-
ects in China. CDM projects in China have accounted for 58.8% of global
CERs issued since the program began.
58
Furthermore, an agreement made
during the COP17 Conference in South Africa will give developing nations
(such as China) access to a US$100 billion Green Climate Fund. herefore,
despite the possibility that the Kyoto Protocol (and the CDM) might col-
lapse, international inancial incentives for China to support renewable
energy expansion remains. In terms of disincentives, international sup-
port appears to be amassing for border taxes—a carbon tax applied onto
imported goods based on the energy proile of the exporting nation.
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