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The Human Tragedy of the Stalled Shale Gas Revolution in China

Jul 08, 2016

How many more people must die before China will un-leash the potential of its shale gas?  In 2013, the world was wildly optimistic about the impending shale gas revolution in China.  The Chinese government set ambitious targets for development, Chinese investors were eager to make huge returns, and the United States was enthusiastically sharing its knowledge and experience.  Back then I wrote an Op Ed in the New York Times titled “China Must Exploit its Shale Gas,” and took several trips to China to talk to Chinese government officials, energy companies, and investors about how to get the revolution going.

But since then, progress has been non-existent, and approximately 4.8 million Chinese have died from air pollution.  A few new targets for shale gas production have been announced, a few companies have made highly visible investments, and a few showcase projects are in development – but the third government auction of shale bed leases, originally planned for 2014, has been postponed yet again.  Many blame the lack of progress on complex geology, lack of fresh water, or the inexperience of local companies.  Happily, none of these issues are true barriers.  Unfortunately, it is the government itself that is holding back the revolution.

It is the people of China that are the primary victims of this lack of progress.  Berkeley Earth, the organization that I co-founded in 2010, recently published a study of air pollution in China, showing that 1.6 million people are dying every year from the horrible air pollution caused predominantly by coal. That’s 4,400 people every day.  Another way of thinking about it is that on a bad day in Beijing (and there are many bad days in Beijing), it’s as if every man, woman, child, and baby is smoking more than a pack of cigarettes a day.  Most people I have spoken to in Beijing dismiss this pollution as “just haze.” Or say that it’s not a problem for them, because they “are used to it.”

The deadliest pollution is called PM2.5 , standing for particulate matter 2.5 microns in size and less. The greatest source is coal, and a switch from coal to natural gas reduces PM2.5 by a factor of 400.

China can clean up its air pollution. In early September 2015, China planned a massive military parade to celebrate 70 years since the defeat of invading Japanese forces in World War II.  The Government ordered more than 10,000 factories and a number of construction sites in and around Beijing to close or reduce output, and put new limits on drivers, local shop owners and even electronic commerce, citing concerns about security and traffic.  The results were dramatic, beautiful clean air around Beijing and beyond. The local Chinese refer to it as “parade air.”

Berkeley Earth now updates its online map of air pollution every hour.  It now includes China and much of Asia, the United States and parts of the Americas, and much of Europe.  While there are a few other locations that also have terrible air pollution (in particular, India, Turkey, and Chile), most of the areas covered have clean air, while the people in China suffer.

There are many ways to help clean up the air in China.  Scrubbers can help reduce the air pollution from coal.  But using them greatly increases the cost of production, so many coal-fired power plants do not use them.  Solar and wind energy sources are also being pursued, but have little potential for quick expansion on the scale needed for meaningful impact in the next 10-20 years.  Nuclear power will also have an important role to play, but the upfront costs involved make it hard to expand quickly.  China needs all of these solutions–but they also need shale gas, which has a much greater potential for rapid expansion in China than do all the others combined. China cannot afford to wait to reduce its dependency on coal.

I believe that a shale gas revolution can still happen in China the way it did it the United States. Indeed, the shale gas revolution in China could be even bigger and faster. But the Chinese Government has not learned the right lessons from the U.S. experience. The government and State Owned Enterprises are still trying to control the process of shale gas exploration, through partnerships with large U.S. oil and gas companies, demonstration projects, and especially the use of auctions. The Chinese Government has missed the critical component of the shale gas revolution in the United States – that it was lead by a mass of small, innovative, new companies, doing something that nobody else believed was possible. Many of them made mistakes, and went out of business. Others made major discoveries. In order to succeed, the Chinese Government needs to open up the market for shale gas exploration and discovery. They should not attempt to pick the winners and the losers, but rather step back and allow anyone to give it a go.

Delaying the shale gas revolution is costing lives. The government must recognize its failure, and allow anyone to explore for and produce shale in China.  It is the population of China that has the most to gain if this is allowed to happen.

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