China Bans Solid Waste Imports

After decades of ignoring soil, water and air pollution within its jurisdiction the Chinese government has notified the WTO that it will ban ‘foreign garbage‘ imports. To make room for the rapid economic growth that propelled China to the status of global manufacturer its authorities chose to shut an eye on the various environmental misdeeds consequent to economic expansion. That involved a tripling of waste generation within less than a decade. The decision to ban waste imports such as plastics, paper and industrial residues, is an indication that Chinese authorities are ready to deal with the negative externalities of their economic growth.

China imports 24 types of waste, most of which come from neighboring economies. The import ban covers almost exclusively solid waste such as plastic, paper, slag from steelmaking and textile waste, which are classified as a source of pollution resulting from their incineration or landfill deposition. While there are reasons to cheer for China’s ambitious to reduce domestic pollution and for that matter ban waste imports, this decision is poised to harm Chinese recycling businesses in coastal areas. The decision, due to enter into force towards the end of 2017, will shut off $3.7 billion worth of plastic waste and $1 billion worth of unsorted paper.

The impact of the ban is also not something of scale.  Waste imports account for a small share of domesticaly produced Chinese waste volumes. For examples, imported plastic waste amounted to 7Mt in 2016 while domestically produced plastic waste was about 30Mt. A similar story applies for other waste streams. A follow-up on the import ban should, in consequence, be tackling domestically produced waste with hazardous consequences when incinerated or disposed in landfills.

 

A number of aspects emerge from the waste ban news, as:

  • Chinese authorities are using their centralized power to tackle a sensitive issue such as waste, but their starting point is external (smaller) source rather than from within (the larger). Their impact can only be limited.
  • This could also be a sign of maturity from the part of China, who is also committed to the decarbonization pledges made with the Paris Climate Agreement unlike some developed nations.
  • Allegedly, the waste contamination problem of coastal Chinese provinces has been heavily under-evaluated with implication for water, soil and air contamination which could take a minimum of two generations to mend.
  • The announcement to the WTO sends a political message to the neighboring economies who relied on China to off-take their polluting waste streams. This means that other economies in the region could take the role china has been playing so far, or these nations need to develop domestic disposal measures for the polluting wastes.

 

 

 

Millennials

It has been a while since I last posted on the blog, and I have to excuse my absence with a research spree into the growing belief among economists that most of the developed world is close to the levelling of growth potential. This fascinating topic has by now a plethora of facets, with various opinions being debated in both social and academic circles. I found the discussions on energy and decentralization some of the most fascinating ones, since they are so closely connected to what I am working. Nonetheless, I will address one thing at the time.

To set the scene, the developed world is changing from within. The current economic model, which enjoys a widespread acceptance is capitalism (or liberalized market economy). What happens when this market functioning model is reaches the limit of productivity growth? It then enters a lethargic state of stagnation, or even decline. Its spill overs are increasingly turning into the breeding ground for a business models based on collaborative commons (shared economy). It is often argued that the communication revolution and subsequent changes of energy regimes serve at the onset of a powerful configuration which is gradually eroding the supremacy of capitalism, challenging its status-quo.

As for every system reshuffle the social engine is the force behind the shift. In this case, the emergence of a well educated generation of conscious individuals with a strong moral compass, which promotes the implementation of climate change mitigation options and is an early adopter of technological innovation, has the potential to set off a paradigm shift for the way society participates in the economy. This social force is generically called ‘the millennials’ (also denominated ‘generation Y’).

Millennials are the most educated generation to date and although education is no substitute for wisdom, millennials are critical and curious about the products and services they purchase. The wide range of diversity among millennials means that they access almost equally diverse consumer goods and services. They are less sensitive to price (as their previous generation) but claim a higher ethical standard for their investments.

Millennials need to be passionate about the work they do, and recruiters have seen an increased propensity of young professionals to opt for jobs in circular economy, recycling, renewable energy and smart technologies. Perhaps these jobs being less pervasive as conventional ones acts as a psychological ‘mush have’, which is why competition for engineers in the renewable energy sector is increasingly higher.

Millennials value transparency, which means that environmental wrong doing, such as emission and legislative frauds, are treated with anguish today and may very well be a death blow argument tomorrow.

Millennials are selective. They are interconnected and have access to pre-screened information channels. That is, marketing campaigns recurrently incorporate a social media dimension and Netflix has become yesterday’s television.

Millennials are political at need but not fanatic. The few instances when millennials have passionately contributed to poles representation have been the instances when their values were at stake.

Having millennials behind the steering wheel to foster system decentralization by building on the spill overs of capitalism by means of the internet-of-things platform has the potential to turn the emerging and niche applications of collaborative commons business models into ubiquitous success stories.

There are various thresholds that millennials need to cross over in order to be taken serious. I believe that the issue of timing and time is of the essence now. Does the momentum of the environmental movement provide enough thrust for them to take off, and if so how long will it take until their impact is significant as to structurally alter incumbent economic models?

Nuclear Power: Friend or Foe?

Recall the tone around the role nuclear in the EU energy mix in the wake of the 2011 Fukushima Daiichi nuclear disaster? It was hostile. It was as hostile as the appetite for saturated fats these days. It’s easy, satisfies the needs and consequences nowhere in sight until they break the scale. But time forgets, the same way the memory of the Japanese nuclear disaster half-lived with the passing of years.

But soon after the hazard stroke, a wave of reactions prompted by the Fukushima Daiichi disaster emerged across the EU Member States. Mycle Schneider, the international nuclear energy consultant, deemed the disaster a ‘unique chance to get it right’ on energy policy by accelerating Germany’s nuclear phase out by 2022. In Italy, the population voted 94% against the government pursuing new nuclear projects, in a referendum. But the boldest of statements came from the nuclear hungry French administration which announced the intention to curtail by one third nuclear usage towards 2050. France is the largest nuclear power producer in Europe, accounting for half of the EU(28) nuclear electricity production and three quarters of its own gross electricity. Widely, EU Member States shared a bitter sentiment towards nuclear energy soon after the disaster, and action was proposed to be undertaken to diminish its role in the future.

Let the Fukushima disaster be only a reminder of how expensive nuclear disasters have become and how far reaching they are in time. It ended up costing the Japanese government $105 billion in the five years since the disaster, with an additional $23 billion awaiting to be spent in the clean-up process. This represents twice as much compared to what Japanese authorities predicted back in 2011. Radiation clean-up and compensation to residents make up the largest part of the cost, which are far reaching in time as the full scale of the impact has not entirely been accounted for.

Comparative life-cycle GHG emissions of different energy sources

Comparative life-cycle GHG emissions of different energy sources (Source: WNA report)

Before tragedy stroke, nuclear energy enjoyed a positive reputation among energy sources. It is clean, concentrated and mildly affected by security of supply. It’s life cycle emissions are significantly lower than those of fossil fuels, hovering in the same emission cluster with renewable energy sources. Aside from generating very low emissions, nuclear is a highly concentrated power source. 4g of enriched uranium can generate the same amount of energy as 300cm gas/350kg coal/250 litres of oil. Because of its high concentration and the fact that uranium ores are more vastly available across the globe compared to some fossil fuels, nuclear has lower security of supply risks.

Despite the wide range of benefits, the potential of nuclear is shadowed by the risks of nuclear waste and the cost of capacity decommissioning. In Europe, the first generation of capacity built in the 1960s is approaching closure and decommissioning. The discussion has been gently postponed with the nuclear life-time extensions awarded since the 1990s, about the issue is surfacing back causing friction between tax payers and utilities. Moreover, the issue with nuclear waste is not fully resolved given there is a lack of sensible long term implications of the way underground storage behave.

Nuclear Reactors

Upon COP21 though, EU Member States are faced with an ironic choice. The targets set out in the EU energy framework regarding GHG emission reduction targets, the adoption of renewable energies and energy efficiency are all binding for Member States. In consequence Member States vouch their efforts to decommission their energy mix, a task that can be carried out either by subsidizing renewable capacities or with the integration of nuclear in the mix. If memory serves well, the stand on re-adopting nuclear is hostile as some utilities deemed it a ‘loosing value proposition’.

One of the most vocal EU Member State to look away from nuclear energy by 2022 is Germany, a country with a green plan. The firm pursue for renewables in the energy mix is paying off for Germany, as their contribution reached 40% of primary electricity consumption in 2015. The country is way on its way to achieve the GHG emission reduction targets it so strongly hangs on, by 2030.

Unlike their neighbour, Belgium and France are in a delicate situation. In Belgium, nuclear capacity contributes to 45% of the total gross electricity production in 2014, with decommissioning prospects sending the energy mix in a tight situation. The country is in ‘urgent’ need for additional capacity to replace part of the nuclear whilst keeping electricity prices competitive and complying with the GHG emission reduction targets. Just as in the case of France, the renewable energy potential is limited and its implementation costly. Such issues are sending governments back to the drawing board to re-assess the decarbonisation framework.

The emission reduction targets act as a constraining factor for EU Member States to reconsider their position on nuclear for the energy transition. Slovakia recently added two reactors, France and Finland have reactors under construction and the UK has started negotiations with the French utility EDF for the construction of a new reactor at Hinkley Point. This is an indication that after the diffusion of the nuclear crisis the sentiment is warming up towards nuclear, at least at the surface.

The pressure is stronger for Member States which have little RES potential while in the meantime can’t afford to spend significant amounts from their budgets on technologies which have not proven their maturity value. Cases in point are the UK and Poland which need to face the pain of moving away from coal while they have little RES potential. For the UK the financial aspect is not as problematic as for Poland, that is why the Hinkley Point debate is making headlines. Poland keeps tapping the argument that its hungry energy economy can’t support the cost of nuclear or RES subsidies for now.

In the near future, when the European Commission is going to press the binding decarbonisation targets against the door, Member States such as Poland will have to decide quickly whether nuclear will still be a foe, or it will become their energy friend in the transition.

Framing the Russian Gas

EU Energy Consumption of Russian Natural Gas

EU Energy Consumption of Russian Natural Gas

The tense situation in Ukraine these days can be attributed to a series of causes as they are discussed at large on a variety of media outlets worldwide, but it is beyond the scope of this post to identify them and even further develop on them. This post aims to put into perspective what the Ukrainian crisis means for the EU from an energetic perspective, and question how the general state of the situation is going to unfold for EU-28 in the coming years.

Generally, in the context of the international resource dispute the EU-28 countries have started to change their long term energetic strategies by diversifying their energy mix and resource partners. For example, in the wake of the Fukushima nuclear disaster Germany and Sweden have started decommissioning their nuclear reactors; while Denmark is progressively pushing for an ever higher share of renewables in its energy mix.. France and UK are making a move towards gas being it conventional or unconventional. At large, European nations are moving towards less carbon intensive fuels.

The position of the EU countries in the Ukrainian crisis is delicately linked to the EU-Russian relations in a variety of aspects among which the geo-resource position of Russia as a coal, oil and gas exporter. This position is arguably of strategic importance for the EU importing countries especially in areas concerning gas. The dependence on Russian gas can be historically traced back to the end of World War II, but more recent events (the end of the Cold War) have tighten the strings and lead to bilateral cooperation. After the Cold War, European powers envisioned to unify the energy market in the same manner they’ve done with the Coal and Steel Community after the World War II, and thus further strengthen their position as a unified economic power in the international markets. By intending so, France made the first move and engaged Denmark and Germany alongside in a dialogue with Russia about building a gas pipeline extending from Russia all the way to France. This pipeline would feed-in the energetic needs of the transit countries and France, in the context of an increasing energy demand in the West European nations in late 1970s. At the time when this project was initiated it was rather ambitious and risky for Europe, which is why eventually it did not take off. In the coming years France moved on in building a nuclear fleet and Germany exploiting its coal resources, but mid 1990s brought back the need for cheap and reliable fossil resources in Europe. This reopened the EU-Russian dialogue for the Russian gas pipeline (Nord Stream) which was launched in 1997 and inaugurated in 2011. This pipeline accounts for about 20% of the European gas imports from Russia, a share which is prone to increase year by year (CIEP, 2013).

With the expansion of the Nord Stream pipeline in late 2013 the Ukraine transit gas pipeline is facing pressure. Even if absolute imports via Ukraine have changed little over the past years, the share of Russian gas imports in Europe via Ukraine has decreased (CIEP, 2013). This means that the Ukraine transit gas pipeline is feeding less gas into Europe via Romania and Bulgaria, than it used to; and this downward trend is expected to continue in the coming years mainly because of the gas hub associated with Nord Stream and the tense situation in Ukraine. A CIEP report (CIEP, 2013) on the issue argues that the Ukraine transit Russian gas pipeline renders vulnerable Eastern EU Member States such as Romania and Bulgaria which import 25% and respectively 100% of their gas needs via this route (Financial Times, 2014). These nations are faced with the challenge of ensuring gas security of supply because of their relative weak integration of transmission systems with the rest of Europe.

Crunching the numbers shows in fact how little the Russian gas incoming through Ukraine actually accounts to the overall EU-28 energy consumption. In 2013 the Russian gas imports transiting Ukraine represented about 15% of the total gas consumption of the EU-28 Member States, which in absolute terms represented about 80 Bcm/year (2013). Of the total volume of gas import incoming through Ukraine, only 53 Bcm/year are under security of supply ‘threat’, and of meager concern for EU-28. This volume represents a marginally 2.3% of the total energy consumption of the EU-28 (2013) and can be compensated for by the diversification of pipeline routes and the reliable storage levels put in place after the 2006 and 2009 shocks. At large, the Russian gas transiting Ukraine is a sensitive issue when there are no alternatives to address this supply, but alternatives could be set-up through joint efforts. Rough estimates argue that EU-28 can survive without Russian gas cca 300 days/year (2013), an estimate which has improved greatly since the first gas shock in 2006.

When factoring in the recent developments of the EU-28 energetic infrastructure one might argue that Europe is an energy shocks free region. With EU 2030 Climate and Energy Framework ambitions ahead, the European nations are making progressive steps towards achieving the 40% CO2 reductions (1990 base year). The means to achieve this is through peak shaving and switching to less carbon intensive fuels; the combination of both is LNG in NGCC. The existing 28 units (2012, incl. under construction units) are expected to be enforced by the additional 32 projected units. This impels for a Europe wide effort to unify the gas network for an increased energy security in the region.

In conclusion, the EU-28 has reasons to be concerned about the security of gas supply of its Eastern Member states in the context of the Ukrainian crisis but the bigger picture shows a unified strong European energetic market, which could easily tackle gas shortages via the storage capacities available and the diversified pipeline routes. As pointed out above, the dependence on the Russian gas transiting Ukraine, is marginal in absolute terms and the diversification of pipeline pursued in the last decade (Nord Stream, Blue Stream) softened the risk of transit related supply disruptions