In a speech in Wilmington, Delaware, Democratic Party presidential candidate Joe Biden built on his plans for reviving the economy in the wake of the coronavirus pandemic with a focus on significantly cutting fossil fuel emissions. The proposal attempts to eliminate carbon dioxide emissions from the power grid by 2035. Such an attempt might be a renewables-only approach or a net-zero carbon dioxide emissions goal that would include nuclear energy and carbon-capture technology. But Biden’s $2 trillion proposal is not a policy to recover from the devastation of the COVID-19 recession because the time goals are not consistent and changing the energy portfolio of the nation is an extremely costly endeavor that requires reallocating labor, capital, and innovation. Those reallocation costs, especially retraining people for new jobs, will slow the recovery. With a debt of $26 trillion, the country cannot afford a “clean energy standard.”
Instead, Biden should watch closely what China is doing, which will probably make China the only G20 country whose economy will grow in 2020. China’s imports and exports are indicative of this. Demand for China’s medical products has surged during the pandemic. China’s textile exports including masks increased by 32 percent during the first six months of this year, with medical devices jumping by almost 50 percent.
China’s Coal Plant Construction
China is constructing coal-fired power plants to stimulate its economy, as it did after the global recession in 2009. China currently has 249.6 gigawatts of coal-fired capacity under development (97.8 gigawatts under construction and 151.8 gigawatts in planning)—a 21 percent increase over yearend-2019 (205.9 gigawatts). The amount of coal-fired generation under construction exceeds that of the U.S. entire coal fleet. Once built, China’s total coal-fired capacity will equal or be larger than the total generating capacity of all sources—natural gas, coal, nuclear and renewables including hydro—in the United States. Clearly, China is not worried about reducing its carbon dioxide emissions, which the Paris Agreement allows China to grow until 2030, when carbon dioxide emissions are supposed to peak in that country. China already consumes over half the world’s coal annually.
China’s plans for new coal plants have steadily increased since 2019, after the central government began relaxing restrictions on new coal plant development. Between January 1 and June 15, China permitted more coal plants (17.0 gigawatts) for construction than it permitted in all of 2018 and 2019 combined (12.0 gigawatts). Almost half (7.9 gigawatts) of the 17.0 gigawatts permitted in 2020 are to power long-distance transmission lines from coal plants in the West to demand centers on the coast. Three-fourths (12.7 gigawatts) of the 17.0 gigawatts are sponsored by local companies, and many are being fast-tracked: units 3–4 of the Hohhot Jinshan coal plant in Inner Mongolia went from announced to construction in just three months.
Despite overcapacity of generation in China, coal remains a significant part of the country’s planning mix, led by local leaders eager to capitalize on the readily available credit and central government support for stimulus spending. Investment in utilities from January to May 2020 was 14 percent above the same period in 2019. State-owned banks lend to state-owned utilities with little review and increased local lending quotas and calls to boost spending to offset the economic impact from COVID-19 encourage even greater lending.
China’s Imports
China’s demand for iron ore and coal has also surged. China is importing commodities critical to its infrastructure: iron ore imports into China grew by 10 percent over the first half of the year, coal by 13 percent and liquefied natural gas (LNG) by 3 percent. Australia accounts for up to 60 percent of China’s annual iron ore imports and more than 30 percent of its coal imports.
China’s crude oil imports surged 34.4 percent year on year to an all-time high of 12.99 million barrels per day in June as Chinese buyers who secured low-cost oil in late March received their deliveries in June. It was the first time China’s monthly crude imports surpassed 12 million barrels per day, and was 14.6 percent higher than the previous record high of 11.34 million barrels per day in May. The record June volume brought imports for the first half of 2020 to 10.82 million barrels per day—up 9.3 percent on the year, despite an eight-month low of 9.72 million barrels per day in March due to the coronavirus pandemic. China is fueling its economy with oil and filling its strategic stockpiles with low-cost crude.
Conclusion
While China is burning more coal, more oil, and more natural gas to fire its manufacturing and development, Biden’s approach is to unilaterally disarm the United States, which became self-sufficient in energy in 2019 for the first time in over 60 years. Expensive, complicated, pie-in-the-sky programs will only push the United States into more debt, and make us more dependent on others for our energy after successfully achieving energy independence after six decades of foreign energy dependence. Biden should watch more closely what China is doing, and recognize that America’s hard-won energy dominance is an asset in the U.S. economy’s coronavirus recovery and future growth potential.
