This chapter is an exract from my final dissretation on 'Environmental effects of shipping imports from China and their economic valutaion. The case of valve components in aluminium, iron and steeel'.

1. Production processes
Section 4.1 presents the general situation of China as exporter of embodied
polluting emissions. Sections 4.2 and 4.3 analyze the emissions occurred in the
iron and aluminium production processes.
1.1 China introduction
1.1.1 Pollution
Forbes Magazine reports that all 10 of the 10 most polluted cities in the world
are in China (Forbes 2006). One third of Chinese territory is affected by acid
rain (Wassermann 2009). China's polluted environment is the result of its rapid
development and the large increase in primary energy consumption, which is
primarily provided by coal power plants (Yi et al. 2007). One of the serious
negative consequences of the coal-based-driven development has been
increased pollution, smog, and degradation of natural resources (ibid.). Much
solid waste is not properly disposed of; water pollution is a source of health
problems across the country; and air pollution causes up to 1,750,000
premature deaths each year (ibid.).
Coal largely dominates China’s primary energy consumption, accounting for as
high as 67% in 2003, compared to only 23.5% for the world average in 2000
(Chen 2007). This primary energy consumption increased by 278% from 1980
to 2003, with an annual growth rate of 4.55% (Figure 1) (ibid.).
Figure 1- China’s primary energy consumption during 1980–2003 (Chen 2007)

2. Chinese industry consumes mostly coal and electricity, which is also produced
mainly by coal-fired power plants in China (Yanjia and Chandler 2009). Oil and
natural gas make up only 5% of the total energy consumption (ibid.). Coal
covers about 65% of primary energy production (Table 1), over 60% of the total
internal energy demand, 80% of the fuel used by thermal power plants to
generate electricity, and 40% of the final fuel used by final consumption sectors
(Palazuelos and Garcia 2008). The high share of coal, as well as some
inefficiencies in processes, which are getting reduced through technological
improvements, are the reasons why China-made products have relatively high
carbon content (Sinton et al. 2005; Xu 2002; Palazuelos and Garcia 2008). The
shift to cleaner energy is a challenge that China must tackle in the coming years
(BECon 2004; Crompton and Wu 2005; Lin 2005; Levine 2006; Jiang 2007).
Table 1- Total production and offer of primary energy. Elaborated with data from IEA
(2006a). (1): Oil-equivalent tones.
China has recently overtaken the USA as the world largest emitter of CO2
(Wassermann 2009). Within 5 years, China’s CO2 emissions have nearly
doubled (Weber et al. 2008).
Templet (2001) reflects that subsidized energy prices in countries like China
leads to inefficient allocation, higher pollution and efficiency loss by the
economy.
1.1.2 Economic growth
For more than 25 years until 2007, China’s GDP growth has exceeded 10%
annually, more than double that of low and middle income economies and well
over three times the figure posted by high-income nations (Table 2) (Bustelo
2007).

3. Table 2- Comparison of average annual GDP growths (%) (Source: World Bank) (Bustelo
2007)
China’s share on world GDP rose from 3.4% in 1980 to 15.4% in 2005, while
the US's share remained steady at around 21% and the joint share of the
countries that make up the EU today fell from 29% to 21% (Figure 2) (ibid.).
Figure 2- Weight in world gross product 1980-2006 (Source: IMF) (Bustelo 2007)
China’s competitive advantages are notably cheap land and cheap labor (Helm
2008). Bustelo (2007) adds other significant strengths, such as a high savings
rate, a Confucian work ethic, a rising middle class that could reach 150 million
people by 2010, and a substantial degree of integration in the world economy.

4. He also refers some disadvantages, notably the inefficiency of the banking
sector, sharp inequality in regional and personal income distribution, corruption,
aging population, over-industrialization, excessive dependence on foreign
capital and growing energy dependence.
Banister (2005) estimated that China’s labor total compensation by 2002, when
data were first published, accounted for about 3% of the average hourly
compensation in the USA and other developed countries, 10% of the one in
their regional competitors and 25% of the one in other emerging economies like
Mexico and Brazil. Ceglowski and Golub’s (2007) estimations are compatible
with Banister’s: by 2004, the percentage against USA or Western European
countries was between 3% and 7%. Nevertheless, when the productivity level is
considered, they conclude that, by 2002, the relative unit labor cost in China
was around 25% the average in the EU and between 27 and 43% the one in the
USA (ibid.).
Chinese government plans a fourfold economy development with double energy
consumption during 2000–2020, which poses a high threat to sustainability
(Chen 2007).
1.1.3 Emissions embodied in exports
Figure 3- Partition of Chinese total domestic CO2 emissions (Weber et al. 2008)
In 2005, almost one third of Chinese emissions (1700Mt CO2) were due to
production of exports (Figure 3). This proportion has risen fast from 12%
(230Mt) in 1987 and 21% (760 Mt) in 2002 (Weber et al. 2008). It is therefore

5. likely that consumption in the developed world is driving the emissions
increasing trend (ibid.).
China’s economy is export-oriented, exports accounting for 45% of its GDP
(Helm 2008). Table 3 shows how, while imports from almost all regions
decreased in the period 1995-2000, imports from China increased heavily for all
importers (Ahmad 2003).
Table 3- Imports of manufactured goods by region, % of total (Ahmad 2003)
Figure 4- Major exporters of embodied emissions in exported goods, in Mt CO2 (Ward
2005)

6. Figure 4 reflects China’s position as the world’s largest exporter of emissions
embodied in goods.
Figure 5 shows that China was also the country that most increased their
exports of embodied emissions in the period 1990-2000.
Figure 5- Absolute increase of embodied emissions exports 1990-2000, by exporting and
importing countries, in MT CO2 (Ward 2005).
Industry sector is the highest energy consumer in China, accounting for 68% of
the total final energy consumption in 2000 (Chen 2007). Over 50% of the
energy consumption in the industry sector was from steel, cement, ammonia,
aluminium and paper industry (ibid.). Figure 6 shows how far the energy
intensity in the production of the most energy intensive in China goods
exceeded the world’s advanced international one.

7. Figure 6- Comparison of unit energy consumption for major energy intensive products
and equipments between China and world advanced level in 2000 (Jiankun et al. 2007)
Table 4 shows the emission factors of several industries and countries. China,
Russia, India and fast developing economies have the most carbon-intensive
production processes (Ahmad 2003), which supports the argument of ‘pollution
haven’ presented in the section ¡Error! No se encuentra el origen de la
referencia., discussing the market failure.
There is still a large technological potential to save energy in China, as it is at
the low end of the value chain in the international division of industrial structure
(Jiankun et al. 2007).

8. Table 4- Emission factors: embodied (direct + indirect) embodied CO2 emissions by US$ by industry- kg CO2 per US$ (Ahmad 2003)

9. 1.1.4 Improvements
Nevertheless, China has achieved some significant improvements to its
environment during the recent years. According to the World Bank, China is one
of the few countries in the world that have been rapidly increasing their forest
cover. It is managing to reduce air and water pollution (Wassermann 2009). In
November 2008, Chinese Government introduced a US$498 billion economic
stimulus package (the largest in China's history) under which they plan to
improve the waste and rubbish treatment facilities, to prevent water pollution,
accelerate green zones and natural forest planting programs, and increase
energy conservation initiatives and pollution control projects (Chinaview 2008).
According to Jiankun et al (2007), energy conservation and energy structure
improvement are at the core of China’s development strategy; but population
expansion, economic growth, urbanization level improvement, and booming
transportation, will make China’s future energy consumption, as well as carbon
emissions, to increase unavoidably (Chen 2007).
Through energy efficiency improvement and substitution to low-carbon energy,
carbon intensity decreased dramatically from 2.75 kgC/US$ in 1980 to 0.92
kgC/US$ in 2003 with an annual decrease rate of 4.63% (Chen 2007) (Figure
7).
Figure 7- China’s carbon emission and carbon intensity during 1980–2003 (Chen 2007)

10. 1.1.5 No ‘blame it on China’
This document does not intend to blame on China for an excess of emissions.
On the one side, as reflected in Table 5, historic contributions to climate change
from industrialised countries have been more than double the ones of
developing countries. And, even currently, they are higher.
Table 5- Contribution to global man-made CO2 emissions (%) (WDM 2007)
On the other, per capita carbon emissions are still low compared with the
world’s average, but they have increased by 3.14% per year in the period 1980-
2003, (Chen 2007). Since 1990 to 2008, CO2 emissions per person in China
increased from 2 to 5.5 tonnes, while they decreased in the EU-25 from 9 to 8.5
and from 19.5 to 18.5 in the USA (PBL 2009). These changes reflect the large
economic growth in China and structural changes in national and global
economies and the impacts of climate change policies (ibid.).
Further, highly polluting industries have been located in countries that are not
obliged by the Kyoto Protocol, therefore resulting in a reallocation of emissions
from developed countries to developing ones. According to the WDM (2007), in
the UK, for example, contribution of manufacturing to GDP declined from 22%
in 1995 to only 13% in 2006, while the total domestic material consumption
remained stable. If the net import of UK emissions was added to the emissions
produced in the UK in 2005, the emissions resulting from UK consumption

11. would rise by 37%, and there would not be a 15% emissions reduction over
1990, but a 2.7% excess. If also aviation and shipping were included, the
increase since 1990 would be 8%.
Therefore, a ‘blame it on China’ game should not be promoted through the
media when it has been rich nations who have historically caused the problem,
when unequal per capita emissions remain and when the riches’ way to reduce
emissions since Kyoto has been to move the production needed for their
consumption to China.