China is a quickly emerging market in many ways. China has one of the fastest growing economies and a rapidly emerging middle class with a standard of living that is far better than the previous generation of workers (Cheng, Wong, & Woo, 2013, p. 370). The prolonged and quick economic, industrial expansion in China combines with the demand of a more affluent citizenry to create a growing demand on the electrical generation infrastructure of the country (Liu, 2012, p. 469). It is the access to inexpensive electricity that drives Chinese economic growth (Cheng et al., 2013, p. 371). This electrical demand requires the nationalized systems for delivering this service must ramp up their ability to provide this commodity to further drive the Chinese economic expansion.
Electricity generation growth can be a time consuming proposition. It takes several years to build new power plants and the associated distribution systems that service delivery requires. The demands of an emerging and growing economy must be done in the most economically-feasible manner in order to facilitate the need and to take advantage of the synergy created by their economic opportunity. This advantage is accomplished with the use of the least expensive fuels.
The need for electric expansion that drives the continuing growth of the industrial engine and the service delivery to the Chinese people is required to achieve the desired, higher standard of living that the people seek to attain. The least expensive generation facilities and the least expensive fuel per BTU is coal (Grubert, 2012, p. 174). Chinese coal reserves are not easily accessed. China lacks the infrastructure to ship their mined coal from the reserves in the west to the people and power plants in the east. Chinese coal is also lower in BTU value and more polluting than western coal from the United States.
The coal industry of the United States is able to provide the excess capacity that could replace more polluting fuels in the Chinese power plants. China has sought to ban low-quality coal imports from Indonesia in order to better comply with environmental quality standards (Hook, 2013). American coal is more easily produced in the west, with lower production costs, minimal environmental impact, and a source of low sulfur fuel (Grubert, 2012, p. 183). North America is in direct line of the prevailing trade winds that bring a great deal of Chinese pollution and would benefit, greatly, from reducing polluting emissions in the Chinese power plants.
The use of strategic trade policies that would ensure that China has access to lower polluting fuel that creates a valuable trade opportunity for a high value resource that is produced economically with little environmental impact would benefit both the United States and China. This additional export market would lower fuel costs (for low-polluting coal) for China and increase domestic profits for United States producers while providing employment for American workers (CapellaUniversity, 2011, p. 107). The strategic trade policies that lower the hurdles to shipping and exporting coal while negotiating out any tariffs that could impede the importing of American coal into China would raise barriers to other coal exporting countries that are not able to meet the import standards (CapellaUniversity, 2011, p. 107). The mutually beneficial relationship would create a more environmentally-friendly production of Chinese power to drive the expansion of the Chinese and American economies.
– Eric Roesler
References
CapellaUniversity (Ed.). (2011). Economics in global environments [custom textbook}. Upper Saddle River, NJ: Pearson.
Cheng, Y. S., Wong, W. K., & Woo, C. K. (2013). How much have electricity shortages hampered China’s GDP growth? Energy Policy, 55(0), 369-373. doi: 10.1016/j.enpol.2012.12.015
Grubert, E. (2012). Reserve reporting in the United States coal industry. Energy Policy, 44(0), 174-184. doi: 10.1016/j.enpol.2012.01.035
Hook, L. (2013). China coal import ban sparks industry battle. FT.com.
Liu, G. (2012). Electricity pricing in China and the role of the State. Economics Bulletin, 32(1).
ericroesler 