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Abstract
The question of whether China is on the verge of a ‘shale gas revolution’ is examined. This has potentially significant consequences for energy policy and climate change mitigation. Contrary to the optimistic reading of some commentators, it argues that various technological, environmental, political, regulatory and institutional factors will constrain the growth of China's shale gas market and that such a revolution might in any event have consequences that are at best mixed, at worst antithetical to climate change mitigation.Policy relevanceChina's reserves of unconventional gas have the potential to transform energy policy, as has occurred in the US, resulting in the substitution of shale gas for coal in the energy mix. Because gas emits only approximately half the GHG per unit as coal, such a move would have important implications for climate policy. However, substantial obstacles stand in the way of the ‘energy revolution’ that some policy analysts see China as embarking upon. The need to acknowledge these obstacles, particularly those relating to regulation and governance (and whether or to what extent they can be overcome), is an issue of profound importance to the future of climate and energy policy.
Notes
1. The implications of shale gas exploitation on climate change are discussed in more detail below. For more detailed empirical analyses on the environmental impact of shale gas see Broderick et al. (Citation2011).
2. For a conservative assessment of China's shale gas future see Wood Mackenzie (Citation2012).
3. Although much larger supplies of gas are estimated (see MIT Energy Initiative, 2011).
4. Whether the scale of the present shift towards gas over coal in the US persists, however, is uncertain, due to factors such as natural gas prices (EIA, 2013).
5. Australia also has important shale gas deposits which it is beginning to exploit, although not on the scale of the US, as too do a number of other countries including India, Canada, Indonesia, and some countries in the EU, although here, political opposition to shale gas exploration may serve to keep most of it in the ground. See IEA (2012b).
6. In 2012, China's Ministry of Land and Resources (MLR) released its onshore shale gas resources survey, which indicated total reserves of 134.42 trillion cubic metres, and exploitable reserves of 25.08 trillion cubic metres (excluding Qingzang Plateau area) (Kwok, Citation2012). See also Gascoyne and Aik (2011) and Yu (2012).
7. In spite of China's efforts to diversify its supply sources, the Middle East remains the largest source, followed by African countries such as Angola (EIA, 2012b).
8. Specific impacts include large quantities of water use, harm to fish and plants, and contamination of soil (EPA, 2013).
9. For a broader analysis of the obstacles to shale gas development see IEA (2012b) and Chou (2013).
10. CNPC is closely working with Shell to explore Sichuan's Fushun-Yong chuan shale-gas block and with Chevron on the Chuandongbei project also in Sichuan. PetroChina, Sinopec and CNOOC, the three major National Oil Companies in China, are also reported to be initiating exploration in China, together with several foreign oil companies. See Bloomberg News (2011).
11. The US-led GSGI aims to assist countries seeking to develop their own unconventional gas resources ‘to identify and develop them safely and economically’ as part of an effort to promote energy and climate security around the world. See Statement on US–China Shale Gas Resource Initiative (US Office of the Press Secretary, 2009).
12. In 2010, China's state-owned China National Offshore Oil Corp (CNOOC) invested US$1.1 billion to buy one-third of US shale gas specialist Chesapeake Energy's oil and gas assets, and subsequently Sinopec purchased a stake in Devon Energy for $900 million. See Yang (2012).
13. Shell has already signed a contract with China National Petroleum Corporation to cooperate in the development and production of shale gas in the Fushun-Yongchuan block in the Sichuan Basin. See Yu (2012).
14. See Gao (Citation2012) for a general discussion.
15. For a general discussion see Stevens (Citation2012) and references therein.
16. As to the latter see the next section.
17. For empirical analyses that review a large number of shale wells, see Logan et al. (Citation2012), O'Sullivan and Paltsev (Citation2012) and Weber and Clavin (Citation2012). Also see the ongoing work of the Environmental Defense Fund (e.g. Alvarez & Paranhos, Citation2012).
18. For a useful summary see Stevens (Citation2012, p. 6).
19. Weber and Clavin (Citation2012, p. 5688) go on to remark that ‘understanding system-level climate impacts of shale gas, through shifts in national and global energy markets, may be more important and requires more detailed energy and economic systems assessments’.
20. I am indebted to an anonymous referee for this point.
21. For example, the Cornell study above engaged with the first of these issues but not the second.
22. ‘The Plan lays out an overall target and four milestones to be achieved by China from 2011 to 2015, including (i) completion of a nationwide shale gas survey and appraisal; (ii) production output to reach 6.5 billion cubic metres by 2015; (iii) development of suitable methods, technologies and equipment for China's shale gas survey, appraisal, exploration and production; and (iv) establishment of technical standards, rules and policies regulating the following activities in relation to China's shale gas development, such as reserve survey, appraisal and certification, test and analysis, exploration and production, and environmental measurements’ (Kwok, Citation2012).
23. See, e.g., Hu Jintao's ambitious attempt to change the culture of growth through ‘Green GDP’ (Zhang, Citation2007).