Economy

How A Changing Global Energy Equation Could Leave China In The Cold

Shanghai, the largest city in the world's biggest energy consumer
Shanghai, the largest city in the world's biggest energy consumer
Yu Huapeng

BEIJING - A new study published by the National Academy of Economic Strategy (NAES) finds a global energy market that is in the midst of major changes. China, in this context, is facing both opportunities and challenges; in particular, there are concerns about China’s energy security brought on by shifts in the sector in North America.

The global energy market is undergoing three major changes. First, the diversification of the oil supply. With huge oil reserves and production growth in North Africa and Latin America and the development of unconventional oil and gas resources in North America, the three global oil-exporting centers will be the Middle East, North America, and Africa. Second, with increasing oil consumption in Asian countries, competition among oil producers from African and Latin American emerging countries will be rife. Third, the development of new energy sources from shale oil, gas and tar sands alters the balance of power between energy-producing countries, so energy trade disputes will intensify.

As the report pointed out, the relationship between North American countries and global energy trade regions has undergone major changes in recent years – in particular in the United States, where dependence on foreign oil and gas has decreased. This has created new issues for China’s energy security. If China and America’s interdependence in strategic trade sectors such as coal, petrol and gas can be increased, it will help the two big powers avoid a comprehensive strategic competition.

“There are mainly two types of friction in the China-U.S. energy relationship. One of them is that when Chinese oil and gas companies try to acquire American companies, they face political obstruction. Another is that America has repeatedly launched anti-dumping and countervailing duty investigations over the wind power and solar photovoltaic power generation equipment exported by China. Since China hasn’t yet acquired market economy status in the World Trade Organization, China is in a disadvantageous position during the trade dispute resolution process,” writes Professor Zha Daojiong of Peking University, one of the authors of the study.

As the world’s biggest energy consumer, China is one of the most interested parties in the global energy market, as Shi Dan, vice-director of the NAES points out. In recent years, China’s dependence on foreign oil has reached nearly 60%, while for natural gas, it’s close to 30%. It has also become the world’s largest net coal importer.

The geopolitics of oil

As China bypasses the United States as the largest energy consumer, it needs to establish good relations with countries in the international energy business while safeguarding its national interests at the same time. As China rapidly expands its foreign energy investments, it must also carefully manage its relationships with the energy producing countries. In addition, China is faced with an unprecedentedly complex international context. Though its international standing has gone up in the global energy market, it is also subject to more challenges and pressures.

The study also noted that Central Asia and Russia, as well as Africa and the Middle East are China’s strategic regions for energy imports. China must have different strategic approaches for each of these regions. In Central Asia and Russia where China’s relations are politically cold and economically hot, things have to change. China must also work to strengthen economic and trade relations with Africa so as to raise the competitiveness of its investments in Africa. And because of the political instability in the Middle East, it has to handle the situation with political and diplomatic wisdom, while dealing as with the multi-lateral relationships between China, the Middle East and the United States.

Meanwhile, changes in the Asia-Pacific region are bringing more uncertainty to China's energy security. With an optimistic economic development perspective in Asia, the region’s energy consumption will continue to grow, especially in the large energy-consuming countries like China and India, as well as Japan and South Korea. Energy import demand may exacerbate regional competition for the energy market.

However, tense relations in the Asia-Pacific region are not conducive to energy cooperation. Territorial disputes, combined with outside influences, deepen the distrust within the region and could be disrupt the for the energy supply, which is sensitive to the political context.

The U.S. sanctions against Iran have also aggravated the problem of energy supply – China and India are Iran's top two oil customers. As China’s third largest source of crude oil, Iran is of strategic importance. Meanwhile, as a consequence of the changes brought on by energy sector reforms after the Fukushima nuclear disaster, China must work to strengthen its energy relationship with Latin America, in order to raise its bargaining ability in the global resource game.

Though Latin America cannot guarantee the security of China's overall energy supply, nevertheless, Chinese oil companies’ participation in the region’s energy market has multiple strategic significances. In addition to the diversification of China’s crude oil imports, it can also enhance economic and trade relations with Latin America as well as affecting the global energy market and thus indirectly increasing China’s chips on the table.

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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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