China needs to develop cleaner ways of using coal, an area in which Scotland has some expertise, writes Brian Wilson
I departed the UK for China at the weekend with the Grangemouth recriminations in full swing and, after a brief outbreak of unity, positions were being taken on what the implications might be for the constitutional debate.
Since Ineos seem to have got pretty much everything they wanted, maybe that is the wrong debate. Whatever the constitutional set-up, politicians would have been falling over themselves to secure a better solution than closure of the petrochemical plant with grim knock-on effects for the refinery.
However, Alistair Carmichael, the new Scottish Secretary, did not neglect to point out that closure of the petrochemical plant had been averted after co-operative working between UK and Scottish governments, the former having underwritten £125 million in the proposed new plant which, when delivered, will be based on imports of shale gas from the US.
The Nationalists countered that they would have made the same offer if they had the power and money to do so, which is undoubtedly true. But it also misses the point in favour of unity which is that, under current circumstances, both governments were on the same side. In future, they would be competitors.
There is massive over-capacity in oil refining not only in the UK but in Europe as a whole. Cheap production of US shale oil, on a scale which has take even the Americans by surprise, is increasing all the time. Surpluses, particularly of distillates, are being exported to Europe and killing a refining industry based on more expensive and declining crude oil supplies.
There was a clear political imperative last week for the UK government to make every effort to ensure that Grangemouth stayed open. After all, we are all part of the same country. If that changed, it would be naïve to suppose that “the Rest of the UK” would regard Grangemouth as anything other than a competitor in an increasingly desperate struggle. So the question worth reflecting on is whether we were better served last week by being on the same side rather on competing ones?
That is surely rhetorical in the context of Grangemouth. But it can also be applied to many potential circumstances in which we would not only be creating an international border within our small island but also a competitor, rather than a partner, on the other side of it. That does not seem to make a lot of sense.
Since China features so prominently in our economy, it seemed appropriate to come and see these issues from a different perspective. As supplicants for trade and investment, we are a very small part of an extraordinarily large picture. They make a lot of things in China – but, most significantly, they make decisions which have huge impacts on both the Scottish and UK economies.
For starters, the Grangemouth refinery is half-owned by the Chinese National Petroleum Company. The state oil company, Sinopec, is a very substantial investor in the North Sea. Most recently, the prospects for nuclear new-build in the UK were salvaged by a Chinese investment decision. All very welcome and hardly a day goes by without news of further investment or acquisition.
In return, we sell into China and, in some circumstances, our companies can invest in joint ventures. The market is almost beyond comprehension in scale and potential. But the corollary is that the projects which the Chinese bring forward also tend to be colossal and call for extensive collaboration involving government and companies in order to compete. We need to consider how Scottish interests are best served in that scenario.
While China is investing all over the world in order to safeguard its energy security, their main challenge at home is also crying out for radical solutions – and we should be able to help them. The problem is pollution of the atmosphere which, for much of the time, is at such a scary level that the issue can no longer be avoided politically.
Yesterday, the air pollution levels in Beijing were at almost ten times the recommended EU limit. In one industrial city, I was told, the reading went to 25 times the healthy maximum. Things are getting worse and the subject is now constantly spoken about – at the head of government as well as among the increasingly-masked population – as being the major threat to well-being, negating other advances in living standards.
At the heart of the problem is China’s dependence on low-grade coal in its power stations to fuel the vast majority of the country’s continuing economic growth. There is a parallel with our own cities in the post-war years. The smell yesterday vaguely reminded me of Glasgow in my childhood before the Clean Air Acts. The Chinese breathe in some very nasty particles.
By 2030, one in eight of the world’s population is projected to be living in China’s cities, yet currently they are proportionately at the same stage of urbanisation as we were in the mid-19th century. There are vast construction programmes and the Chinese have a target of 20 per cent of all new-build being “green” by 2015. That explains why the Scottish business delegation being led by Alex Salmond next week will focus on construction as well as energy.
Then there is the growing middle class who aspire to owning cars – but also to clean air. The Asian Development Bank projects the vehicle population of China to treble within 20 years to 400 million, twice as many as in the United States.
That will surely drive the imperative of developing vehicles that do not depend on fossil fuels. It is also leading to a massive expansion in public transport and huge projects well-suited to UK participation. Beijing’s metro system has now overtaken London’s as the most extensive in the world. More than 30 cities have urban rail systems under construction.
In the energy sector, there is massive potential for co-operation in both renewables and nuclear. But it is also worth remembering that the most urgent need with the most positive potential outcomes is to develop cleaner ways of burning coal because, one way or another, they are going to be burning it for a long time to come. Scotland has a lot of expertise in these technologies.
The sheer scale of the Chinese pollution problem puts our own domestic efforts in perspective. While the effects are most debilitating for the Chinese people themselves, the impacts are also global.
In other words, the more our companies and governments can do to help China address its problem, the more we will be helping ourselves and our children.