China s Water-Energy Nexus Challenge

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1 12 6 May 2014 China s Water-Energy Nexus Challenge Sinéad Lehane Acting Research Manager Global Food and Water Crises Research Programme Key Points China faces an intractable water crisis by 2030 under a business-as-usual scenario. Crippling water pollution, disparities in supply and demand and predicted growth in both energy and water requirements, have created insurmountable challenges for China s central government. The historic focus has been on supply-side management and engineering the water supply, but consideration of environmental sustainability and demandside management is now required. Planned development of hydroelectricity and China s location within the Tibetan Plateau Region, have the potential to create regional water insecurity and tensions between states. Summary Access to water and energy and continuity of supply are two critical issues facing China today. With the population expected to reach 1.6 billion people by 2030, the increasing demand for water and energy will far exceed available resources. Even today, China struggles to provide enough clean, fresh water and energy for industry, agriculture and domestic users. Limited resources have driven China to devise large infrastructure projects, which will significantly change the flows of natural waterways. It is also looking at the Tibetan Plateau as a potential source of future water and energy supply. Encompassing the sources of many of the largest rivers in Asia, China has the power to play water hegemon in the region, raising concerns about water security for downstream riparian neighbours.

2 Analysis China will face an intractable water crisis by 2030, if plans to tackle its crippling water pollution and overconsumption fail to genuinely address the source of the problem. Exacerbating water insecurity is the unquenchable thirst of Chinese industry and the predicted growth in energy demand correlated with continuing economic expansion and population growth. Home to 20 per cent of the world s population, China has less than ten per cent of its arable land and seven per cent of its potable water. The geographic disparities between water resources and water demand, have led Beijing to adopt an ambitious strategy of large infrastructure projects and water diversion schemes, to water its dry northern region. Energy generation will need to double in the next 20 years to keep pace with China s booming industries. According to the OECD s International Energy Association, this will require 65 per cent more water. Access to water and energy and continuity of supply, are the two most critical issues facing China today. Historically, the two have been managed separately, but today it is critical that China s strategies address shortages of both together, adopt a lifecycle approach and take into consideration their interactions and interdependency. China s Water Supply China faces a considerable challenge in addressing growing water scarcity. Estimates suggest that out of more than 600 cities in China, over 400 are water scarce. In 2009, China had a per capita water availability of 2,079 cubic metres per year; the world average was 6,225 cubic metres. By 2050 China s total water deficit could be as great as 400 billion cubic metres 1. Approximately 98 per cent of China s surface water is recharged through precipitation, creating vulnerabilities in supply when flooding or drought occurs. Rainfall is affected by the variability of the monsoonal climate; China experiences most of its rainfall in a short period over summer and autumn. Geographical rainfall disparities have created a further barrier to water access. The majority of precipitation (more than 2000mm per annum on average) falls in the sparsely populated south-east region (Figure 1), while the densely populated and high resource demand regions of the north-west, experience limited precipitation (less than 200mm per annum on average). Rapid industrialisation, urbanisation and booming population growth, have led to poorly managed and unsustainable resource use. Scarcity is particularly acute in China s north, which has more than 45 per cent of China s population. On the other hand, 64 per cent of the state s arable land and the production of 40 per cent of the industrial output, lie in areas with less than 20 per cent of China s water resources. These disparities in supply and demand have led to demand-side management, rather than water use efficiency. This has produced a preoccupation with large infrastructure projects, to supply growing demand levels for both water and energy. 1 Jiang, Y (2009), China s Water Scarcity, Journal of Environmental Management, vol. 90 (2009), pp Page 2 of 10

3 Groundwater Overall, groundwater accounts for approximately one-fifth of China s total water consumption; but as much as 50 to 80 per cent in the north and northwest. A lack of consistent groundwater governance has led to extreme overexploitation across China and in many instances irreversible ecological damage. The North China Plain (NCP) in particular has been affected by groundwater over-extraction, due to agricultural and industrial activity; this has led to the salinisation of aquifers, land degradation and a loss of agricultural productivity. The exploitation of fossil aquifers in the NCP is of serious concern, as water supplies in these underground reservoirs face ongoing depletion, with little or no recharge. In Beijing, more than two-thirds of the city s water supply is pumped from subterranean reserves and the water table has dropped by more than half in a decade 2. The depth of wells, in response, has increased significantly in the last ten years as water tables continue to fall. According to China Water Risk the northern Hebei province now has wells at m depth, where once they were dug to 30m. Groundwater over-extraction is threatening the health of China s aquifers; as much as 90 per cent of groundwater in China s cities is contaminated. In 2012, China s Ministry of Land and Resources issued the Communique on Land and Resources of China 2011, which reported 2 Chellaney, B (2011), Water: Asia s New Battleground. Washington, DC: Georgetown University Press. Page 3 of 10

4 that, of approximately 5,000 groundwater check points, 55 per cent of the samples were heavily polluted. This presents a direct risk to agricultural industry, as livestock, crops and soil are exposed to harmful contaminants. Conversely, it is those engaged in agricultural industries farmers and livestock producers who are contributing close to half of all groundwater pollution, through the leaching of fertilisers, pesticides and waste runoff into groundwater tables and rivers. In 2013, a survey conducted by the Institute of Hydro-geology and Environmental Geology at the China Academy of Geological Sciences, showed that over 70 per cent of groundwater in the NCP is affected by severe pollution and is unfit for human contact. Recognising the severity of groundwater pollution, in 2011 China released the National Groundwater Pollution Prevention Plan. The plan aims to curb groundwater pollution in ten years, through the investment of approximately US$5 billion in surveying, monitoring, remediating and preventing groundwater pollution. China s Rivers There are nine river basins in China; the Yangtze, Yellow (Huang), Hai-Luan, Huai, Song-Liao, Pearl, Southeast, Southwest and Northwest. According to a survey released by the Chinese Ministry of Water Resources in 2013, the number of rivers in China has halved in the past five decades. This is a loss of approximately 23,000 rivers and very few of those left are free from pollutants. Of those that remain, there are over 1,500 rivers that drain an area of 1000km 2 or more. The water source for the majority of China s larger rivers is the Tibetan Plateau, where most of China s rivers travel to the east or south, falling from great heights in the north-west, and empty into the Pacific Ocean or the South China Sea. This has created ideal conditions for the development of hydroelectric dams. Riverine health is threatened across China, with many rivers experiencing a loss of connectivity and others almost completely drying up. This has reduced the ability of basins to recharge aquifers, led to a widespread reduction in wetlands and increased the sediment loading and salinisation of waterways and soil. In the north, the Yellow, Liao, Hai and Huai River basins support two-thirds of China s cropland. Inadequate rainfall and severe surface and ground water pollution, however, have limited the availability of freshwater in the region. According to Xia et al. more than two billion cubic metres of sewage water is used for irrigation in the Hai river basin, due to the contamination of rivers and a lack of freshwater 3. Engineering Water Supply 3 Xia J, Zhang L, Liu C and Yu J (2007). Towards better water security in North China, Water Resource Management vol. 21 pp Page 4 of 10

5 China has an historical fixation on manipulating natural water systems in large engineering projects. The oldest example of this is the Grand Canal, a 1,500 year old waterway linking the south and north. The geographical disparities between north and south China have led to the development of significant water-transfer projects across the country, in an attempt to balance water demand with access. The movement of water on such a grand scale has caused significant ecological degradation, the forced displacement of millions of people and critical water quality reductions. China s largest river, the Yangtze, has seen the development and diversion of much of its water, leading to significant sediment loading and water quality degradation. The Three Gorges Dam, the world s largest hydroelectric dam, has significantly altered the natural flow of the Yangtze River. It was designed, in part, to prevent the disastrous floods that occur approximately every 10 years, but researchers claim it may now be the cause of extended drought in central and eastern China. Further, the depletion of fish stocks, increased incidences of landslides and rapid degradation of water quality, all linked to the dam s construction, have severely impacted the livelihoods of people in the basin. The South-North Water Transfer Project is China s most ambitious project to date. On completion it will divert 45 cubic kilometres of water annually from the Yangtze River basin to the Yellow River basin, through three canal routes from the south, east and west. In an attempt to reduce groundwater withdrawals and provide much needed water to China s north, the project will link China s four main rivers the Yangtze, Yellow, Huaihe and Haihe Rivers. In 2013, the first stage of the Eastern Route began supplying water to the provinces of Jiangsu, Anhui and Shandong, utilising the Grand Canal as the link between the Yangtze River Page 5 of 10

6 and the northern regions. The project is expected to take 50 years to complete, with water flow in the Central Route due to begin in mid- to late Construction of the controversial Western Route has not yet commenced. Water flows in the Yangtze River have seen a significant reduction over the past decade, with the basin experiencing its worst drought in 50 years in Rainfall has also declined, leading residents and environmentalists in the south to question the prudence of transferring a large proportion of its water to the north. Further concerns have been raised over the transfer of pollution and waterborne diseases through the diversion canals and their impact on wetlands and river flows. Of greatest concern for China s neighbours is the final canal, known as the Western route. It is designed to tap three tributaries of the Yangtze River on the Tibetan Plateau. The plan is to divert water at the Shuomatan Point or Great Bend, a section of the Yalong Tsangpo River just before it enters India as the Brahmaputra River. Significant flow reductions from this point have the potential to affect millions in India and Bangladesh, raising concerns about the control China will have over their water resources. Water Quality & Pollution While addressing physical water scarcity has remained a major focus for water managers in China, pollution has emerged as the critical challenge in ensuring long-term water security. The severity of pollution in both ground and surface water sources across the country is staggering, with over 40 per cent of water courses deemed seriously or very seriously contaminated. Each year, China emits over two million tonnes of ammonia nitrogen and 24 million tonnes of organic pollutants (measured through chemical oxygen demand (COD) tests) into its waters, according to Environment Minister Zhai Qing, in a news conference earlier this year. China s rivers are particularly important in rural areas, where a lack of an alternative safe water supply has led to a reliance on unhealthy river and groundwater for all facets of life. According to the Ministry of Environmental Protection the water in nearly half the rivers and lakes in China is unfit for human use. The contamination of groundwater also poses a serious threat to public and environmental health. A 2013 study by the Ministry of Environmental Protection, estimates that more than 57 per cent of groundwater is polluted. Despite these figures, approximately 280 million Chinese people continue to drink unsafe water. Those who can afford it buy bottled water, but this is a luxury few outside the cities can afford. The World Bank puts the cost of water pollution related health impacts at approximately US$3.9 billion per year. The prevalence of cancer villages acknowledged by China s Environment Ministry for the first time in 2013, only demonstrates further the burden pollution is having on the country. While regulations on pollution have been in effect since 1979, the government has, so far, been unable to tackle this insurmountable problem. Weak pollution-control measures have Page 6 of 10

7 led many industries and those in agriculture, to continue using waterways as dumping grounds for effluent and waste. Often the fines for polluting waterways are less costly than the investment in upgrading waste treatment and storage facilities, providing little incentive to dispose of waste properly. Water for Energy Apart from agriculture, energy is the highest consumer of water in China. The International Energy Authority (IEA) predicts China s energy demand will rise by 60 per cent between 2012 and With available water supplies in decline, China is facing a tightening chokepoint between energy and water. Like the agricultural sector, China s energy production is concentrated in the north. This has created a high level of risk to the water supplies for the largest state-owned power enterprises in the country. The diversification of both locations and energy sources will be required to secure China s energy production in a scenario of water inaccessibility. While water resources will face increasing pressure under energy expansion predictions, it is equally important to note that energy development is significantly threatened by the scarcity of water. A reduced ability to supply either water or energy could potentially cripple China s ongoing economic expansion and development. The mining and processing of coal and the supplies to coal-fired power plants alone, account for 20 per cent of water withdrawals. Currently supplying 70 per cent of generated electricity, coal-fired power production is expected to increase by 30 per cent in the next decade. This will lead to a considerable increase in water demand in the energy sector. Doubling the number of hydroelectric dams by 2030, to expand renewable energy capacity, is also a key priority for the government. In the current Five Year Plan ( ), hydropower projects have been prioritised, with a target to construct as many as 60 medium and large dams by China has the fastest growing capacity for renewable energy in the world. Much of this energy, however, is water intensive. Increasing desalination capacity is another key focus of the Twelfth Five Year Plan, with the goal of generating 2.2 to 2.6 million cubic meters of water per day by Many of China s coastal cities, including Tianjin and Qingdao, have incorporated desalination into their middle-to-long term strategies for securing alternative water resources. An energy intensive process, the expansion of these alternative water resources will add to the rising demand for energy. As it stands, there is currently not enough water to meet the growing demand from the energy sector, while maintaining supplies to agriculture, urban centres and other industries. By 2030, China will have more than 350 million extra urban dwellers. Increased urbanisation will require a significantly larger provision of both water and electricity. Given the predicted economic and population growth in China, the ability to expand and diversify both energy and water supplies is critical. Page 7 of 10

8 Food production in China Agriculture is the largest consumer of water resources in China, utilising approximately 70 per cent of annual water withdrawals. China has historically maintained a policy of food selfsufficiency; however, with the current limitations of both arable land and water, this policy is no longer sustainable. From 2001 to 2012 China s import dependence doubled from 6.2 per cent to 12.9 per cent. In the country is expected to import record amounts of grain. Water use in the agricultural sector is extremely inefficient. According to a 2009 World Bank Report, only 45 per cent of the water withdrawn for agriculture is actually used on crops. Part of the problem is that the charge for irrigation is based on acreage calculations, rather than actual water consumption. This has led to an unsustainably low price for water, in an effort to maintain rural incomes, which provides little incentive to save water. If China is to expand, or even maintain, current production levels, water inefficiency must be addressed. A preoccupation with supply-side management, including the mass-diversion of water across the country, will only go so far in supplying enough water to support increased agricultural production. Improved irrigation practices, more efficient use of rainwater and a review of water pricing, are just a few of the demand-side practices that could be used to address water security in the agricultural sector. The agricultural industry is one of the key contributors to China s severe water pollution. While a few larger enterprises have advanced waste and wastewater technology, the majority of rural industries, both agricultural and otherwise, lack proper treatment facilities. As a result, most wastewater is discharged directly into waterways. The excessive use of nitrogen fertilisers, pesticides and waste-runoff on agricultural land has also contributed to the degradation of groundwater. The continued use of this contaminated groundwater for irrigation has, in turn, reduced the productivity of agricultural land and affected soil health. Supply versus Demand Side Management For decades Chinese policy towards water management has focused on the supply-side, rather than demand-side management. The preoccupation with diversion projects and large hydroelectric dams reflects a priority for engineering over ecology. It is clear that a businessas-usual approach to water management will fail to secure enough water for Chinese consumption in the middle- to long-term. The establishment of water markets and a water-rights system separate from the state, are unlikely to lead to breakthroughs in the short-term. Current water law clearly outlines that surface and groundwater are the property of the state. Realistically, more clearly defined individual water rights, independent of the state, and free from corruption or control, are unlikely in the short-term. Further, increasing the price of water to reflect its true value is not so straightforward. In the past decade, many cities have begun increasing their water prices through market-based reforms. To support low-income consumers, special rates were included in these reforms. Page 8 of 10

9 Reforms to water pricing in rural areas, however, will require more careful planning. China relies on millions of smallholder farmers to sustain its food security. These farmers, in turn, rely on low water prices to enable them to generate enough income to keep producing and feed their families. Increasing water prices, while ensuring the rural population can maintain their livelihoods, is critical to sustaining the agricultural industry and a large percentage of the population. The fragmentation of governance, inconsistencies between constituencies and weak systems for monitoring and regulation, create significant barriers to meaningful demand-side reform. While it is clear from the Twelfth Five Year Plan that management remains firmly fixed on supply, there has been a promising swing toward demand-side management. Most notable are the changes to the Environmental Protection Law (EPL) in April. For the first time in over 20 years, Beijing has amended the EPL, increasing the power of the Ministry of Environmental Protection to deal with polluters. Of particular importance, is the removal of the cap on environmental fines. At present, polluters have little incentive to adopt safe practices and invest in waste treatment, with the costs far exceeding the fines received for discharging waste into the environment. From January 2015, however, polluters will face cumulative daily fines to an unlimited amount, as long as violations continue. Polluters will also be named and shamed and NGOs will have the ability to take legal action against polluters in the public interest. Changes to the EPL reflect a fundamental change in environmental and broader governance priorities and a shift towards environmental protection rather than economic development. As The Diplomat notes, greater institutional change in China will be critical to ensuring that any environmental legislation being passed has the power to generate real change. Water hegemon of Asia & the Tibetan Plateau Water insecurity in China is a cause for concern across the whole Tibetan Plateau region. As outlined above, the threat of water and energy insecurity in China is considerable. With demand for both expected to rise exponentially, Beijing must find ways to meet that demand to maintain economic growth and stability. The prioritisation of engineering water solutions, particularly in the form of dams, will continue for the foreseeable future. In the coming decade, the proliferation of dams within the Tibetan Plateau region will create challenges for both the environment and regional governance. China is not alone in its plans for the Plateau; India, Nepal, Laos and most other states dependent on the Himalayan watershed for their water, are developing, or have plans to develop, hydroelectric dams. Occupying the upper reaches of the Tibetan Plateau and in control of the sources of many of the region s greatest river systems, China is in a unique position to play water hegemon. It has already dammed every major river and tributary in Tibet and development plans include the construction of hundreds more dams in the region. There is no country in the world that parallels China in its water stake. The question now is, given the considerable internal strains on water and energy resources, will China exploit the rivers of the Tibetan Plateau to the Page 9 of 10

10 detriment of downstream states? FDI is currently investigating water security in the Tibetan Plateau; outlining water demand and deficits in the region and the potential for insecurity, both within and between states. ***** Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International. Published by Future Directions International Pty Ltd. 80 Birdwood Parade, Dalkeith WA 6009, Australia. Tel: Fax: slehane@futuredirections.org.au Web: Page 10 of 10