Buried treasure, deadly price


Jasper Becker


Weekend: May 28-29, 2005


 

It is early on a Sunday morning in November 2004 and 300 miners, exhausted at the end of a 12-hour night shift, are preparing to ascend 1.5 kilometers to the surface.

A massive explosion ignites a fireball of coal dust. The blast races up the narrow shaft, crushing the husband of Wang Wucai (not her real name) against a long wall of coal and sealing the shaft forever.

"He still hasn't come back,'' Mrs Wang keeps saying as if he still might, more than six months after the accident.

A smallish woman with cropped hair and red chilblained cheeks and hands, she is dressed in a man's jacket. As she retells her story, she breaks down.

Like most of the 166 miners who died in the Chenjiashan coalmine accident, her husband was a peasant on a temporary work contract despite having worked in the mine for 18 years since he was 20.

Even though his job was at a state coalmine, as a peasant he had fewer benefits than workers who are protected by the "iron rice bowl'' welfare package. Peasants work for a lower salary and are not entitled to insurance, pensions or housing. If they are not needed they are sent back to their villages and if they die, compensation is just 1,500 yuan (HK$1,412) or the equivalent of a year's income in this part of northwest China.

"If they catch me talking to you, I might get nothing,'' she pleads. "Please don't mention my name, or say I spoke to you. They are listening everywhere.''

The dry eroded loess hill country of Shaanxi, where the Wangs come from, is a cruel place at the best of times. But it is rich in coal. Rain falls intermittently, the rivers have run dry, any water is black from pollution and the soil is barren. Yet underneath lies a vast Jurassic belt of coal that spreads below the mountains of Inner Mongolia, Shanxi and Shaanxi and other provinces of northwest China.

You can taste the soot floating in the air. Roads running through treeless gullies are dominated by giant roaring coal trucks. Trucks that should be carrying 20 tonnes are bent sideways under loads of up to five times that much, grinding out potholes in the new road surface.

This is the dark side of China's economic boom, where the sun rarely shines through thick clouds of pollution pouring out of giant smokestacks from power stations and coke and cement plants.

Shanxi's highways are jammed with trucks delivering coal to energy-starved cities along China's east coast with their factories churning out textiles, shoes, televisions and computers.

At the same time China's ports are piled high with imported iron ore and coke for its steel mills that an overstretched railway system cannot shift.

Just six years ago, China's economy was in the doldrums. State mines were going bankrupt and had laid off hundreds of thousands of miners. Across the country angry workers were lying down across railway lines to protest over unpaid wages.

To save the economy and keep the Communist Party in power, tough-talking premier Zhu Rongji launched a trillion-dollar infrastructure spending boom in 1998. Without it the economy would have collapsed, he later said. That, coupled with China's entry into the World Trade Organization has transformed the economy and pushed world commodity prices to record highs.

The cost of this investment frenzy in human and environmental terms will be paid by the whole world as China is committed to high-pollution growth with its building of hundreds of small, inefficient coal-fired power stations.

 

Since 1998, China has doubled its coal production to 1.8 billion tonnes. China now digs out twice as much coal as the United States, the world's second-largest producer.

It makes three times more steel than it did five years ago, topping 300 million tonnes last year.

Nothing so big or so fast has ever happened before in the history of the world's economy and China can't or won't slow down this juggernaut for fear of economic or political collapse.

To fuel this expansion, Chinese banks have lent so much money to firms and consumers that their bad debts now outstrip those of Japan. But as long as the boom lasts some people are getting very rich.

One of them is Li Xiaopeng, 46, who runs Huaneng Power International. Li is the son of former Chinese premier Li Peng, a former power industry minister who later became notorious for his role in the 1989 Tiananmen Massacre.

Li Xiaopeng is chairman of a semi-privatized company listed on the New York Stock Exchange that owns 16 power plants and a controlling interest in seven others. Li's sister, Li Xiaolin, is chief executive of China Power International, another energy company that listed in Hong Kong last year.

Just how wealthy Li Xiaopeng, and indeed the whole family, is remains a closely guarded secret. When an article raising the subject appeared in Securities Weekly two years ago, all copies were quickly confiscated and the author jailed

After Huaneng declared its profits doubled over the past four years, Li expressed confidence he would soon be the chairman of a Fortune 500 company. He says he expects that by 2010 sales revenue will top US$10 billion (HK$78 billion).

Huaneng buys the coal produced at Chenjiashan mine for its power stations and Mrs Wang's husband was forced to work overtime as the company sought additional profits. His coalmine had already delivered its contracted quota of 1.8 million tonnes to Huaneng by the end of October at a fixed price. The mine's management was driving workers to dig out an extra 400,000 tonnes before year's end because that coal could be sold on the open market at very high prices.

Coal prices have rocketed upwards in the last two years because of the electricity shortages that plague eastern China, causing production halts at many factories.

Even Shaanxi province ran out of coal this year and its power stations had to stop generating electricity when there was just a week's stockpile left in the yards.

To encourage Chenjiashan to keep digging, managers were offered bonuses of US$50,000 - more than most people in Shaanxi could earn in a lifetime of hard labor.

Survivors of the blast said their bosses had manipulated gas detection equipment to avoid triggering alarms and threatened miners who refused to go down with fines and dismissals. A week before the accident, safety monitors ignored another blaze but gave the go-ahead to continue production even though there was so much smoke they had trouble breathing.

Just how many lives are being sacrificed in China's energy sector depends on who is counting. Officially, three million Chinese work in the mines, mostly in 580 big state mines which kill about six thousand miners a year.

This death rate is 100 times what it is in America or Australia. A country that produces a third of the world's coal accounts for 80 percent of the industry's fatalities.

In reality, China probably has 6.6 million miners, many of whom work in the country's 70,000 smaller mines run by villages and local governments. Virtually all of these miners are peasants whose deaths and injuries do not show up in statistics gathered from state-owned mines by the central government.

Robin Munro of the Hong Kong-based China Labour Bulletin estimates the real death toll at 20,000 a year, excluding those dying prematurely from lung diseases. Some 600,000 miners suffer from pneumoconiosis and the number grows by 70,000 a year.

The economic cost of this disease is put at US$25 billion or 0.4 percent of China's gross national product , according to a study by Shanghai's School of Public Health at Fudan University.

Thanks largely to coal consumption, China's cities are the most polluted in the world and lung diseases, mostly attributed to air pollution, account for a quarter of all deaths in China.

China has overtaken the United States as the world's largest emitter of sulfur dioxide. About 30 percent of China's total land area and over 60 percent of cities in southern China are damaged by acid rain, according to Xinhua.

When all these associated health and environmental costs are added up, coal turns out to be a far more expensive energy source than it first appears to be.

"The real price of coal could be three times the current price,'' claims Fred Hu, managing director of Goldman Sachs Asia.

China's industry relies on coal to provide 80 percent of the energy it needs because it appears to be cheap compared to imported oil or gas and factories waste it to an extraordinary degree.

China takes six times as much electricity to make a tonne of steel as Japan and three times as much as most European countries. The same inefficiency is evident in the power sector.

The strain of moving all this coal around the country is also placing an enormous burden on China's infrastructure. Most coal is shipped by rail and more than half of rail transport is tied up transporting coal. As demand has leapt so quickly and unexpectedly, the rail system has not been able to cope and the whole transport system has become a bottleneck.

China is proud of its record of economic planning but 10 years ago the Communist Party experts got their predictions badly wrong.

"We miscalculated,'' admits Zhou Dadi, director of the Energy Research Institute under the National Development and Reform Commission.

Planners assumed that in the second half of the 1990s there would be no growth in the steel, cement and aluminum industries and demand for coal would drop. The central government started closing coalmines and prepared for electricity output to grow by just 4 percent a year.

Coal production, which had grown rapidly from 560 million tonnes in 1980 to 1.4 billion tonnes in 1996, fell to 900 million in 1999.

The planners thought it would take until 2020 for China to produce 1.8 billion tonnes of coal but China passed that mark last year. At this rate the country will be mining 2.7 billion tonnes a year by 2015. That figure was not supposed to be reached until 2050.

Caught out by crippling electricity shortages, China has now embarked on a furious program of power-plant building. Huaneng Power alone will build 10 new power stations in the next five years, doubling its generating capacity.

Across the country, 500 new coal-burning power stations are under construction that will triple the energy produced by coal-fired power stations by 2015. Over the next 30 years, half the world's new power capacity will be built in China.

The implications for the global economy are immense and deeply worrying. China's growth will doom all efforts to slow global warming and cut emissions of greenhouse gases.

That now seems like wishful thinking. For one thing, American researchers who studied the cost of acid rain on China's GDP used statistics which underestimated emissions by excluding local coal production and consumption. This in turn illustrates another problem central to the debate about the future.

Control over much of China's economy has slipped out of Beijing's hands. Cheap credit from state banks has enabled local governments to invest as they please in energy-intensive projects such as steel, aluminum, and cement factories, and the coal-fired power plants to supply them.

Try as they might, central leaders seem powerless to force local authorities to cancel these projects. While the central government has authorized new plants totaling 339 gigawatts, local governments are building another 120 gigawatts of power stations without Beijing's approval.

Under the Kyoto Protocol which came into force this year, the Dutch have pledged to cut emissions by 80 percent, Germany by 50 percent and Britain by 21 percent but none of this will make any difference. European countries are confident that dirty smokestack industries will decline and they can rely on clean gas imports from Russia.

But most of China's greenhouse gases come from burning coal and China has sufficient coal reserves to power the country for the next 200 years. Economic planners are confidently assuming that coal is bound to account for between 60 and 70 percent of China's energy needs for the foreseeable future.

In the next 20 years, China is likely to be emitting more carbon dioxide and sulfur dioxide than the United States, Japan and Canada combined.

Three years ago the influential Lawrence Berkeley National Laboratory argued that between 1996 and 2000, China's greenhouse gas emissions actually fell 17 percent while the economy grew 36 percent. It therefore concluded that China's economy could grow quickly while still reducing its emissions.

A great opportunity is being missed. The technology now exists to gasify coal or to build new power stations that are both pollution free and highly efficient. China itself has pilot projects to try out new technology including one in Henan province which turns coal into gas while it is still underground.

In the United States, President George W Bush has set aside US$2 billion for a 10-year initiative called "FutureGen'' which will create a new kind of highly efficient power plant that will produce electricity without pollution or greenhouse gases.

One technology, the integrated gasification combined cycle (IGCC), can convert coal into hydrogen. Five plants in the United States, the Netherlands and Spain are already using it.

"I invite China to be among the first to join FutureGen,'' announced Mark Maddox, US Deputy Assistant Secretary of Energy on a visit in April without much hope of a favorable response.

 

The trouble is that China is moving far too slowly to embrace the new technology. It is not required to reduce emissions before 2012 according to the Kyoto treaty.

"There seems to be some begrudging understanding that they need to do it cleaner, but they are trying to do it on a very tight budget,'' one senior official says.

That is a polite way of putting it. Chinese companies are driven by short-term profits. An Australian coal expert who has toured many Chinese power plants says even those which have installed desulfurization flues never use them. "Unless an inspector is coming, they turn them off to save money,' he says.

The Chinese banks that finance the new power plants are only lending to power companies using tried and tested technology. What is more, nearly all the new plants being built are small - usually 50MW or less. These are easier to finance but need 60 percent more coal to produce the same amount of electricity as a bigger plant.

An advanced, clean plant can cost three times as much to build. To benefit from efficiency savings, China would need to build power plants at least 300 MW in size.

This is not happening. The frenzy of construction is ensuring that the country will be stuck with thousands of highly polluting inefficient power plants which will be costly to scrap or retrofit. It could take another 25 years before they will be replaced

"If ever a country had a stake in developing an energy-efficient economy, it is China,'' says Lester Brown of the Worldwatch Institute. "It has an opportunity to leapfrog into the future, bypassing the energy-inefficient stages that now plague the industrial countries with all their vested capital in ageing, inefficient technologies.

"If it continues to unnecessarily boost carbon emissions, China may face trade restrictions from other countries on imports of goods manufactured in China. People may start actively blocking Chinese imports because of their concerns about climate change,'' he warns.

In the meantime, China has trumpeted a new drive to raise safety standards.

"This accident has taught us a lesson paid for with blood,'' China's Premier Wen Jiabao declared in January after he went to Chenjiashan to attend memorial services in honor of the dead miners.

"Safety levels must be raised to guarantee that all miners can return home safe and sound,'' he said.

A geologist by training, China's mild, bespectacled premier once worked on the coalface himself. He may be sincere but many remain unconvinced that anything will change.

"Cultural attitudes are at the root of the problem,'' says one Western safety expert. "They already have world-class safety regulations but no one enforces them.''

The government first began seriously tightening the rules in 1993 and set up new coalmine safety supervision bureaus in January 2000 with offices in the main mining provinces but inspectors have remained ineffective.

In Chenjiashan mines, safety technicians are hired by the mining company and paid just 300 or 400 yuan a month. Most are fresh-faced graduates who are cheap to hire and fire.

After an accident in April 2001 in which 38 miners died, inspectors fined the local mining administration for violating safety procedures. The management promptly deducted the fines from miners' wages. In China unions do not protect workers' rights or monitor safety infringements.

Foreign experts say nearly all accidents are preventable. About 60 percent of deaths are from explosions of coal gas in shafts but in China, mines rarely use the basic precaution of covering walls with limestone dust to lessen risks.

When an explosion does occur, perhaps because of some electrical spark or a faulty connection, the limestone turns into carbon dioxide which puts out the fire.

The other major cause of mortality is flooding.

"It is carelessness. They don't know the old works because they don't keep maps or detailed surveys so they often hit another flooded mine,'' says one expert.

The Chinese government has now announced it is allocating an extra US$480 million to improve mine safety. But this is still a drop in the bucket compared to the US$20 billion invested in coal and power last year.

"Even though the government has tightened safety standards, supervision is just one aspect,'' says Zhou Dadi.

Meanwhile, MrsWang remains intensely skeptical about Wen Jiabao's promises. Neither she nor the other grieiving widows were able to go near him when he visited their town.

"He wasn't allowed to meet ordinary workers,'' she says. "They promised all this money as compensation but I wanted to tell him I have received nothing so far.''

The government announced it had increased compensation for deaths from 15,000 yuan to 51,000 yuan, but only for "official'' workers, not peasants, and added an extra 20,000 yuan allowance for widows and another 20,000 when the body is not recovered.

Mrs Wang says the results of an investigation into the causes of the accident have not been released and no one has been arrested or held responsible. Instead she and the other widows have been warned by the local police that their movements are being watched and their phones tapped.

"The police said the coal company will help you but don't speak to anyone,'' she says and begins to cry again. "How am I now going to live ? How are my children going to go to school ? Who is going to look after us ?''

Still sobbing, she says: "Somebody help me, somebody help me.''

Photographer Patrizia Bonanzinga's images of the Chinese coal industry, taken over several years, have been published as a book, The Road to Coal (Hopefulmonster, Torino 2004). More information is available at

http://www.hopefulmonster.net/


Copyright 2005, The Standard, Sing Tao Newspaper Group and Global China Group. All rights reserved. No content may be redistributed or republished, either electronically or in print, without express written consent of The Standard.



 

 




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