Christmas, Inc: South Africa fuels Santa’s workshop

Editor's note: When it comes to the economy, the holidays really do bring us together. Coal mined in South Africa heads to China, where it fuels the plants desperately in need of a little pick-me-up in this economic climate. The stubborn flow of goods persists from there, and even during the dismal European debt crisis, people in France stuff their pockets full of Christmas cheer this time of year. Take the full tour of GlobalPost's Christmas, Inc., a series about how your holidays get made.

DURBAN, South Africa — A few weeks before Christmas, a man dressed as a lump of coal stood outside the UN climate conference in Durban. “Kick me,” read a sign pinned to his back, and so people did, booting him in the rear as he flailed around wearing black leggings and a garbage bag.

This was among the many stunts at the Durban summit by activists urging countries to “kick the coal habit.” Coal burning, which releases carbon dioxide emissions into the atmosphere, is the main cause of global warming.

But China, the world’s biggest carbon emitter, won’t be shutting down its coal-fired power plants any time soon. The growing Chinese demand for the dirty rock is even encouraging coal-exporting countries to increase their production.

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China’s economic boom has been powered by coal, and ever more is needed to keep up the pace of growth, driven by the manufacturing sector. Santa’s workshop is literally fueled by coal: an estimated 70 to 80 percent of all toys sold in the United States are made in China, which relies on coal for 70 percent of its energy.

Power shortages remain a perennial problem in China, including this winter, with some coal-fired power stations shutting down because coal is in short supply and too expensive. Analysts say that in southeast China it can be cheaper and easier to buy imported coal than to transport coal from northern China.

So while China is the world’s biggest coal producer, and traditionally an exporter, its growing demand has seen it turn to importing coal from countries including South Africa, Australia, Indonesia and Colombia.

Just down the South African coast from Durban, site of the climate-change summit in early December, is the Richard’s Bay coal terminal, one of the world’s biggest. South Africa exported record amounts of coal from Richard’s Bay to China in October and November.

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Chinese companies have also been investing heavily in coal-mining projects in South Africa, which itself relies on coal-fired power plants for more than 90 percent of its electricity.

For South Africa, the world’s fourth-largest coal exporter, China’s needs have been a boost to the coal-mining industry, and made up the shortfall in exports to financial crisis-stricken Europe.

“China desperately needs our coal and they are prepared to buy it, providing the price is right,” said Xavier Prevost, a senior coal analyst at XMP Consulting in Pretoria.

Prevost said the demand from China is so great that South Africa could be exporting more if not for capacity problems, with weak rail infrastructure hampering the transport of coal to the Richard’s Bay terminal.

But Greenpeace, the environmental activist group, said South Africa has a “coal addiction” and should be working toward green forms of energy, not looking to benefit from coal exports.

“We need to shift away from coal entirely,” said Melita Steele, a climate-change expert with Greenpeace Africa. “Simply exporting our emissions to other countries is not a solution.”

The International Energy Agency warned last week in a report that coal demand is expected to rise in the next five years. The report raised specific concerns about “China’s massive appetite for coal,” highlighting the potential impact on global electricity costs.

“For all of the talk about removing carbon from the energy system, the IEA projects average coal demand to grow by 600,000 tons every day over the next five years,” executive director Maria van der Hoeven said in a statement.

Philip Andrews-Speed, a UK-based energy-policy analyst, said that between 2003 and 2006, China’s coal consumption soared beyond expectations, and is continuing to rise by up to 10 percent a year.

"Despite efforts to reduce dependence on coal, that has not happened,” Andrews-Speed said.

China imported a record 165 million tons of coal in 2010, and imports are expected to reach 150 million tons this year.

While this is a small percentage of the 3.5 billion tons of coal that China is expected to use this year, it is still significant on the international stage, where China’s net imports account for about 15 percent of world-traded coal.

“Very subtle changes in the supply-and-demand balance inside China has a significant effect on international markets,” Andrews-Speed said.

Changhua Wu, greater China director for The Climate Group, said Beijing is working to reduce its dependency on coal, and has become the world’s largest investor in renewable-energy projects. The government’s 11th five-year plan has been widely praised for emphasizing green growth and low-carbon initiatives, she noted.

But it is not easy to implement major changes to energy usage in a country with a massive population and pressure to maintain the fast pace of growth.
“In history, no country has been put in the same situation as China is today,” Wu said.