Does Coal Always Mean Water Stress Along With Economic Growth?

By Dr. Lijin Zhong, Fu Xiaotian, Dr. Jiao Wang 12 November, 2015

WRI looks at how Ningxia manages water for coal & shares strategies to reduce future water stress

WRI recently published the report “Water Risk Analysis and Recommendations for Water Resources Management in Ningxia”. For this report WRI partnered with China Water Risk and the Ningxia Development Research Center. The report analysed water resources profiles, water resources management, and current water use patterns in Ningxia province, China.  WRI’s Aqueduct Water Risk Framework and Map tool was used to assess the baseline water stress of Ningxia with a focus on Ningxia’s coal industry. A closer look was taken at the development of the coal industry and its impact on water resources. The report also provides suggestions for the management of Ningxia’s water resources whilst developing coal. 

Ningxia is one of the most water-stressed regions in China, with per capita water resources just 30 percent of the national average and over 70 percent of the land subjected to high to extremely high water stress, according to WRI’s Aqueduct Water Risk Atlas.

Ningxia is one of the most water-stressed regions in China, with per capita water resources just 30% of the national average

Although Ningxia is one of the smallest provinces in China, it is home to one of China’s largest coal bases, Ningdong Energy and Chemical Industry Base (“Ningdong base” below). Coal production and power generation has driven Ningxia’s economy over the past decade. However, as an extremely thirsty industry, coal has put more stress on the area’s water supply and heightened competition with other users, including farms and households.

Ningxia is home to one of China’s largest coal bases
Coal production and power generation, though thirsty, has driven Ningxia’s economy over the past decade

A WRI working paper recommends developing a coordinated system to ensure sustainable development of water and the economy in Ningxia.

Coal drives Ningxia’s GDP but also exposes the province to water risk

Ningxia’s coal industry made up around 50 percent of total industrial production in 2012 and helped drive a tripling of GDP per capita between 2005 and 2012.

However, such rapid coal development exacerbated water stress. By the end of 2012, 91.5 percent of installed power capacity of Ningxia’s coal fired power plants was in areas with acute water shortage (see below).

By 2012 91.5% of installed capacity of coal fired power plants was in areas with acute water shortage

Water consumption will grow 2x by 2020 compared to 2010 levels if targets are met at the Ningdong base

Even though power plants using air cooling technologies, which reduce water consumption, accounted for 62.8 percent of the total installed capacity, new planned coal-fired power plants will still increase water demand. Estimates by WRI suggest that water consumption will rise 1.5 times by 2015 and double by 2020 compared to 2010 levels if coal fired power generation targets are met at the Ningdong base.

Ningxia has 5 prefecture-level cities: Yinchuan, Shizuishan, Zhongwei, Wuzhong and Guyuan which are shown in Figure 2.

Policy and economic changes to deal with coal’s thirsty water demands in Ningxia

Ningxia provincial government has adopted policies and implemented economic measures to meet the coal industry’s high demand for water; including water conservation, water rights transfer and water pricing measures. Increased investment in water-saving technologies cut Ningxia’s water consumption per RMB10,000 of GDP by 77 percent, and industrial water consumption per RMB10,000 industrial value added by 68 percent from 2004 to 2012. During the same period, about 88 mn m³ of water were transferred to nine coal projects through water right transfers.

However, these measures’ effectiveness can be further improved, especially through investments the efficiency of agricultural water use. Agriculture accounts for 90 percent of Ningxia’s total water withdrawal, most of it flood irrigation, but the province’s agricultural water use efficiency is 6 percent lower than the national average. The government has proposed transferring water from agriculture to coal production, but there are limitations given the existing canal infrastructure. At the same time, funding is limited and farmers are not able to move to water-saving farming methods without additional financing.

Local govt has proposed transferring water from agri to coal production

But agri water use efficiency is 6 % lower than national average

Current policies treat water & energy separately, not recognising that they are inextricably linked

Meanwhile, Ningxia’s current water rates and water resources fees are too low to reflect the real value of water, weakening incentives to conserve this vital resource. In addition, current policies treat water and energy as separate elements in Ningxia, not recognising that they are inextricably linked.

5 ways Ningxia could coordinate sustainable coal and water development

To ensure sustainable development of the coal sector and water resources in Ningxia, WRI’s recommends:

1. Recognising that water is a finite resource and needs to be seriously considered when planning coal development. Given the scarcity of water and the growing demand for it from cities and industries and for food production, it makes sense to increase non-coal energy and energy efficiency investments.
2. Improving agricultural water efficiency. Our analysis estimated 0.34 bn m³ of water could be saved by increasing agriculture water use efficiency from 45 percent (Ningxia 2012 value) to 51 percent (China 2012 value). Regardless of coal development inefficient agricultural water is needed for other sectors and to support Ningxia’s growing economy.
3. Developing a robust water rights allocation and trading system between companies and farmers or within companies with safeguards to protect farmers but also promote more efficient water use.
4. Accelerating water price reform. Raising water resources fees and exploiting price leverage to encourage conservation.
5. Setting up a system of eco-compensation for the coal and mining sector using incentives – such as subsidies and tax exemptions, and policy supports to encourage the mining industry to protect and restore natural areas that can improve water quality and water supplies.

This article first appeared on the World Resources Institute website here.

Further Reading

• Small Hydro: The Future Is Green – We talked to Director-General of the International Center on Small Hydro Power. Prof. Dr. Heng Liu on small hydro in China – its future and role in the country’s power mix to ensure energy security & combat climate change
• Yellow River Changing Course -Prof. Vivian Forbes at Wuhan University provides a detailed overview of the Yellow River’s 5,500km long journey from source to delta and shares how & why the alignment of the river’s mouth has changed over the centuries
• Vanishing Ice: Asia Running Dry – The Hindu-Kush Himalayan region plays a vital role in Asia’s water future. It is the source of 10 major rivers which feed 17 countries. CWR’s Tan shares her worries over the vanishing glaciers & the lack of cohesive action to tackle real threats
• Bara Shigri: The Glacier’s Sigh – Award-winning explorer Jeff Fuchs returns to the Bara Shigri glacier only to find it drastically altered within two years. Sitting under an ice-shelf, Fuchs recounts local tales of “snows going” and the glacier’s “aches & groans” as it retreats

• Balancing Water For Agri & Coal – China’s coal mines lie next to its farmlands and it plans to save water used in agriculture to fuel coal growth. In “Towards a Water & Energy Secure China”, China Water Risk explores strategies to control water use between agriculture & coal to ensure both food & energy security
• China: Not Ready To Move Away From Coal – Professor Xie Kechang, Vice President of the Chinese Academy of Engineering, on the future role of coal, strategies to ensure energy security & challenges ahead for coal-to-chemicals
• Will Energy Bases Drain the Yellow River? – The Deputy Director of the Center for Water Resources Research at the Chinese Academy of Sciences, Prof. Jia Shaofeng shares his views on how water demand  by China’s energy bases can be met
• Water Ten To Revamp Chinese Agriculture – Takeaways from Shanghai’s Global Agriculture Sustainability Forum are reviewed in relation to the new Water Ten Plan. Fertilizer, pesticide, irrigation & product tractability markets look set to change. China Water Risk’s Hu on what the new plan means for the future of Chinese agriculture
• New Trading Markets to Enforce Red Lines – China has been experimenting with market mechanisms. Can China’s new water permit trading markets (discharge & use) help the nation hold its Three Red Lines on water use, efficiency & pollution as well as catalyze a bigger water market? Feng Hu expands