THE IMPLICATION OF LIMITED CONVENTIONAL FOSSIL FUELS AND DECLINING EROI ON ECONOMIC GROWTH IN CHINA [Lianyong Feng, China University of Petroleum, Beijing, +86 13911236801, [email protected]] [Yingchao Chen, China University of Petroleum, Beijing, +86 15210951519, [email protected]] [Yan Hu, Sinopec Group Exploration & Production Research Institute, Beijing, +86 18811391446, [email protected]] [Jingxuan Feng, China University of Petroleum, Beijing, +86 15811158866, [email protected]] [Chaoren Jin, China University of Petroleum, Beijing, +86 18811372380, [email protected]] [Bin Chen, Beijing Normal University, +86 13811765907, [email protected]] [Willam X. Wei, Grant MacEwan University, Edmonton, Alberta, Canada, 7806333535, [email protected]] Overview EROI represents the ratio between energy output and input during the process of energy production. EROI evaluation, as a new method, gives a fresh view to solve some problems related to the economy and society. In this paper, we have calculated the EROI of Chinese fossil energy in detail and analyzed the implication on China’s economic Growth. By using the C-D production function and the energy production function, the paper forecast the economic growth of 2011-2025 in China. Taking the energy consumption during the production process into consideration, we improve the energy production function. We selected the known parameters of the historical data from 1980 to 2011, and taking the use of the first-order equation of the residual to get the unknown coefficients according to the method of the least squares criterion. The final equation—with 14 unknown parameters—is a nonlinear equation. To solve this kind of simulation, we build a first-error equation to search for the value of the parameters. The program we use is run by Lingo. The declining EROI of China’s conventional fossil fuels not only means decreasing energy quality and increasing energy costs, but also a drop in net energy that is available to the economic system; the implication being a change in the conventional optimistic perspective for energy supply. This paper proposes the definition of available net energy consumption as “domestic energy production equals net energy imports minus energy consumption”. Even though the ratio of energy consumption to energy production is minus 4% to plus 5%, we cannot ignore its impact on economic growth in China. The paper is organised as follows: After the introduction the second section gives forecast of net energy consumption. The third section introduces the research method: the C-D production function and the energy production function.In section four we give the results of the modeling estimation and the analysis of the prediction. In the fifth section we draw conclusions above.
Methods EROI evaluation approach. The C-D production function; The improved energy production function: t and take GDP as the Y A0e [i (t)Eth,i i (Ei ,t)] i economic output: GDP A e t [( 1,i )E (E ,t)] 0 ct th,i i i i 1 e . The final equation expressed as: 2011 Min Min GDP A et ( 1,i )E (E ,t) j o ct j th,i, j i, j i, j j1950 i 1e
Results First, EROI of Daqing Oil Field is declining from 10:1 in 2001 to 6.4:1 in 2012 and will be 5.2-5.7:1 in 2017. Second, China’s economic growth rate will be 5.71% and 3.6% in the Thirteenth Plan and Fourteenth Plan periods, in the consideration of EROI.
Conclusions Because of the declining EROI of China, China’s economic growth rate will be 5.71% and 3.6% in the Thirteenth Five Year Plan and Fourteenth Five Year Plan periods, which means China’s economic growth will break down. Moreover, the economic growth in China will decline from 2015 to 2025. In the future, China needs to know how much net energy is available. The impact of net energy on China’s economy is huge even though the ratio of energy consumed in the process of production to energy produced is as small as 4 to 5%. Furthermore, a small change in net energy in China has a large impact on economic growth. China should consider net energy supply in energy decisions and decrease the actual energy consumed by the energy production process.
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