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Governing China’s Energy in the Context of Global Governance

September 2011
Global Policy 2(s1)

DOI:10.1111/j.1758-5899.2011.00124.x

Authors:

University of Oklahoma

This article seeks to understand what role China can and will play in global energy governance by examining how its domestic energy context shapes the country's attitudes toward the multilateral, market and climate change aspects of global energy governance. It finds that China demonstrates a preference for bilateral/regional to multilateral energy institutions, exhibits an inclination to blend state and market when pursuing energy security, and shows a principally consistent but pragmatically flexible approach to global negotiations on climate change. Contrary to the conventional wisdom, China's engagement with the international energy order suggests that a rising and energy-hungry China has not and is unlikely to upset the very system that has benefited and will continue to benefit the country. Instead, this article argues that China has shown signs and promises of contributing to global energy governance by offering financial, technical solutions and stimulating the world to develop clean energy. However, energy governance in China has experienced considerable capacity decay in the era of reform and globalization. This decay not only bodes ill for the country's ability to lead in global energy governance but also complicates international attempts to engage China on complex energy and climate challenges. © 2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

. Ministerial-level bureaucracies germane to energy governance in China

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. China's involvement in global, regional and bilateral energy institutions

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Governing China’s Energy in the

Context of Global Governance

Bo Kong

Johns Hopkins University SAIS

Abstract

This article seeks to understand what role China can and will play in global energy governance by examining how its

domestic energy context shapes the country’s attitudes toward the multilateral, market and climate change aspects of

global energy governance. It ﬁnds that China demonstrates a preference for bilateral/regional to multilateral energy

institutions, exhibits an inclination to blend state and market when pursuing energy security, and shows a principally

consistent but pragmatically ﬂexible approach to global negotiations on climate change. Contrary to the conventional

wisdom, China’s engagement with the international energy order suggests that a rising and energy-hungry China has

not and is unlikely to upset the very system that has beneﬁted and will continue to beneﬁt the country. Instead, this

article argues that China has shown signs and promises of contributing to global energy governance by offering

ﬁnancial, technical solutions and stimulating the world to develop clean energy. However, energy governance in China

has experienced considerable capacity decay in the era of reform and globalization. This decay not only bodes ill for

the country’s ability to lead in global energy governance but also complicates international attempts to engage China

on complex energy and climate challenges.

Policy Implications

•The fragmentation of the central government in China, together with the rise of substate actors and state-owned

ﬂagship energy corporations in the country’s energy governance, means that it is unrealistic to expect China to have

a uniﬁed view and voice on global energy governance in the near term.

•In light of the fundamental interests of China to engage the international system, the country’s absence from the

world’s most important multilateral energy institutions says as much about its reluctance to join these restrictive

organizations as these organizations’ lack of seriousness to engage China.

•The blending of market tools to a state-dominated energy economy characterizes China’s state capitalism approach

to addressing complex energy challenges and the country has largely exported this approach when it engages the

international energy market.

•China’s staunch positions on climate change bespeak its preoccupation with development, but its changing atti-

tudes toward key issues in global climate negotiations reﬂect its ﬂexible and pragmatic approach to development.

•To seek effective participation from China in global energy governance, the international community cannot engage

Beijing alone; instead, it must also engage local governments in China that have gained autonomy over energy

affairs and those restructured and partially marketized energy SOEs that have exhibited entrepreneurship in shaping

and implementing the country’s energy and climate policies.

The scale of China’s energy economy and the country’s

rise in the international system bespeak its importance

for global energy governance – the setting and enforce-

ment of rules and regulations for global collective

energy interests. Speciﬁcally, its transformation into the

world’s largest energy consumer and largest emitter of

greenhouse gases in very short order has placed the

country at the center of the discussion of almost every

single international energy policy: meeting the surging

global energy demand, reducing worldwide greenhouse

gas (GHG) emissions, eliminating energy poverty and

mobilizing capital for transition toward a low-carbon

economy. Because of its scale, how China seeks its

energy security worldwide carries profound implications

for the stability of the global energy system and world

peace. Its global hunt for energy security also affects the

international attempt to develop and enforce interna-

tional standards for revenue management and revenue

transparency. The country’s importance for governing

global energy affairs is set to grow with the ongoing

reconﬁguration of the international system that

accompanies a shift of the geopolitical power toward

Global Policy Volume 2 . Special Issue . September 2011

Global Policy (2011) 2:SI doi: 10.1111/j.1758-5899.2011.00124.x ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

Research Article

emerging economies, especially China and India. Thanks

to this shift, the world is increasingly multipolar and

China, together with those major emerging economies,

is becoming a central actor. Thus, the rise of China and

other emerging economies will fundamentally shape

the global energy trade and investment patterns and

their associated ﬁnancial, diplomatic and geopolitical

relationships.

However, it is not obvious what role China can and

will play in global energy governance. This constitutes

the central question of this article. To analyze this ques-

tion, this article attempts to study China’s attitude

toward the multilateral, market and climate change

aspects of global energy governance. Speciﬁcally, it will

examine how China interacts with global energy institu-

tions, how it balances a market versus state approach,

and how it integrates climate change when addressing

the international dimension of its energy and climate

challenges. To locate answers to these questions and

understand China’s global role, this article will ﬁrst and

foremost probe the country’s domestic energy context.

There are three reasons why domestic energy context

is essential to understanding China’s role in global

energy governance. First, China’s international energy

policy is an extension of its domestic policy. Thus,

domestic constraints and perceptions regarding energy

security shape China’s energy policy overseas. Second,

energy governance in China is integral to global energy

governance. As the largest energy economy and the

largest GHG emitter in the world, how China governs its

energy directly affects global energy governance.

Depending on the effectiveness of its domestic energy

governance, China could export its effective and innova-

tive solutions or thorny problems that will alleviate or

aggravate global energy challenges. Third, domestic

structures shape China’s global response. Speciﬁcally,

they shape China’s interest, capacity and incentives to

participate in global energy governance.

This article is structured as follows. It begins with an

anatomy of China’s domestic context both in energy and

governance terms. This is followed by an analysis of how

China embraces multilateralism, market, and climate

change in its international energy policy. It then con-

cludes by revisiting the abovementioned three themes

and integrates China’s domestic energy governance and

global energy governance.

China’s domestic energy context

China needs energy for its economy to grow but as its

economy expands it needs more energy. This growing

need stems chieﬂy from the demand required to keep

pace with an economy that has been growing at an

average growth rate of 10 per cent per year since the

country inaugurated its economic policy of ‘reforming

and opening up’ in 1978. Speciﬁcally, three fundamental

drivers of China’s energy demand have emerged from

this rapid and sustained economic growth over the span

of the past three decades or so. They are: (1) expansion

of China’s industrial economy, especially heavy indus-

tries, which consumes more than 70 per cent of the

country’s total energy use; (2) China’s expanding exports

following the country’s entry into the World Trade Orga-

nization, which account for nearly one-third of both the

country’s gross domestic product (GDP) and its total

energy consumption; and (3) the growing consumption

of energy-intensive goods, such as electrical appliances

and motor vehicles, and energy-intensive services, such

as travel by air, road and water, in an increasingly urban-

ized and wealthy China. These demand drivers pushed

China’s total energy consumption to double between

1984 and 2000, and it then doubled again between 2000

and 2008 (IEA, 2010b). Because of this phenomenal

demand growth over the past decade, China overtook

the United States to become the world’s largest energy

consumer in 2009 (IEA, 2010b), much earlier than the

expected year of 2030 (Energy Information Administra-

tion of the US Department of Energy, 2006). To meet its

energy demand, China has relied primarily on fossil fuels,

especially coal, which accounts for 70 per cent of its

total primary use.

This predominant dependence on fossil fuels, however,

gives rise to the security and climate dimensions of its

fundamental energy challenge, which are increasingly

inseparable from one another. First, China’s fossil fuel

resource base is insufﬁcient and shrinking. As such,

China is increasingly dependent on foreign energy. It

became a net importer of oil, natural gas and coal in

1993, 2007 and 2009, respectively. It imported 54, 12

and 5 per cent of its total oil, natural gas and coal con-

sumption, respectively, in 2010. By 2030, imports are

projected to account for 75 and 40 per cent, respec-

tively, of China’s total oil and gas consumption (IEA,

2010b), although the country’s coal supply and demand

is expected to balance over the long run. This growing

dependence poses at least three risks to China: (1) dis-

ruptions to its imported energy at the source of imports

or during transportation; (2) sustained and extremely vol-

atile energy prices damaging the Chinese economy; and

(3) a clash between China’s foreign policy interests and

its overseas energy interests. This growing foreign

dependence has contributed to China’s perceived energy

security challenge; that is: can China secure access to

adequate and affordable energy supplies from overseas

and ship them back without compromising its economic

interests and foreign policy interests? This concern is

especially pronounced when it comes to the country’s

dependence on the volatile Middle East and the sea lines

of communications, through which over 90 per cent of

China’s imported energy travel (Kong, 2005).

Bo Kong

ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

Second, because of its rapid energy consumption and

overwhelming reliance on fossil fuels, especially dirty

coal, China’s energy-related emissions have grown out

of control. For example, its total energy-related CO

emissions doubled between 2000 and 2007; conse-

quently, China overtook the United States in 2007 to

become the world’s largest emitter of CO

(IEA, 2009),

the greenhouse gas believed to be responsible for the

bulk of global warming. Further, while these emissions

are likely to decrease in developed countries in the

future, they will continue to grow rapidly in China.

Between 2007 and 2030, China’s CO

emissions are pro-

jected to grow by over 90 per cent to nearly one-third

of total global emissions, more than North America,

Japan and the European Union combined (IEA, 2009).

This means that China is more responsible than any

other country for the additional impacts from current

and future ﬂows of CO

emissions into the atmosphere,

although its contribution to the global cumulative stock

of CO

still pales in comparison with developed coun-

tries. Its emissions growth, however, does not portend

well for those least developed countries and small-island

states whose existence itself could be threatened by glo-

bal warming. Further, per capita CO

emissions in China

are already 12 per cent higher than the global average

(IEA, 2010a). Consequently, China is under intensifying

international pressure from both the developed and

developing countries to curb its growing emissions at

global climate negotiations. The United States, Canada

and the European Commission even proposed a punitive

‘carbon tariff’ in their domestic legislations against

imports from countries, especially China, that do not

make the same climate effort. Reducing CO

emissions

essentially requires China to transition from a fossil fuel-

based economy to a low-carbon economy. This in turn

carries profound implications for China’s energy con-

sumption mix and its search for energy security.

Meanwhile, perceived climate change consequences in

China also dictate Beijing’s integration of climate change

and energy security. The ﬁrst White Paper on climate

change that Beijing issued in 2008, for example, notes

that the average temperature of the Earth’s surface in

China has risen faster over the past century than the

global level; it also highlights the impacts of climate

change on China’s food security, water security, ecosys-

tem resilience, coastal zone safety and socioeconomic

wellbeing (State Council of People’s Republic of China,

2008). While there is recognition of the uncertainty

regarding climate change, there is also a consensus that

it is in China’s self-interest to tackle climate change and

that this effort will yield other associated dividends, such

as improving the country’s energy security by reducing

its dependence on foreign energy and enhancing its

competitive advantage by leading in clean energy. Thus,

China also has an incentive to blend its efforts to con-

front energy security and climate change both at home

and abroad.

Confronting the twin challenges of energy security

and climate change in China requires strong governance

in its energy sector. Governance here refers to structures

and processes, both formal and informal, through which

authority is exercised, enforced and regulated; structures

are the contexts and rules of the game under which

governing actors operate, while processes are interac-

tions between these governing actors (Kong, 2010).

However, energy governance in China has experienced

considerable capacity decay in the era of reform and

globalization. This decay reveals itself in three ways:

severe state fragmentation at the central level, increasing

autonomy of substate actors at the local level and the

rise of state-owned ﬂagship energy corporations at the

industry level.

The severity of state fragmentation is illustrated by the

structure of both its energy and climate governance sys-

tem. For example, the energy industry of the world’s

largest energy consumer has been ‘ministry-less’ since

1998. This is because its energy governance has been

decentralized and its energy-speciﬁc bureaucracies have

been abolished during the course of its six rounds of

major administrative reorganizations – launched in 1982,

1988, 1993, 1998, 2003 and 2008, respectively (Kong,

2006). These reorganizations have dispersed and scat-

tered the country’s decentralized energy authority

among parallel central ministries. Based on the author’s

tally in Table 1 (Kong, 2006), there are now 16 ministerial

bureaucracies under the State Council – China’s cabinet –

germane to different segments of energy governance in

China. Further, this fragmentation also permeates within

central bureaucracies. For example, the National Devel-

opment and Reform Commission (NDRC) is one of the

most important central ministries in China germane to

energy governance, and its energy authority is dispersed

at least among ﬁve departments – the Department of

Pricing, the Department of Basic Industries, the Depart-

ment of High-Tech Industry, the Department of Resource

Conservation and Environmental Protection, and the

National Energy Administration (NEA). The irony is that

the NEA was established in spring 2008 as China’s chief

energy governing body. In reality, it has to bargain with

the NDRC and the other 15 energy-germane, ministerial

bureaucracies. Absent an overarching energy law that

clariﬁes who is responsible for what, when and how, this

fragmentation results in ‘too many cooks’ in China’s

energy governance kitchen, creates overlap and confu-

sion over energy governance, invites lengthy and con-

tentious bureaucratic bargaining and inﬁghting over

divisive energy issues, and ultimately deprives the coun-

try of the ability to address complex and long-term

energy challenges (Kong, 2009). To mitigate this

fragmentation, facilitate interagency coordination, and

Governing China’s Energy 53

Global Policy (2011) 2:SI ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

improve the capability to confront China’s energy secu-

rity challenges, Beijing launched a high-level National

Energy Commission (NEC) in 2010, headed by Premier

Wen Jiabao and his deputy Li Keqiang and composed of

heads from 21 other central bureaucracies. However, the

NEC is merely an ad hoc body that meets irregularly and

is mandated only to be a consultative body; with no

budget, staff or residency, it is at best another informal

structure of the ‘spaghetti bowl’ of China’s fragmented

energy governance structure.

Similarly, fragmentation also characterizes climate gov-

ernance in China. Climate change affects the activities

governed by almost every central bureaucracy, but no

single one is ultimately responsible for it. Four central

bureaucracies play a central role: the NDRC in climate

policy formulation and implementation; the China Met-

eorological Administration (CMA) in coordinating with

the Intergovernmental Panel on Climate Change (IPCC);

the Ministry of Foreign Affairs in climate negotiations;

and the State Forestry Administration in negotiations on

reducing emissions from degradation and deforestation

(REDD). But other bureaucracies, such as the NEA, the

Ministry of Science and Technology and the Ministry of

Industry and Information Technology, are also important

in implementing climate-friendly energy and industrial

policies. To coordinate among bureaucracies, especially

when dealing with the international community, Beijing

has also relied on the interagency approach, which dates

back to 1989 when it began to participate in the IPCC

working groups. Speciﬁcally, Beijing has relied on an

overarching interagency coordinating body for climate

governance. Initially, it was the National Coordination

Table 1. Ministerial-level bureaucracies germane to energy governance in China

1. NDRC – National Development and Reform Commission

2. SASAC – State Asset Supervisory and Administration

Commission

3. MIIT – Ministry of Industry and Information Technology

4. MOST – Ministry of Science and Technology

5. MlOLR – Ministry of Land and Resources

6. MOF – Ministry of Finance

7. MOFCOM – Ministry of Commerce

8. MOT – Ministry of Transportation

9. MOR – Ministry of Railways

10. MOWR – Ministry of Water Resources

11. MOA – Ministry of Agriculture

12. MEP – Ministry of Environmental Protection

13. MOHRSS – Ministry of Human Resources and Social Security

14. SAWS – State Administration of Work Safety

15. SERC – State Electricity Regulatory Commission

16. SAT – State Administration of Taxation

NDRC Responsible for planning the long-term energy development in China and implementing its annual energy

development target and asked to balance the country’s energy development with other sectors of the

economy, set energy prices and approve investments in the energy sector both at home and abroad.

SASAC Supervises the state-owned assets of all centrally-owned energy SOEs. charts directions of their reform, and

appoints their top executives.

MI1T Formulates and implements industrial development plan and industrial policy for energy related sectors, including

electric vehicles, petrochemicals and coaL chemicals; regulates energy equipment manufacturing and sets industrial

standards; overseas energy conservation and energy intensity reduction in industrial sectors.

MOST Supervises energy research, development, demonstration, and deployment (ER&3D) and promotes energy

technology innovation.

MOLR Oversees mineral surveys and appraisals, including utilization plans, grants licenses for mineral exploration and

production, and administers the registration and assignment of exploration and production licenses.

MOF Allocates fuel subsidies in China and promotes renewable energy development through tax credit and

ﬁnancial subsidies.

MOFCOM Issues quotas and licenses for energy imports and exports; regulates foreign investment in China’s energy

sector and Chinese energy investment overseas.

MOT Supervises and coordinates energy transportation by road and water.

MOR Supervises and coordinates energy transportation by rail.

MOWR Supervises hydropower development and oversees the safety issues involved in building dams; reviews

and approves large- or medium-scale dam projects.

MOA Supervises energy development and utilization in rural China.

MEP Responsible for energy-related environment issues in China, including nuclear safety.

MOHRSS Oversees the personnel structure and managerial appointment of energy SOEs and regulates the income

distribution and pension plans of the employees of energy SOEs.

SAWS Overseas energy production safety issues, especially coal mine safety.

SERC Overseas and regulates the electric industry in China.

SAT Regulates taxes related to the production, sales, exports and consumption of energy products and services,

such as Valued-added tax of energy companies, resource tax, and fuel tax.

Source: Adapted and updated on the basis of Kong (2006).

Bo Kong

ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

Group on Climate Change, which then became the

National Coordination Committee on Climate Change,

and was replaced by the National Leadership Group on

Climate Change (NLGCC) in 2008. Headed by Premier

Wen Jiabao with the assistance of Vice Premier Li

Keqiang, State Councilor Dai Bingguo, the NLGCC

includes 22 central bureaucracies (some are the same as

the members of the NEC) (State Council of People’s

Republic of China, 2007). The evolution of China’s cli-

mate coordinating body features two changes: (1) the

later iteration has higher status than the previous one,

signifying the increasing importance of climate change

on the central leadership’s agenda; and (2) a gradual

shift of perception about climate change from a scien-

tiﬁc and environmental issue to a development issue as

represented by the NDRC’s replacement of the CMA to

be the lead agency of the coordinating body. However,

similar to the NEC, the NLGCC is also an ad hoc, coordi-

nating body. Consequently, this set-up creates a policy

leadership vacuum on climate change, leaves an

accountability deﬁcit and invites jockeying for inﬂuence

on climate policies from a bureaucratic vantage point.

Because of asymmetric competence and capacity for cli-

mate change, the prominence of member bureaucracies

of the NLGCC in climate governance varies. The same

fragmentation is also replicated among local govern-

ments and complicates climate policy implementation at

the local level.

Beijing’s energy governance capacity decay is also

evidenced by the increasing autonomy of local govern-

ments. With the decentralization of energy administra-

tion, energy production and energy prices launched in

the era of reform, the locus of energy governance in

China has gradually shifted away from the central gov-

ernment to local governments. The regrouping of taxes

into central, local and shared tax in 1994 has generated

further incentives for local governments to look for ways

to boost local taxes and seek extra-budgetary revenues

(Loo and Chow, 2006). Under the new ﬁscal regime, local

governments are primarily liable for their own economic

growth, which constitutes the chief measurement of

local ofﬁcials’ performance in China. It is against this

backdrop that local governments perceive energy and

climate priorities set by the central government in Bei-

jing. Thus, local governments often overshoot the cen-

trally set target if a central energy policy yields local

dividends. For example, to centralize and coordinate coal

supply, the NEA plans to create 20 coal production bases

and limit China’s total coal production to 3.5 billion tons

by 2015; however, coal development targets submitted

by coal-rich provinces have already exceeded 24 produc-

tion bases with production capacity much higher than

the NEA target (Wang Xiuqiang, 2010). In contrast, local

governments often underperform or refuse to perform

when a central energy or climate policy requires local

sacriﬁces. For example, to reduce energy intensity and

energy emissions during China’s 11th Five Year Plan

(2001–05), Beijing launched an aggressive nationwide

campaign to cut down energy intensity by 20 per cent.

But the National Audit Ofﬁce recently found that some

localities deviated from Beijing’s policies of shutting

down small, inefﬁcient and high-pollution, high-energy-

intensive production capacities; instead, they continued

to allow these capacities to operate, expand and some-

times exaggerate their reductions of energy intensity

and energy emissions (National Audit Ofﬁce of the Peo-

ple’s Republic of China, 2011).

Finally, the rise of restructured, state-owned enter-

prises (SOEs) in the energy sector reﬂects the third

dimension of China’s energy governance capacity decay.

In contrast with the decline of the central government’s

capacity to govern energy in China, a group of restruc-

tured and centrally owned energy SOEs across the

country’s fossil fuel, nuclear and hydropower sector have

witnessed their autonomy and inﬂuence over energy

affairs signiﬁcantly increase over the course of the coun-

try’s reform. After years of decentralization and its

accompanied energy governance fragmentation, the cen-

tral government of China is now too weak to rein in

these transformed energy SOEs. The reasons are three-

fold. First, as discussed earlier, there simply lacks any

energy-speciﬁc line ministry or integrated ministry

responsible for energy governance. Consequently, the

central government often relies on energy SOEs, many

of which grew out of former line ministries, for govern-

ing their corresponding sectors, leading to the structure

of ‘co-governance’ as in the case of China’s petroleum

sector (Kong, 2010). Second, the designated energy-

speciﬁc bureaucracies often lack bureaucratic clout. A

case in point is that the State Electricity Regulatory Com-

mission (SERC), established in 2003 to regulate China’s

electricity industry, resides in the ofﬁce building of the

China State Grid Corporation, the country’s largest grid

company, which is an entity the SERC is supposed to

regulate. Third, reforms have unleashed the commercial

impulse of these partially marketized energy SOEs, which

often pits them against the strategic imperative of the

state. For example, while the Chinese government

liberalized petroleum and coal prices, it still controls oil

products and electricity prices for fear of their impact of

pass-through to inﬂation. Consequently, state-owned oil

companies and power generation companies, many of

which are partially listed at home and abroad, have to

balance operational losses and state imperatives. Their

reluctance to sell oil products and electricity at huge

losses has frequently contributed to artiﬁcial fuel and

electricity shortages in China.

As a consequence of its energy governance capacity

decay within Chinese central leadership, local govern-

ments and energy SOEs, the central government in

Governing China’s Energy 55

Global Policy (2011) 2:SI ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

Beijing is no longer capable of governing China’s energy

alone. Instead, it is compelled to seek cooperation from

the increasingly autonomous local governments and the

partially marketized, commercially empowered energy

SOEs when confronting complex energy and climate

challenges both at home and abroad. Therefore, the

complex interactions among different stakeholders in

China’s energy landscape have made it difﬁcult for Beij-

ing to engage international energy institutions, markets

and communities in a coherent manner.

China engages the international energy system

Engaging the international energy system serves China’s

fundamental interests. First, because of the country’s

transformation into a net importer of every form of fossil

fuel and its growing import dependence, access to for-

eign energy is vital for its sustained economic growth,

which in turn underpins the legitimacy of the Chinese

Communist Party’s (CCP) rule in China. Second, access to

advanced energy technologies abroad is helpful to the

country’s effort to tackle complex energy and climate

challenges, thus promoting China’s developmental inter-

ests. Third, as Chinese energy companies internationalize

their operations, access to investment opportunities in

the international energy system is essential to their

overseas expansion. Finally, engaging the international

energy system also helps reduce geopolitical risk for Chi-

na’s effort to acquire energy supplies, energy technolo-

gies and energy investment opportunities abroad. Thus,

given its status as the world’s largest energy consumer

and largest GHG emitter, one should expect China

actively to engage the international energy system and

participate in global energy governance. However, both

the depth and scope of China’s engagement with the

international energy system at the multilateral level is

circumscribed. In fact, it remains outside the world’s

most important multilateral energy institutions – which

are western dominated and membership restricted. In

light of the fundamental interests of China to engage

the international system, China’s absence from these

multilateral institutions says as much about China’s

reluctance to join these restrictive organizations as these

organizations’ lack of seriousness to embrace China. This

is also reﬂective of China’s conﬁdence and capacity to

engage the international energy system at the multilat-

eral level as it has been much more active in engaging

regional and bilateral energy institutions. Thus, China

demonstrates a dichotomy of engagement with the

international energy system.

On the one hand, China still remains outside the pri-

mary energy institutions at the global level and is a

junior partner lacking sufﬁcient say in global energy

institutions. While it has been involved in a number of

energy-germane global institutions, such as the World

Bank, various United Nations agencies, including the

International Atomic Energy Agency, and some con-

sumer–producer dialogue forums, such as the Interna-

tional Energy Forum (IEF), it remains outside three key

structures: (1) the world’s most important energy pro-

ducer cartel – the Organization of Petroleum Exporting

Countries (OPEC); (2) the world’s most important energy

consumer alliance – the International Energy Agency

(IEA); and (3) the major economies club that extends

leadership in global energy and climate governance –

the G8. Hence, when describing China’s engagement

with the international energy system, the NEA has the

following assessment: ‘China’s energy cooperation with

the international community remains at a low level, lacks

substance, and is general and dialogue-oriented. While it

has membership in coordination or dialogue-type inter-

national energy institutions, China maintains little pres-

ence in alliance- or collaboration-oriented international

energy institutions’ (Wang Li, 2007).

While it is easy to understand why China as a net oil

importer lacks OPEC membership, China’s non-presence

in the IEA seems to be an anachronism. The IEA is the

major international energy consumer alliance, designed

to promote energy supply security. As the world’s larg-

est energy consumer and largest GHG emitter, China

should be a natural ﬁt for the organization, but two fac-

tors have prevented China from joining. First, member-

ship in the IEA is predicated on two conditions:

membership in the Organisation for Economic Coopera-

tion and Development (OECD) and possession of oil

emergency reserves at the equivalent of 90 days of net

oil imports. China meets neither condition, although it is

accelerating the build-up of domestic strategic petro-

leum reserves. Recognizing the implications of leaving

out the world’s largest energy consumer, both the IEA

and the United States recently expressed publicly that

they would favor China’s eventual membership in the

IEA. However, it is unclear if the IEA is indeed ready to

bend the rules to grant China membership and broaden

the organization beyond OECD countries to include

other emerging economies, such as India and Brazil. Nor

is it clear that the IEA has sorted out how the addition

of new members will affect existing members’ voting

rights.

A second reason for China’s nonmembership in the

IEA is the country’s mixed views about the organization,

rendering China unlikely to join until the IEA sorts out

its internal differences. China recognizes the importance

of the IEA in promoting dialogue among energy con-

sumers, sharing energy data and coordinating energy

policies in times of major supply disruptions. In fact, it

began participating in some of the IEA activities from

1997 and has received substantial IEA support in

strengthening its energy statistical collection, energy

analysis and energy forecasting capacity. However, China

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ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

still identiﬁes with developing countries and there are

three concerns about the implications of membership in

the wealthy nations’ energy club for China’s developing-

country-based foreign policy: (1) membership in the IEA

would involve obligations that could constrain China

and reduce its ﬂexibility; (2) membership in the IEA

could lead China into a passive situation because the

organization is dominated by OECD countries and as a

result China might end up having little say in the IEA;

and (3) membership in the IEA could complicate China’s

role as a developing country in international climate

negotiations and increase pressure on China to take

more responsibilities (Wang Lianhe, 2009). Beijing’s high-

proﬁle, defensive reaction to the IEA’s announcement of

China overtaking the United States to become the larg-

est energy consumer in 2010 speaks to China’s suspi-

cions about the dividends to be gained by joining the

organization. Finally, there is also skepticism about the

relevance of the IEA in today’s world. When responding

to my question in March 2010 on whether China might

consider joining the IEA, a leading energy scholar in

Beijing asked this: ‘Given China is already enjoying

access to IEA activities, what additional beneﬁts can it

get by becoming a member of the increasingly irrelevant

organization other than paying more dues?’

As for the G8, this institution typiﬁes the emergence

of ‘club governance’ in international politics, which is

deﬁned by groups of countries providing international

public goods that can be enjoyed by countries beyond

the immediate circle of the actual club members

(Schneckener, 2009). While showing a cyclical pattern,

energy has featured from the outset as an important

topic on the G8’s agenda as a key dimension of macro-

economic policy and it has received renewed and

elevated attention since the G8 Summit in Gleneagles

in 2005 (Lesage et al., 2010). Since then, the G8 and its

variants, including the G8 + 5 (i.e., China, India, Brazil,

Mexico and South Africa) and the G20, have begun to

assert leadership over both global energy and climate

governance. China has been actively participating in the

G8 process under the G8 + 5 formula since the Glenea-

gles Summit and under the G20 arrangement in the

aftermath of the global ﬁnancial crisis. For example, it

joined the International Partnership on Energy Efﬁciency

Cooperation in the 2008 G8 + 5 meeting and commit-

ted to rationalizing and phasing out inefﬁcient fuel sub-

sidies over the medium term in the 2009 Petersburg

G20 Summit.

However, China is not a member of the G8 and many

in China remain unsure of about the future of the G20.

Similar to concerns about its membership of the IEA,

China is unlikely to consider becoming a member of the

G8, which is perceived as the ‘rich country club’. Nor is

there any indication that the G8 will extend the invita-

tion to China. While China has been actively participat-

ing in the G20, at a recent workshop chaired by Yang

Jiemian, president of the Shanghai Institute for Interna-

tional Studies, a group of leading Chinese scholars and

policy experts expressed the following reservations. First,

the G20 is merely an international forum coordinating

global economic governance and both its outreach to

members and agenda are decided by the G8. Thus, the

G20 cannot replace the G8, but China’s inﬂuence is not

yet powerful enough for it to be invited into the G8.

Second, the emergence of the G20 reﬂects the relative

decline of developed countries and the rapid rise of

emerging powers. The question thus arises whether the

US will continue to coordinate policies among major

economies after the world economy has fully recovered.

Finally, China bases its foreign policy on its identity as a

developing country and perceives the need to protect

the interests of developing countries in the G20, but

only a few countries from the Group of 77 are allowed

to participate in the G20 (Yang Jiemian, 2010).

On the other hand, being left out of these most

important energy institutions at the global level, China

has shifted its attention to regional and bilateral energy

arrangements. As Table 2 indicates, in comparison with

its involvement in global-level energy institutions, China

is much more active and involved in regional and bilat-

eral energy-germane arrangements. Table 2 provides an

example of some of the intraregional energy institutions

China is involved in. Membership in these institutions

allows China to engage countries in its neighboring

region on energy topics through public forums, regular

high-level meetings or committees dedicated to energy

topics. Some of these institutions are even founded at

China’s initiation, such as the Shanghai Cooperation

Organization (SCO), which was initially established to

facilitate security cooperation in the Central Asian region

but has proven instrumental in promoting regional

energy cooperation.

However, many of these regional energy institutions

have thus far not met the expectations of delivering divi-

dends to China on regional energy security cooperation.

Although they have put forward and discussed a plethora

of proposals and initiatives, many of these regional

energy institutions tend to lack regulatory and enforce-

ment power to implement these proposals. As a result,

some of these institutions have essentially been reduced

to ‘talk shops’ while others, such as the Greater Tumen

Initiative Energy Board, have functioned as mechanisms

promoting capacity building. Further, the stark reality of

economic and geopolitical differences sometime makes

regional energy cooperation difﬁcult.

A case in point is the SCO, which includes hydrocar-

bons-rich Russia, Kazakhstan and Uzbekistan, hydropower-

rich Kyrgyzstan and Tajikistan and energy-hungry China.

Thus, the logic for enhanced regional energy cooperation

is compelling. Russia even proposed establishing an

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‘energy club’ under the SCO in June 2006 and this pro-

posal is also in line with China’s hope of creating some

sort of ‘SCO Energy Community’ to marry its rapidly

growing energy demand with rich energy supplies in

Russia and Central Asia. However, there exist at least

four obstacles to regional energy cooperation under

the SCO framework: (1) Russia and China are leaders of

the SCO but Russia is concerned about China’s rapid

rise in Central Asia, which it sees as its traditional

sphere of inﬂuence; (2) the energy interests of Russia

and China diverge, with Russia worried about China

extending energy-rich Central Asian states’ options to

Table 2. China’s involvement in global, regional and bilateral energy institutions

Mandate Organization Name Degree of Participation

Global Comprehensive World Bank Substantial

Various UN bodies Substantial

International Atomic Energy Agency (IAEA) Substantial

Speciﬁc International Energy Forum (IEF) Dialogue partner

International Renewable Energy Agency (IREA) No participation

Multilateral

(restricted)

Comprehensive Group of Eight (G8) + Outreach 5 Nonmember participant

G-20 Summit Substantial

Speciﬁc International Energy Agency (IEA) Nonmember collaborator

Nuclear Energy Agency (NEA) No participation

Organization of the Petroleum Exporting Countries (OPEC) Dialogue partner

Gas Exporting Countries Forum (GECF) No participation

International Partnership for Energy Efﬁciency

Cooperation (IPEEC)

Technical participation

Regional and

interregional

Comprehensive Asia-Paciﬁc Economic Cooperation (APEC)-Energy

Working Group

Substantial

Association of Southeast Asian Countries {ASEAN) + 3 – (10+3) Substantial

ASEAN + 3 Natural Gas Forum Substantial

East Asian Summit (EAS) – Energy Ministers Meeting (EMS) Substantial

Great Mekong Sub-region Economic Cooperation (GMSEC) Substantial

Greater Tumen Initiative (GTS) – Energy Board Substantial

Shanghai Cooperation Organization (SCO) – EMS Substantial

Central Asia Regional Economic Cooperation (CAREC) Substantial

Speciﬁc Energy Charter Treaty (ECT) Observer

African Energy Commission (AEC) No participation

Bilateral Energy

Arrangement

Comprehensive China-Russia Strategic Partnership Substantial

China-Saudi Arabia Strategic Oil Partnership Substantial

China-Venezuela Strategic Partnership Substantial

China-ASEAN Strategic Partnership for Peace and

Prosperity

Substantial

China-Argentina Strategic Partnership Substantial

China-Brazil Strategic Partnership Substantial

China-Nigeria Strategic Partnership Substantial

China-Indonesia Strategic Partnership Substantial

China-Kazakhstan Strategic Partnership Substantial

China-Canada Strategic Partnership Substantial

China-Arab States Cooperation Forum Substantial

Forum on China-Africa Cooperation (FCO) Substantial

Speciﬁc China-Japan Energy Ministers Meeting Substantial

China-U.S. Energy Dialogue Substantial

China-U.S. Gas and Oil Industry Forum Substantial

China-European Union Strategic Dialogue on Energy

and Transport

Substantial

China-OPEC Roundtable on Energy Substantial

China-U.K. Energy Working Group Meeting Substantial

China-Canada Energy John Working Group on Energy

Cooperation

Substantial

Note: Comprehensive refers to institutional arrangements that cover a wide range of issues, of which energy is a part. Speciﬁc refers

to institutional arrangements set up for pure energy purposes.

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ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

break Russia’s control of energy export routes and keen

to diversify its supplies to countries beyond China, such

as Japan and South Korea; (3) the economic disparity

among member states is so large that China becomes

the default source of capital, narrowing the scope for

win-win cooperation on energy projects; and (4) while

China and Kyrgyzstan are members of the WTO, others

are not, thus leaving room for trade barriers, especially

in the energy area, and creating possibilities for

resource nationalism as evidenced in Russia under the

Putin administration and increasingly in Kazakhstan as

well (Chen Xiaoqin, 2008).

Drifting outside major global energy institutions and

constrained by regional ones, China has therefore largely

placed emphasis on bilateral energy arrangements when

engaging the international energy system in its quest for

energy security. Table 2 also provides examples of Chi-

na’s energy diplomacy in the form of exclusive strategic

partnerships or energy dialogues. As indicated by these

examples, Beijing has thus far demonstrated a clear

preference for bilateral engagement over regional and

multilateral engagement. This conforms to the energy

governance capacity decay China has experienced in

that a severely fragmented central energy governance

system, challenged by the rise of local governments and

energy SOEs, lacks the capacity to have a coherent view

on why and how the country should engage interna-

tional or regional energy institutions. Absent any bureau-

cratic ‘champions’ inside the Chinese energy governance

system that could push the country to engage the inter-

national system multilaterally, the Chinese government

falls back on its customary practice of bilateral engage-

ment either with a regional association or individual

energy economy. To the extent that regional engage-

ment takes too long to yield any tangible energy secu-

rity dividend, it should come as no surprise that Beijing

has favored bilateral energy engagement.

China engages the international energy

markets

In addition to engaging international energy institutions,

acquiring supplies, advanced technologies and invest-

ment opportunities also requires China to interact with

the international energy markets. Three factors have thus

far shaped this interaction: how China balances market

versus state at home, how China perceives the interna-

tional energy market and how the international energy

market has responded to China. While the ﬁrst factor is

largely a derivative of the path dependency exhibited in

the country’s energy governance, the latter two are con-

structed, rightly or wrongly, on the selective basis of its

dealings with the international energy market. In

the eyes of policy makers in Beijing, all these fac-

tors have pointed to the need to rely on the state to

govern its energy economy and its world quest for

energy security.

First, China demonstrates a clear preference for the

statist approach to energy at home.

This preference is a

legacy of the CCP’s embrace in 1949 of the former

Soviet Union’s economic model, under which the state

centralized all decisions over economic activities, includ-

ing the energy sector. It is also a reaction to the coun-

try’s early experience of being denied access to foreign

energy. After the Korean War broke out in 1950, the

Coordinating Committee for Multilateral Export Controls

(COCOM) placed China under an oil embargo. Conse-

quently, China had to import most of its crude and oil

products from the Soviet Union and Eastern Europe.

However, following the Sino–Soviet split, the Soviet

Union not only withdrew from China all of its economic

aid but also stopped exporting to China the important

equipment necessary to develop oil resources at home.

The western embargo and the withdrawal of Soviet

assistance immediately led to a shortage of petroleum

supplies in China, disrupting economic activities and

even military training. In light of this historical experi-

ence, China’s growing dependence on foreign energy

heightens the country’s sense of vulnerability. Addition-

ally, because of the impact of energy prices on the

economy and the country’s collective memory about

hyperinﬂation leading to mass student demonstrations

in 1989, it regards the energy sector as the ‘commanding

height’ of the economy that is too important to be left

to the market. This thinking has changed little even in

the era of reform and deregulation. As an illustration, on

18 December 2006, Li Rongrong, chairman of the State

Assets Supervision and Administration Commission

(SASAC), the watchdog of the centrally owned SOEs in

China, categorized oil and petrochemicals, together with

armaments, power generation and distribution, telecom-

munications, coal, aviation and shipping as the seven

sectors over which the state will retain ‘absolute control’

(Zhao Huanxin, 2006).

Second, perceptions of a western-dominated, unfair

international energy market system also prompt China

to cling to the statist approach it is accustomed

to. According to Zhang Yan, deputy director of the

Economic Cooperation Ofﬁce under the Department of

Policy and Planning of the Chinese Ministry of Foreign

Affairs, this unfairness has two manifestations (Zhang

Yan, 2007). First, because of their political, economic and

military power as well as their development experience

and advantage, major western developed economies

and big energy-consuming nations dominate the inter-

national energy markets and have the major say over

the creation and modiﬁcation of the rules of the game;

in contrast, many developing countries are simply

passive participants of the international energy system.

Second, the existing international energy cooperation

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regime is conﬁned to limited sectors or countries. Being

a latecomer to the international energy markets, China

thus ﬁnds itself overshadowed by a western-dominated

system and kept at arm’s length by some of the world’s

most important energy institutions as discussed earlier.

Moreover, Chinese energy SOEs, when embarking on

their overseas quest for energy security in the early

1990s, did not have the capital, technology or manage-

ment experience of western multinational energy

companies. Therefore, the Chinese government felt com-

pelled to resort to a self-help approach that emphasized

support for its energy SOEs.

Third, setbacks for Chinese energy SOEs in using the

market approach and the resurgence of ‘resource nation-

alism’ in energy-rich countries also convinced China of

the need for the statist approach to energy. Beijing

found justiﬁcation for its statist approach after the

Chinese energy SOEs suffered setbacks when they fol-

lowed market rules to engage major western interna-

tional energy companies (IOCs). In the ﬁrst instance, the

western oil consortium operating the Kashagan oilﬁeld

in Kazakhstan blocked attempts by two Chinese state-

owned oil companies – Sinopec and CNOOC – to obtain

shares of the project in 2003. In the second instance, the

United States Congress blocked CNOOC’s attempt to

acquire a California-based oil company, Unocal Oil Cor-

poration, in 2005. Years after these two episodes, Chi-

nese energy ofﬁcials and analysts in conversations with

the author still point to them as evidence that the west

does not play by market rules and intends to deny Chi-

na’s access to foreign energy. The argument goes that

the Chinese state must throw its weight behind its

energy SOEs for them to compete in the international

energy markets. The shift of power in the interna-

tional energy markets from western-dominated interna-

tional oil companies to NOCs further lent support for the

argument for state support. As a testimony to this shift

of power, NOCs control approximately 90 per cent of

the world’s oil reserves and 75 per cent of production

(similar numbers apply to gas), as well as many of the

major oil and gas infrastructure systems (Tordo et al.,

2011).

Meanwhile, the last three decades of reform and open-

ing up have also etched their mark on China’s statist

approach to energy. Although the transition launched by

Deng Xiaoping away from a centrally planned economy

to a market one is a long journey that is far from over

and prone to stalling in China, Beijing has employed

some market tools to manage its energy economy. For

example, it has launched market reforms, initiated dereg-

ulation and partial liberation, injected market competi-

tion and incentivized corporatization of its energy SOEs.

This blending of market tools with a state-dominated

energy economy characterizes China’s state capitalism

approach to addressing complex energy challenges.

When it engages the international energy market, China

has largely exported this approach.

Speciﬁcally, China’s use of this state capitalism

approach to energy when engaging the international

energy market is best exempliﬁed by the country’s

quest for oil security since the early 1990s. This quest

has two deﬁning characteristics. First, it places an

emphasis on equity oil, that is, the proportion of crude

production that a concession owner has the legal and

contractual right to retain or sell as a guarantee on

investment under the production-sharing agreements.

Second, this quest centers on the implementation of a

broad ‘going out’ strategy to secure oil supplies over-

seas, which frequently packages trade, investment, for-

eign aid and energy deals in a holistic fashion and often

entails the working together of the government of

China, its NOCs and its state-owned policy banks (Kong,

2010). Two illustrations of this holistic approach are the

‘projects-for-oil’ and ‘loans-for-oil’ model China has

adopted when engaging the international energy

markets. It adopted the ﬁrst in Angola, so the model is

also called the ‘Angola Model’. Under this model, Chi-

nese development banks – the China Export and Import

Bank (China Exim) or China Development Bank (CDB) –

provide concessionary loans tied to the procurement of

goods and the participation of contractors from China

to help build infrastructure, social or industrial projects

in the oil-rich countries, which in turn give Chinese

NOCs access to their oil resources and pay back these

loans with their future oil production (Alves, 2010). The

second model gained prominence in the wake of the

2008 global ﬁnancial crisis. Basically, Chinese NOCs have

secured access to long-term oil supplies from crisis-

stricken, capital-constrained oil economies thanks to

concessionary loans provided by the China Exim and

CDB. For example, between 2009 and 2010, these two

banks, especially the CDB, have helped Chinese NOCs

extend loans worth $75 billion over 20–25 years to

energy companies and government entities in at least

six countries – Russia, Brazil, Ecuador, Angola, Kazakh-

stan and Venezuela; in return, Chinese NOCs will receive

30 million tons of crude oil annually from these coun-

tries (Downs, 2011; Lin Yongfeng, 2010).

Given China’s scale and rising importance in the inter-

national energy markets, its blending of state and market

has raised concerns about its intentions and impacts.

Thus far, most of the concerns are centered on the worry

that China practices mercantilism in the following four

dimensions: (1) it would ‘lock up’ international oil

reserves and redirect oil trade through its worldwide

quest for energy security; (2) the country behaves like a

‘China Inc.’ in coordinating its government, banks and

energy SOEs in its quest for energy security; (3) it would

use its newly gained leverage deriving from its growing

energy ties, especially with autocratic, oil-rich regimes, to

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ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

undercut or challenge the west’s interests; and (4) it

would prioritize energy interests and be willing to enter

into conﬂicts with other countries to compete for energy,

especially in disputed hydrocarbon-rich areas such as the

South China Sea and the East China Sea (Jaffe and Lewis,

2002; Lieberthal and Herberg, 2006; Ziegler, 2006; Zweig

and Jianhai, 2005). It is beyond the scope of this article

to fully address each concern, but detailed studies have

found all the above concerns unfounded. Speciﬁcally,

empirical work has established the following stylized

facts about China’s pursuit of energy security worldwide

(Downs, 2007; Kong, 2010). First, Chinese NOCs sell a

large proportion of their equity oil to the international

energy markets and their equity oil production after over

a decade of investment is only 1 per cent of global oil

production. Second, there is a lack of coordination within

the Chinese government or between the government

and the Chinese NOCs regarding the country’s quest for

energy security worldwide. Third, China’s dealings with

autocratic, oil-rich regimes reﬂect partially the reality that

oil is often in the hands of autocratic regimes as

espoused by the theory of ‘resource curse’ and partially

its disadvantage of being a latecomer to the international

energy markets. But Beijing has largely coalesced with

the west whenever there is a conﬂict between its energy

interests and the west’s diplomatic priorities. Examples

include how Beijing balances its competing interests in

the case of the Iraq War, Sudan peace talks and the Uni-

ted Nations sanctions over Iran. Finally, despite growing

energy needs at home, there is little indication that

Beijing has allowed energy interests to outﬂank its funda-

mental foreign policy objective, which is to create a

peaceful and conducive environment for the country’s

modernization drive. Instead, Beijing has shown increas-

ing interest in working with major energy-consuming

nations to achieve common energy security. This is evi-

denced by its initiation of the Five-Country Energy Minis-

terial Meeting, including China, Japan, Korea, India and

the US, in December 2006. Another case in point is

Beijing’s embrace of the Declaration on the Conduct of

Parties in the South China Sea and its willingness to enter

into a joint exploration agreement with Vietnam and the

Philippines.

China engages the international community on

climate change

China sees climate change as ultimately a development

issue and this perception guides its principally consistent

but pragmatically ﬂexible engagement with the interna-

tional community. The consistency ﬁnds expression in

the country’s two fundamental positions in global cli-

mate negotiations (State Council of People’s Republic of

China, 2008). First, it places priority on development and

insists that climate change be addressed under the

framework of sustainable development. Second, it main-

tains that developed countries are the primary contribu-

tors to the cumulative global GHG emissions stock and

upholds the principle of common but differentiated

responsibilities in allocating responsibilities for global cli-

mate change; therefore, it insists that developed coun-

tries take the lead in reducing emissions and providing

ﬁnancial as well as technical support to developing

countries, which are perceived in China to be the victims

of climate change. These two fundamental positions

shape China’s diplomatic objectives and tactics in global

climate negotiations. As the Chinese Vice-Finance Minis-

ter, Zhu Guangyao, puts it, climate negotiations must

conform to and serve the country’s fundamental devel-

opment interests, seize precious time for it to leap over

its current stage of development, and extend as much

as possible the current window of strategic opportunity

for China’s economic development (Zhu Guangyao,

2008). Along these lines, China has made it clear in glo-

bal climate negotiations that it will not undertake bind-

ing international commitments to reduce carbon

emissions. Tactically, it has always identiﬁed with devel-

oping countries, speciﬁcally the Group of 77 (G77), in

global climate negotiations and has frequently played a

leadership role in pressing developed countries to

increase technological, ﬁnancial and capacity building

assistance to developing countries for their mitigation

and adaptation activities (Lewis, 2007).

However, China’s increasing carbon proﬁle and the

growing development disparity among the G77 favoring

the larger emerging economies, such as Brazil, India, Rus-

sia and China (BRICs), together with the image of a

responsible rising power that it hopes to portray in the

international community, prompt Beijing to show a sig-

niﬁcant amount of ﬂexibility and pragmatism in global

climate negotiations. This ﬂexibility has manifested in its

changing attitudes toward four key issues since it partici-

pated in global climate negotiations in 1990 (Zhang

Haibin, 2007). First, it has changed from being suspicious

to supportive of the Clean Development Mechanism

(CDM). Initially, China worried that the CDM would con-

stitute a means for developed countries to shirk respon-

sibility for emissions reduction and to coax developing

countries to reduce their GHG emissions. But once it

became clear that the CDM has not only stimulated

investment in its energy-efﬁcient and renewable projects

but also put the country in a positive international light

regarding climate action, Beijing threw its full support

behind the program. Second, in light of its own expand-

ing technological capabilities and growing ﬁnancial

prowess, it has gradually dropped the request that

developed countries transfer advanced technologies and

provide ﬁnancial assistance to developing countries for

their mitigation and adaptation activities. Instead, it has

increasingly favored some sort of joint development and

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deployment of advanced technologies between devel-

oped and developing countries. Similarly, it has also

endorsed the idea of exploring new possibilities for

ﬁnancing to help developing countries’ mitigation and

adaptation activities. Third, it has become more receptive

to international climate cooperation regimes other than

the United Nations Framework Convention on Climate

Change (UNFCCC) and the Kyoto Protocol. It has become

increasingly active in climate cooperation bilaterally and

regionally. For example, it has established channels of

bilateral climate cooperation with the European Union,

Australia, the United States, Canada, etc; it has also par-

ticipated in regional climate cooperation through the

Asia Paciﬁc Economic Cooperation, the G8 and the BRIC

club meetings. Finally, it has demonstrated willingness

to become increasingly transparent about its voluntary

emissions reduction. Speciﬁcally, it has become more

receptive to the idea of subjecting its domestic

emissions reduction efforts to international measure-

ment, reporting and veriﬁcation (MRV).

The change in China’s attitudes toward global climate

negotiations is good news for the international commu-

nity because it suggests that China is responding to

international pressure and cares about its international

image as a responsible rising power. More importantly, it

indicates that the country is willing to be part of the

solution to a global collective action problem. Thus, it is

not unrealistic to expect it to contribute more to global

GHG emissions reduction as its development gives rise

to growing ﬁnancial and technological capabilities to

confront climate change at home and abroad.

Indeed, China’s developmental and pragmatic

approach to climate change provides grounds for opti-

mism about the country’s contribution to reducing glo-

bal GHG emissions. This is because the developmental

view of climate change rests on the premise that China

cannot allow climate impacts or its climate efforts to

slow its development. The corollary of this is that the

higher the impacts of climate change are on its ecologi-

cal system essential for its development, the more likely

it is that China will be more serious about its climate

efforts; similarly, the lower the cost to confront climate

change, the more likely China will be willing to under-

take international obligations to reduce GHG emissions

(Zhang Haibin, 2007).

Another corollary is that the more dividends climate

efforts yield the more likely China is to make aggressive

climate or climate-related efforts. Evidence of this has

already found expression in: (1) the recognition that

China is vulnerable to climate impacts; and (2) in the

gradual shift of perceptions in China about climate

change from being a constraint on its economic devel-

opment to a strategic opportunity for it to lead in clean

energy, which is regarded in Beijing as the new com-

manding height of the global economy in the 21st cen-

tury. With this pragmatic view, China has launched an

aggressive campaign toward low-carbon development

that is centered on the following three pillars – energy

efﬁciency, emissions reduction and clean energy promo-

tion. For example, it set a target to reduce energy inten-

sity by 20 per cent for the 11th Five-Year Plan and

accomplished a reduction of 19.1 per cent. On this basis,

the country aims to further reduce energy intensity and

carbon intensity by 16 per cent and 17 per cent, respec-

tively, for the 12th Five-Year Plan (2011–15). Accomplish-

ing these targets requires China not only to phase out

inefﬁcient, energy-intensive capacities but also to

restructure its energy economy. In this regard, the coun-

try’s 12th Five-Year Plan aims to restructure its industrial

economy around seven strategic emerging industries,

including biotechnology, clean energy, high-end equip-

ment manufacturing, energy conservation and environ-

mental protection, clean energy vehicles, new materials

and next-generation IT. Meanwhile, through its aggres-

sive clean energy expansion drive China has become a

global clean energy superpower. For example, it now

leads the world in hydropower generation, wind power

installment, solar water heater usage, photovoltaic cells

manufacturing, nuclear power plant construction, and an

advanced coal ﬂeet. According to the US Pew Environ-

ment Group, China led the world once again in 2010 by

investing $54.4 billion in its clean energy sector, which

accounted for 22 per cent of global investment; with its

industrial policy to dominate clean energy manufactur-

ing and generation, this investment translates into 27

per cent of installed renewable energy capacity world-

wide and 50 per cent of the global manufacturing of

solar modules and wind turbines (Pew Environment

Group, 2010).

China’s rise as a global clean energy superpower car-

ries positive implications for its future role in global cli-

mate governance. It means that the country will have

more and more capacity to reduce emissions at home.

The country’s continued advancement in energy efﬁ-

ciency, emissions reduction and clean energy expansion,

together with its economic expansion will inevitably

gradually lower its climate mitigation and adaptation

costs. The image of China as a global clean energy

superpower and the development beneﬁts associated

with it will also yield more incentives for the country to

be more receptive to emissions cuts in global climate

negotiations. In the Copenhagen climate conference,

Beijing already pledged to reduce its carbon intensity by

40–45 per cent by 2020, compared with 2005 levels,

which is a positive step toward slowing down its emis-

sions growth speed although not the absolute volume

of its total emissions. Some Chinese scholars even pre-

dict that China will be willing to accept binding emis-

sions cuts around 2020 (Zhang Haibin, 2007). China’s

lead in global clean energy also means that it will be

Bo Kong

ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI

able to provide both technological and ﬁnancial assis-

tance to other countries, especially developing countries,

to adopt clean energy technologies at lower cost

through exports of its clean energy equipment or direct

investment in their clean energy sectors. Additionally,

China’s dominance in the clean energy sector also inten-

siﬁes the global race for clean energy economy and its

associated jobs, thus stimulating other countries to catch

up, which will in turn help generate incentives for global

clean energy expansion and GHG emissions reduction.

Conclusions

China’s transformation into the world’s largest energy con-

sumer and largest GHG emitter in very short order has con-

stituted one of the most profound changes to the global

energy system in recent years. Although hardly a surprise

given the scale, speed and trajectory of its development as

well as its relatively low per capita resource endowment,

this transformation has created worries that China’s rise

will upset the global energy system. Speciﬁcally, these

worries are most prominent along three broad themes –

multilateralism, market and climate. On multilateralism,

there are worries that China’s rise in the global energy sys-

tem will rock the existing energy relationships and energy

regimes. On market, the worries are that China will not

play the rules of the game of the global energy markets;

instead, its statist approach to energy security will chal-

lenge the existing trade, investment and ﬁnance patterns

of the global energy markets. On climate, the concerns are

that China is too preoccupied with development to coop-

erate in the global effort to reduce emissions.

This article ﬁnds that all these worries are unsubstanti-

ated. Despite its rapid rise in the global energy system,

China remains a status quo power. Its economic success

over the past three decades makes it clear that the coun-

try has been one of the largest beneﬁciaries of the current

global system and globalization. The ongoing trend

toward a multipolar system which is exempliﬁed by the

rise of the BRIC countries is in China’s favor. Therefore, it

has every reason and incentive to maintain, support and

work with the existing system. To the extent that it thinks

the system is ﬂawed or unfair, it has sought to work

around the system. This is indeed the case with regard to

China’s attitudes toward multilateralism in global energy

governance. It still remains outside some of the key global

energy institutions; instead, it has placed more emphasis

on bilateral and regional initiatives. As argued in the arti-

cle, this practice reﬂects partially those institutions’ reluc-

tance to include China and partially China’s reservations

about being identiﬁed with wealthy nations as well as its

lack of conﬁdence in the ability of those institutions to

protect China’s interests.

This lack of conﬁdence is also demonstrated in how

China balances market and state when seeking energy

security worldwide. Speciﬁcally, with a strategic view of

energy and a collective memory about the risks associ-

ated with the country’s dependence on foreign energy

back in the 1950s, China harbors a signiﬁcant amount of

mistrust about the role of market in its economy and

the global economy. Thus, it has resorted to state inter-

vention in its energy governance. But with its deregula-

tion at home and integration into the global system

after Deng Xiaoping inaugurated the country’s reform

and opening up, China has increasingly blended market

into state when governing its energy economy and seek-

ing energy security overseas. This state capitalism mani-

fests in state support for its energy SOEs and NOCs in

their global acquisition. However, contrary to the con-

ventional wisdom, empirical work also found that China’s

state capitalism approach to energy security exhibits

little indication of mercantilism. For all intents and

purposes, by making their production available to the

international energy markets, Chinese energy SOEs’ over-

seas investment and production have increased the fun-

gibility of the global energy markets, thereby effectually

enhancing the global collective energy security for

energy-consuming countries. This means that China’s rise

as the largest energy consumer in the world requires

mutual adjustment from both China and the interna-

tional energy system. Fortunately, there is some indica-

tion that this mutual adaptation has begun, with major

international institutions, such as the IEA, reaching out

to China and Chinese NOCs entering into partnerships

with IOCs across the world. Given the Chinese NOCs’

evolution over the last 15 years or so, there is good rea-

son to believe that they will increasingly behave like

IOCs. With their competitiveness growing and further lib-

eralization of the Chinese energy market, China is likely

to increase its trust in the global energy markets.

China’s adaptation to the international energy system

is also reﬂected in its participation in global climate

governance. Its staunch positions on climate change

bespeak the country’s preoccupation with development,

but its changing attitudes toward key issues in global

climate negotiations reﬂect its ﬂexible and pragmatic

approach to development. It is this ﬂexibility and prag-

matism, together with the country’s desire to present

an image of a responsible rising power to the interna-

tional community, that gives rise to reasons, as

discussed in the article, to believe that China will play

an increasingly active and constructive role in global

climate governance.

Despite China’s adaptive engagement with the inter-

national energy system, the article’s examination of its

domestic energy context, especially its energy gover-

nance, serves as a cautionary reminder of the constraints

the country faces in participating in global energy

governance. The fragmentation of its central govern-

ment, together with the rise of substate actors and

Governing China’s Energy 63

Global Policy (2011) 2:SI ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

state-owned ﬂagship energy corporations in the coun-

try’s energy governance system means that it is unrealis-

tic to expect China to have a uniﬁed view and voice on

global energy governance in the near term. Because of

its declining energy governance capacity at home, Beij-

ing is unlikely to possess the capacity to provide leader-

ship in global energy governance in the near future. To

seek effective participation from China in global energy

governance, the international community cannot engage

Beijing alone; instead, it must also engage local govern-

ments in China that have gained autonomy over energy

affairs and those restructured and partially marketized

Chinese energy SOEs that have exhibited entrepreneur-

ship in shaping and implementing the country’s energy

and climate policies. Nevertheless, given the country’s

activism in the global energy markets and its aggressive

campaign to expand clean energy, it is almost certain

that China’s contribution to enhancing global energy

production, trade and investment, especially in the clean

energy ﬁeld, will continue to grow.

Notes

The author would like to thank Charlotte Chiang at the Johns

Hopkins University School of Advanced International Studies (SAIS)

for her excellent research assistance.

1. I drew this section from chapter 1 of Kong (2010).

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Author Information

Bo Kong, Assistant Research Professor and Research Director for

East Asian Energy and Environment, Energy, Resources, and Envir-

onment Program, the Johns Hopkins University School of Advanced

International Studies (SAIS).

Global Policy (2011) 2:SI ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd.

Governing China’s Energy 65

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1 - Introduction

Chapter

Sep 2018

Fuzuo Wu

Institutional Insecurity

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China’s International Petroleum Policy

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Jan 2009

Bo Kong

Author Bo Kong reveals how China’s international petroleum policy is shaped by the cogovernance of the country’s petroleum sector by its government and national oil companies, whose interests are at cross purposes with each other. This exhaustive treatment of China’s international petroleum policy examines the cogovernance of China’s petroleum sector by its government and national oil companies, as they work at loggerheads with each other to shape such key policies as overseas investment, domestic price caps, and import controls in the face their country’s exploding demand for foreign oil. Imported oil already accounts half of China’s total consumption and is forecast to increase to 80 percent by 2030. China’s International Petroleum Policy focuses on six major issues: the evolution of China’s petroleum governance regime, the making of China’s international petroleum policy, the international expansion of China’s national oil companies, the challenges confronting Chinese oil companies on the international petroleum chessboard, Beijing’s petroleum diplomacy, and the implications of China’s international petroleum policy. Each chapter describes the historical and institutional context of a particular issue, the key players, and the structures and processes through which policy is developed and implemented.

Global Energy Governance in a Multipolar World

Book

Apr 2010

Investigating the relationship between the emergence of a multipolar world order and the enormous challenges of global energy governance that the world is facing in the 21st century, this volume reflects on fundamental questions such as how the main consuming countries can avoid conflict over scarce resources, how they will cooperate to bring about open energy markets, energy conservation and efficiency, and how they can promote renewable energy sources. © Dries Lesage, Thijs Van de Graaf and Kirsten Westphal 2010. All rights reserved.

Book Review: Global Energy Governance in a Multipolar World

Article

Dec 2010
Energ Environ

Sonja Boehmer-Christiansen

National Oil Companies and Value Creation Volume I

Article

Jan 2011

Key World Energy Statistics 2008

Book

Jan 2008

The International Energy Agency’s annual energy projections. Based on scenarios, these projections compare what will happen if policies remain the same and what might happen if policies were improved. Each edition tends to have a particular geographical or policy focus.

Governing China’s Energy in the Context of Global Governance

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