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The Asia-Pacific Journal | Japan Focus Volume 3 | Issue 6 | Article ID 1956 | Jun 10, 2005
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China's Energy Options: national, regional and global
consequences
Jonathan E. Sinton, Rachel E. Stern, Nathaniel T. Aden, Mark D. Levine
China’s Energy Options: national,
regional and global consequences
By Jonathan E. Sinton, Rachel E. Stern,
Nathaniel T. Aden, and Mark D. Levine
This “Evaluation of China’s Energy Options”
(ECEO) is a very important and informative
analysis of China's energy-supply challenges.
The ECEO was prepared for and with the
support of the China Sustainable Energy
Program. The Program links American and
Chinese experts and is aimed at assisting "in
China's transition to a sustainable energy
future by promoting energy efficiency and
renewable energy." The ECEO was itself
written by an international group of experts on
energy issues. They seek to augment the
Chinese Development Research Centre's 2004
"National Energy Strategy and Policy 2020"
(NESP), an assessment of China's current and
future energy needs and how to satisfy them.
The ECEO is thus a treasure trove of data and
concise analyses of the structure of China's
energy demand and supply as well as the
relevant institutions and organizations.
But the importance of the issues addressed in
the ECEO extends far beyond China. The
backdrop of the analysis is the increasingly
desperate global search for energy supplies.
Not only do all nations confront the end of the
era of cheap and plentiful oil and natural gas; it
is also essential to conserve energy at a time
when soaring consumption fuels global
warming.
Though that daunting context is not part of the
ECEO, it is clear that if a rapidly developing
China chooses the same energy options and
consumption patterns that the rich countries
have - even the relatively energy-efficient
Japanese and Europeans - then world
greenhouse gas and energy (especially oil)
supply problems will be multiplied. What this
report does tell us in this regard is that even
this is in fact an optimistic scenario.
Consider what we learn from the ECEO. Over
1980 to 2000, China quadrupled its GDP but
only doubled its energy usage. Still, China
relies on coal for over 2/3 of its energy needs. It
also went from being self-sufficient in oil to
being a net importer in 1993. It now imports
about 40% of the oil it uses, and that figure is
projected to increase to about 70% by 2020.
China’s NESP analysis projects, over the 20
years from 2000 to 2020, that the country will
again quadruple its GDP while only doubling its
energy consumption. The ECEO confronts this
optimistic outlook head on with the facts.
Current data indicate that China’s energy use
threatens to outpace GDP growth over the
period projected in the NESP. Indeed, in the
wake of the 1997 Asian Currency Crisis,
China's annual increase in energy consumption
skyrocketed from a nadir of about -4% to a
blistering rate of over 15% in 2004. As figure 1
in the ECEO shows, this 15% rate of growth is
about double the highest rate of growth in
energy consumption achieved over 1980 to
2000. And China is just at the beginning of the
curve of private automobile ownership that
promises to further increase oil consumption. It
is no wonder, then, that China's, and
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international, attention is so keenly focused on
energy security. China's immediate challenge is
to grow its economy while also bringing down
this extraordinary rate of increase in energy
use as well as shifting away from coal and
other dirty fuels towards cleaner alternatives.
Its greater and long-term challenge is to avert
the environmental disaster that looms as a
result of its breakneck growth, one that is not
limited to China but extended globally through
such mechanisms as global warming.
The ECEO seeks to build on the NESP by
sketching a structure of incentives so that
energy demand can be brought under control
and concerns over security of supply be at least
balanced with an equivalent zeal for efficiency.
The ECEO finds that what is lacking are 1)
market prices and other incentives (such as
taxes and subsidies) to encourage efficiency
and 2) a central agency empowered to develop
and deploy these mechanisms relatively free of
interference from vested interests. To borrow a
little from the language of public
administration, energy efficiency has many of
the characteristics of a public good. In
particular, encouraging energy efficiency is in
the collective interest. And failure to regulate it
promises mega problems not only for China,
but for the world. The authors recognize that
individual actors will do little to enhance this
national and global interest so long as they are
not compelled to, whether by price or policing
factors that place the costs of environmental
destruction on enterprises.
The ECEO therefore stresses repeatedly and
persuasively that China requires a strong
Ministry of Energy to bring together the many
dimensions of energy acquisition and use and
implement a robust regime of controls. In
coordination with local governments, the new
ministry could also establish institutions to
ensure timely and credible data on energy
supply, consumption and prices. Through
suggesting these mechanisms as well as a new
structure for financing research and
implementation, the ECEO fleshes out the
vision outlined in the NESP.
All the same, there is more than one rich irony
seated at the back of this set of
recommendations. In this era when
decentralization, deregulation and privatization
are the patellar reflex of politics in China and
globally, it is instructive to learn that it was
China's much-maligned central planning
mechanisms that helped keep growth in energy
use well below GDP growth. Moreover, it is also
interesting to discover that it was the
decentralization of power over energy decisions
to state-owned firms that afforded more access
points for vested interests to block efforts at
enhancing efficiency. The critical lesson is not
the elimination of the market, but that energy
issues require a robust and autonomous public
sector if societal, and global, interests are to be
protected.
A further irony is in reading what is essentially
an American report, prepared by the Lawrence
Berkeley National Laboratory, with funding
from the Packard and Shell Oil Foundations
and the Pentagon, that is telling the Chinese
what they need to do to control energy
consumption. America consumes over a quarter
of the world's oil, most of it wasted in vehicular
transportation with prices one-third to one-fifth
or lower than those in much of the world. Yet
there is not a word in the ECEO about why the
US Department of Energy has failed to rein in
this profligacy. As we all know, gasoline taxes
are far too low in the United States while far
more efficient rail transit and shipping remain
marginal operations. By contrast, China is in
the midst of installing over 12,000 kilometers
of high-speed rail networks and strengthening
urban public transport. This and similar such
systems promise far greater energy efficiency
in transport than one finds in the United States.
While the ECEO sensibly recommends mass
transit, including buses for low-cost intra-city
transit, it might have included a comparative
treatment of the manifest failures of America's
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market-oriented approach to achieving energy
efficiency and conservation, and warned of the
consequences that China will face as a result of
the race to automobilization presently
underway in that nation. AD
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