Research Paper on "Energy Policy of the People's Republic of China"

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Importance of Study

Overview of Study

Chapter 2: Review of Related Literature

Chapter 3: Data Analysis

Chapter 4: Summary and Conclusions and Recommendations

Current and Potential Future Energy Policies of the People's Republic of China

Chapter 1: Introduction

The production and use of energy in China experienced fundamental changes and increases during the 20th century. These trends have transformed China, which was one of the poorest countries in the world in the 1930s with electricity generation capacity at a fraction of its neighbors such as Japan, to drive the country progress to the extent that China now boasts one of the world's largest economies. This transformation began in large part following the Communist takeover of the nation in 1949, and the pace of progress in China's energy sector gained momentum thereafter (Qing & Sullivan 1999). By the 1980s, though, China's economic growth introduced new demands for energy resources and the country experienced significant shortages that adversely affected its ability to continue this dizzying pace of progress (Wu 2004). Heavily reliant on coal as a main source of energy, China's policies at the time were focused on increasing production at the local level, but by the closing decade of the 20th century, the focus of energy policies in China has shifted to the development and improvement of the electricity sector (Wu 2004).

These efforts were facilitated by various policies adopted by the Chinese leadership during this formative period in the country's history, with one of the most significant changes during the 1980s being the ability of private enterprises to enter the energy market in China (World Bank 2000). By the mid-1980s, for example, the build-operate-transfer (BOT) model was adopted and by 1999, approximately 15 billion in private funds had been invested in China's energy sector (World Bank 2000). These shifts in energy policies resulted in an enormous expansion in China's electricity generation capacity (Wu 2004). In this regard, Campbell reports that, "China is the world's most populous country with over 1.3 billion people. It has experienced tremendous economic growth over the last three decades with an annual average increase in gross domestic product of 9.8% during that period. This has led to an increasing demand for energy, spurring China to add an average of 53 gigawatts (GW) of electric capacity each year over the last ten years to its power generation capabilities" (2010:2).

By the late 1990s, China's electricity supply was almost sufficient to satisfy the country's rapidly increasing demand; in fact, some regions of the country were capable of generating a surplus (Wu 2004). During the past decade, China has also increased its oil imports as well as domestic production of natural gas to the extent that currently, China's energy sector is characterized by (a) oversupply of coal, (b) rapidly growing electricity-generating capacity, (c) a net oil-importing industry and (d) an expanding natural gas sector. These new developments combined with China's recent entry into the World Trade Organization will inevitably affect China's energy policy well into the 21st century (Wu 2004).

Statement of the Problem

In sharp contrast to the developmental policies that were in place during much of the 20th century, China's energy policies today are focused on ambitious environmentally sustainable approaches. For example, in 2006, China's leadership stated that by 2010, the nation would decrease energy intensity 20% compared to 2005 levels; in 2009, China's leaders also emphasized that by 2020, the country would reduce carbon intensity 40% from their 2005 levels (China 2010). To accomplish these ambitious goals, the Chinese government intends to incorporate energy production capacity from sources besides coal and oil by focusing on nuclear and other alternative energy development initiatives (China, 2010). As a recent report from Bradsher points out, though, "Even as China has set ambitious goals for itself in clean-energy production and reduction of global warming gases, the country's surging demand for power from oil and coal has led to the largest six-month increase in the tonnage of human generated greenhouse gases ever by a single country" (2010:2). According to Gregson (2005), China is currently consuming more than six million barrels of oil each day, and that demand continues to increase. While China remains an important oil producer, approximately 40% of China's demand remains dependent on imports, which increased by almost one-third in 2004 alone to almost 3 million barrels per day (Gregson 2005). Based on these trends and the most recent energy projections for the country, increases in oil consumption in China will continue to remain above 10% annually for the foreseeable future (Gregson 2005). Not surprisingly, these trends have caused the Chinese leadership to focus their efforts on identifying opportunities to satisfy demand in sustainable ways, but the issues involved are multifaceted and complex. The results of a recent special cabinet meeting of the Chinese leadership showed that coal-fired electricity and oil sales each increased almost one-quarter (24%) during the first quarter of 2010 compared to a year earlier, following comparable increases in the fourth quarter of 2009 (Bradsher 2010). These trends indicate that past projections of energy demand in China may have been understated, and the ambitious goals established by the Chinese leadership will require some reevaluation and fine-tuning if the country is going to continue on its current path to economic development in the future, issues that directly relate to the purpose of this study which is discussed further below..

Purpose of Study

The purpose of this study was three-fold as follows:

1. Determine China's current energy reliance on coal, and why this is changing.

2. Identify viable energy options for China in the future, including oil, nuclear, renewables, and examine the likelihood that oil, gas and nuclear will be the most likely candidates for replacing coal.

3. Assess what these trends might mean for Sino-American trade relations given the placement of oil reserves and uranium deposits in the world.

Importance of Study

According to Gee, Zhu and Li (2007), the economic growth of the People's Republic of China will undoubtedly be one of the most significant events of the 21st century for the entire world. Indeed, China is already undertaking the most ambitious construction schedule in modern times, and the country's demand for energy to drive its economy and industrial revolution is without historical precedent (Gee et al. 2007). During the past 2 decades alone, China's economy has grown by an average of almost 10% annually, and it "consumes half [of] the world's cement, a quarter of all steel, and two-fifths of all copper." Currently, it is the second largest oil consumer in the world and the third largest oil importer . . . [Its] oil demand growth has accounted for nearly one-third of the world's total oil demand growth during the past decade, and is adding the equivalent of a medium-size country to world oil demand each year" (Gee et al. 2007:421).

Although still a major oil producer, domestic production in China has stagnated and oil imports have assumed new importance as an economic reality in the country in recent years (Prakash & Hart 2000). According to these authorities, "This represents a fundamental reorientation of China's emphasis on oil self-sufficiency, a legacy of the Maoist era when the Daqing oilfield was held up as a model for national emulation" (Prakash & Hart 2000:53). Despite the fact that oil imports remained relatively inexpensive throughout the 1990s, China's increasing demand for energy has resulted in an increasing reliance on foreign supplies, resulting in concern on the… READ MORE