Understanding the energy challenge

China needs low-carbon development to ensure its energy security. In this effort, writes Lin Boqiang, the country could become a model for other developing nations.

[Produced in association with Rutgers Climate and Social Policy Initiative]

China needs a low-carbon economy not only to meet the challenges of climate change, but also to address its other environmental problems – and its energy security. The country’s immediate ecological problems are plain to see; here, I will attempt to understand China’s energy problems.

China has large total energy reserves, but its population is huge – and thus its per capita reserves are low. Per capita extractable reserves of coal, oil and natural gas are in fact far lower than the global average. If China’s massive population increases its energy consumption, that scarcity will become more apparent.

China is better off than Japan in this regard, but China’s economy is still developing and it faces more severe challenges than Japan did at the same stage of its development. Japan’s industrialisation was aided by cheap energy and a lack of environmental concerns. Late-developing economies face greater energy and environmental constraints as they industrialise and urbanise: energy costs are rising, and environmental options are contracting. The costs of dealing with environmental damage further increase the costs of development. China’s biggest challenge this century will not be today’s financial crisis; it will be the energy and environmental pressures of tomorrow.

International energy markets are small when confronted with Chinese demand. However, if we compare primary energy consumption across major countries, we find that Chinese energy demand is rising, but per capita consumption is still low – although that of India is even lower. Between now and 2030, energy demand in China will double; in India it will triple. Developed economies, such as the United States and Japan – where industrialisation and urbanisation have been achieved – will only see low levels of growth in their energy consumption.

However, despite growth in India and China, per capita figures will remain far below those of the developed world. In 2030, per capita energy consumption in China will be a little more than one-third of that in the United States; India’s will be one-tenth. China’s massive demand for energy will also have an impact on international energy prices; historically, anything that China buys has gone up in price, and the country’s growth will be further impacted by high prices.

Comparing energy consumption structures across major countries in 2007, we find that China’s primary energy came mainly from coal: a crucial factor in terms of pollution. Although the use of oil, natural gas, hydropower and renewable energy sources has increased in recent years, coal still accounts for a very high proportion of China’s energy consumption: 69.5% in 2007, compared with 20.1% for oil, 3.3% for natural gas and 0.7% for nuclear power. India’s energy mix is also dominated by coal, which provides 51.5% of its power. Japan and the United States draw less than one-quarter of their energy from coal.

As a country rises out of poverty, short-term benefits often trump long-term concerns – hence energy resources and the environment do not receive the strategic planning and protection they deserve. At the moment, there is a thirst for power in China, and if the government allows it, this demand will be met with cheap coal. China is currently the world’s second largest producer and consumer of energy, and is undergoing a phase of rapid development characterised by intense extraction and consumption of energy. Hence the tension between sustainable development and limited energy reserves increases, and China’s own need to save energy becomes ever more pressing. It is generally accepted that China has significant scope to save energy; overall energy efficiency is around 33%, 10 percentage points below developed nations. This is often used as evidence that China is energy-inefficient – but that is not the whole truth of the matter.

In fact, China’s energy consumption per capita is far lower than that of the United States or Japan when they were at the same GDP per capita level, according to research by the Center of China Energy Economics Research at Xiamen University. The US and Japan reached a GDP per capital level of US$2,000 (13,655 yuan) in 1951 and 1970 respectively. It is estimated that when China reaches that GDP per capita level, energy consumption per capita will be only one-quarter of that of the US, and half of Japan’s (and slightly lower than the comparable point in the history of Taiwan, which reached a per capita GDP of US$2,000 in 1979, and was then consuming the equivalent of 2.1 tonnes of coal per capita). Therefore, it doesn’t seem correct to blame China for wasting energy: we can only say that the times have changed, as has the situation regarding energy and the environment.

Comparing energy utilisation rates across different countries at the same stage of development, China’s energy efficiency during industrialisation is no worse than that of the US and Japan during the equivalent phase of development. Energy was cheap while the US and Japan were industrialising and there were no environmental constraints: the two nations could use energy as they liked. Improved technology is clearly helping to change this situation: for instance, in the past five years the bulk of China’s coal-fired plants have been built to high international standards; they are significantly more efficient compared with older US plants.

However, China’s low energy efficiency compared to developed nations indicates the scope for the development of a low-carbon economy. Current levels of technology allow for further energy-efficiency improvements: several percentage points of energy saving would have a huge impact. China’s massive population means there is great scope for energy savings through the adoption of low-carbon lifestyles.

Like developed nations, China must go through a stage of urbanisation characterised by high energy use and emissions. But unlike those countries, China’s urbanisation faces challenges that include addressing climate change, ensuring food security and combatting energy shortages. The financial crisis will impact on China’s short-term economic growth, but the country’s rapid expansion will continue: the process of urbanisation is unstoppable, and energy demand will continue to grow. A correct understanding of China’s energy security and environmental issues should be the starting point for low-carbon development, and for setting the targets for that guide that development.

China’s low-carbon growth is of great global significance. The efforts of developed nations to cut emissions will be of instructive value to developing countries, but they are not entirely relevant: there are differences between populations of different developmental stages in terms of the inclination and ability of people to pay environmental costs. As a developing country, China’s experiences of creating a low-carbon economy will be of greater value for other developing nations.

Controlling greenhouse-gas emissions means controlling emissions growth. India is a factor that cannot be ignored. Its population will overtake that of China; since it mainly relies on coal power, India will face similar challenges to China in terms of emissions. Therefore, developing China’s low-carbon economy is not just a mission for China, it is a global one. If China can find a low-carbon path, India and other developing nations will be able to follow in its footsteps.

Lin Boqiang is professor at the Center of China Energy Economics Research, Xiamen University, and a member of the Changjiang Scholars Program.

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