China’s energy conundrum

This article is taken from the Focus magazine by CBBC in May 2018.

Neil Hirst, Senior Policy Fellow at the Grantham Institute, Imperial College London, writes that China’s shift to cleaner energy will change the world.


In recent decades, China’s environmental record has been atrocious. But now, as the 19th Party Congress consolidates Xi Jinping’s leadership, there is a change of heart. Under the headings ‘ecological civilisation’ and ‘beautiful China’, healing the environment has become one of the top priorities of China’s New Era. The global implications for climate change and for energy trade and investment will be profound. Anyone involved in the energy sector should take notice. The future will be different from the past.

Since 1990, China has more than tripled its energy demand, sustaining an economic revolution that has transformed the lives of hundreds of millions of people. China has more than met the UN’s sustainability goal of halving the number of people living in extreme poverty. According to the UN, China has achieved “the most rapid decline in absolute poverty ever witnessed”, and this is something to be celebrated.



But there is a darker side. This single-minded pursuit of economic growth went hand in hand with a reckless disregard for environmental consequences. China’s economic miracle, like the UK’s industrial revolution before it, has largely been built on coal, the most polluting of the fossil fuels. Coal consumption has more than tripled since 1990, reaching a staggering 2.8 billion tonnes in 2016, by which time China was consuming more coal than the rest of the world put together.

“China is already the world’s largest market for renewables, accounting for 41 percent of all new capacity”

China’s spectacular growth of recent decades was concentrated on heavy industry, basic manufactured exports, and the building of China’s infrastructure. By 2016 China produced half the world’s steel and over half its cement, mostly for home use.

The record of pollution of China’s rivers, land, and air has been terrible. According to the 2016 Environmental Statistics Bulletin, out of more than 300 medium and large cities, only 38 reach national air quality standards. Anyone who has recently visited Beijing, Shanghai, or any of the other major Chinese cities will be aware of the problem. Out of more than 6,000 underground water sources monitored by the Ministry of Land and Resources, more than 60 percent fell into the worst or second worst category. There are also problems of land pollution, desertification, and coastal pollution from sewage outfalls.

In 2016, China contributed nearly 30 percent of global carbon dioxide emissions from energy usage, the main cause of global warming. China also contributed a staggering 65 percent of the global increase in these emissions between 2000 and 2016. However, for balance, it is also worth remembering that China’s emissions per person are still well below those of the developed countries of the OECD, and less than half those of the US.

“It is to be hoped that the BRI will not export China’s polluting energy history, but will reflect today’s clean energy revolution”

Now China is facing up to reality. In his seminal speech to the National Party Congress, Xi Jinping was eloquent on the need for change. “There has been a clear shift away from the tendency to neglect ecological and environmental protection,” he said. “China has become… a torchbearer in the global endeavour for ecological civilisation… we will promote a revolution in energy production and consumption, and build an energy sector that is clean, low carbon, safe and efficient.”

China played an important role in the 2015 Paris Climate Summit. Meeting in advance of the summit, Presidents Xi and Obama agreed that climate change was “one of the greatest threats facing humanity.” China committed that its omissions will peak around 2030, with best efforts to peak earlier, and that the share of non-fossil fuels in its energy consumption will increase to around 20 percent.

The active role that China is taking in international climate diplomacy no doubt reflects, in part, China’s own vulnerability as a land already suffering serious water shortages. It also reflects China’s desire to exercise soft power. But Beautiful China is also a factor. Cleaning up the national environment is a popular cause and there is a close connection between the measures needed for this and those required for climate mitigation.



In the field of energy, China is switching to renewables, especially wind and solar, as well as natural gas, to meet growing energy demand. Coal demand has probably peaked, although coal will continue to be the largest element in China’s energy supply for several decades to come. And just as important as the switch to cleaner energy sources will be a massive drive to improve energy efficiency, as well as environmental regulation more generally.

China has embarked on a major programme of investment in renewables. In 2016, according to the International Energy Agency (IEA), China was already the world’s largest market for renewables, accounting for 41 percent of all new capacity. Investment in China’s energy sector in 2016 was almost one fifth of the estimated world total of $1.7 trillion. Most of this was in renewables and in the electricity transmission / distribution that will be needed to deliver the power where it is needed. The IEA predict that Chinese investment in renewables will be around $80 billion per year to 2040, and investment in distribution and transmission only slightly below that. These are vast sums by any standards.

Gas is also expected to play an important part in China’s new energy economy. Gas emits about half the greenhouse gases of coal and is far less polluting of the local atmosphere. So switching from coal to gas, especially for small industrial and domestic use, can contribute to improving air quality. China is expected to become a major importer of natural gas in the coming decades.

Just as important for the environment, China has been running a programme to improve energy efficiency that now covers over 16,000 enterprises. The energy intensity of the economy, that is to say energy demand per unit of GDP, is also declining as China re-balances away from heavy industry. According to the IEA, China achieved an impressive reduction of 5.7 percent in energy intensity in 2016 compared to 2015. They estimate that, again until 2040, China will spend around $90 billion a year on improving the efficiency of buildings, transport, and industry.

Following the 2018 meeting of the People’s National Congress, the government has instituted a powerful new Ministry of Ecological Environment with a mission to oversee regular anti-pollution inspections nationwide and help China protect its environment more effectively. The new minister has announced that more than 1,000 officials, including three of vice-ministerial rank, are to be punished for failing to fulfil environmental protection duties. The new ministry appears to be serious about its role.



As car ownership grows, China is on course to become the world’s largest oil importer, and oil security is an increasing factor in China’s geopolitics. However, China is also the world’s largest market for electric cars. When will this electrification start to moderate the growth in oil demand? In the IEA’s projections oil demand plateaus from about 2030.

China has also launched a programme of international investment, the Belt and Road Initiative (BRI), much of which is expected to be energy focused. The precise content of the BRI is not fully defined, but instead it currently acts as a broad heading that covers the whole range of Chinese investment across Asia, Africa and Europe. Some of this will be commercial but other aspects will have more geopolitical objectives. The immense scale is not in doubt however.

It is to be hoped that the BRI will not export China’s polluting energy history, but will reflect today’s clean energy revolution and that there will be room for collaboration within this for international industries and investors. China is notorious for the restrictions and demands that it has placed on international participation in its economy although Premier Li Keqiang is now promising more “opening up”, a level playing field, and better protection for intellectual property.

However this works out, nobody involved in the international energy industries can afford to ignore the seismic shifts that are occurring in China’s energy economy and the massive impact that this will have on the world energy landscape.

Neil Hirst’s book, ‘The Energy Conundrum: Climate Change, Global Prosperity, and the Tough Decisions We Have to Make’, published by World Scientific Publishing Company, is available now on Amazon.

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