China's Quest for Energy Security: Political, Economic, and Security Implications Jean A. Garrison
University of Wyoming
Paper submitted to the annual meetings of the International Studies Association, New York, New York, February 15-18, 2009
Many scholars and policy-makers argue that securing scarce energy resources is the single most important challenge facing a country’s national security today. The insecurities of the United States, China, Europe, Japan, and most of the developing world, which rely on energy imports, make them all vulnerable to supply disruptions in a time of increasing uncertainty in the global energy supply. Increasing insecurity of supply today accompanied by increasing demand
potentially could lead to a dangerous security dilemma. Growing scarcity in the face of rising oil prices creates conditions for competition among states and fears of future “resource wars.”1 Such traditional geopolitical analyses view energy security through the lens of a classic zero-sum competition that predicts that conflict over scarce resources is inevitable. This context places China’s growing search for energy into a win-loss scenario that pits it against the United States and all other contenders. With this scenario, China is caught up in a broad strategy to buy up scarce energy reserves around the world and thus take “our” oil.2
In contrast, a neoliberal perspective emphasizes that the energy futures of China and the United States, as well as Asia and the globe as a whole, are intimately linked. States that share common challenges—such as vulnerability to fluctuating production levels and rapid price shocks —may also share common interests that foster cooperative relations. Given economic
interdependence, China and others certainly share economic consequences if there is a disruption in energy supplies. They also are affected by the same transboundary environmental consequences that emerge from reliance on fossil fuels. In the latter case, the common threat may set the stage for shared challenges in the need to diversify the energy mix, to shift to alternate energy supplies, and to improve energy efficiencies.
The current push in China to take energy security seriously was spurred by a domestic energy crisis in 2003-2004 that threatened its rapid growth path. Widespread electricity shortages across the country—including blackouts in twenty-four of China’s thirty-one provinces—led to a 15 percent spike in oil demand to 850,000 barrels per day (bpd) fueled by demand for diesel for power generation. This crisis demonstrated clearly China’s import dependence and growing vulnerability. In light of the peak, or near peak, decline of its own energy production capacity (and ever increasing demand), energy self-sufficiency is no longer an option for China. Newly developed fields in western China and offshore are expected to only slightly offset production declines in its largest fields in the northeast, including Daqing.3 In response, the Chinese
government has put its supply-side energy policy front and center in its foreign policy efforts, but also admited that domestic coal and demand-side conservation policies are part of the national security debate.
The fundamental challenge for China is that its search for energy resources in Asia and around the globe has yet to secure the country’s current and future energy needs. Its rapid 1 Klare, Blood and Oil; Klare, Resource Wars.
2 Ebel, China’s Energy Future.
3 IEA, China’s Worldwide Quest for Energy Security; Calder, “Coping with Energy Insecurity,” pp. 3-54; Yusuf and Nabeshima, China’s Development Priorities, pp. 102-108. China’s energy intensity remains high because of its reliance on coal. However, its efficiency is improving with improving technologies and incentives in place to promote energy efficiency.
developing economy—predicted to quadruple by 2030 despite the recent economic downturn— keeps the pressure up. While China’s long-sustained growth is an economic miracle, its
corresponding growth in energy use and recurring shortages show an unsustainable energy strategy and the inability of its supply-side energy policies to address its energy security adequately.Through 2030 China’s demand for oil is expected to increase nearly 3 percent per year, with overall consumption doubling to 13.1 million bpd. Corresponding to this demand increase, China’s decline in domestic oil production (down to an anticipated 2.4 million bpd by 2030) leaves the shortfall to be addressed by imports. This makes securing adequate energy sources a constant need.4 This “reality” has prioritized a new domestic energy campaign
highlighting conservation and seeking greater energy diversification beyond fossil fuels. Looking to the demand-side of the China energy security problem and its potential for renewable energy frames the problem as one of greening China’s development path. This situation challenges China to adjust its economic growth and energy consumption models accordingly.5
Changing its energy-consumption patterns means adjusting away from a traditional economic growth model based on massive energy consumption, low efficiency, and heavy pollution in order to become less wasteful.6 Today, Deng Xiaoping’s economic growth model (or “growth-at-any-cost”) vies with environmental concerns within the broad debate of sustainable development. Growing concern over climate change adds a new impetus to this debate. Given the challenges that China faces, seeking greater energy efficiency is the most cost-effective way to meet its immediate energy security and climate security challenges.7
China’s Energy Shortages and Security Challenges
In the short term, China has forged a two-prong domestic politics approach that addresses domestic consumption practices.8 Beijing’s efforts include attempts to develop cleaner energy and changing the way China uses existing energy sources. Energy-use changes are promoted through new energy laws and regulations, specific conservation plans, implementation of new technology, research and development and policies favoring energy conservation, energy efficiency standards, and labeling, for example. Optimizing the energy mix means expanding beyond readily available coal. The 2005 renewable-energy law set a goal to get 15 percent of China’s energy from renewable sources by 2020, which would be up from the current 7 percent. Although there are financial incentives and a national renewable fund, discounted lending, and tax incentives to move renewable projects forward, the higher up-front costs still make financing difficult.9 Further, given China’s growing energy demands, these goals are not enough to have a significant impact on China’s dependency on fossil levels.10 The best areas for increase include 4 IEA, World Energy Outlook 2007, p. 376. See also Zha, “China’s Energy Security.”
5 Zhao, “China’s Energy Procurement Strategy.” See also Zhao, “Energy and Conflict”; Oon, “China Must Do More”; Lampton and Kong, “China Comes in from the Cold.”
6 Li, “Energy Use ‘No Threat’ to the World.”
7 See, for example, Berrah et al., Sustainable Energy in China.
8 Xia, “Partnerships Will Help Solve Energy Conflicts”; Zhou, “Five Steps to Prevent Future Energy Woes.”
9 Lewis, testimony before the U.S.-China Economic and Security Review Commission, p. 3; Lampton and Kong, “China Comes in from the Cold.”
hydropower with the goal to double output (equivalent to a new 3 Gorges Dam every two years), wind, and biomass. Even so, renewable resources face additional hurdles in that they do not address the energy shortage problem in the near term and have much higher up-front costs than fossil fuel projects.11
In the eleventh five-year plan (2006-2010), the two quantitative development goals are to double the per capita GDP of the country by 2010 (compared with that of 2000) and to decrease the energy consumed per unit of GDP by 20 percent, targeting an annual savings rate of 4 percent. This goal builds on previous improvements in energy intensity levels between 1990 and 2005 that decreased intensity overall by 47 percent per unit of GDP (despite an increase from 2003 to 2005). Zhou Dadi, from the National Development and Reform Commission (NDRC), China’s central planning bureaucracy responsible for setting development goals, believes that this can be done by scaling back the energy-consuming industrial projects that come online and by promoting new energy savings projects.12 Mark D. Levine from the China Energy Group at LBNL argues that China makes great efforts in energy efficiency but that it needs technical assistance and knowledge transfer (capacity building). He states that U.S.-China cooperation is key because between the two they account for roughly 40 percent of global energy use and its related C02 emissions and therefore have the largest potential to reduce emissions growth.13 Addressing China’s Energy Intensity
To address energy conservation in the long term, China must move its economy away from energy-intensive industries. To achieve China’s goals, the Chinese people need structural adjustment in terms of what they produce and physically how they use energy. Much of the country’s pollution problem comes from the transfer of manufacturing to China—28 percent attributed to manufacturing in the energy-intensive sector.14 Growth in the energy-intensive industrial sectors such as iron, steel, and cement continue to put a premium on China’s energy consumption. China manufactures many of the energy-intensive products the globe uses, including 48 percent of global cement production, 35 percent of steel, and 28 percent of
aluminum. In the first two quarters of 2006, 70 percent of China’s industrial energy use was due to items such as steel, metals, chemicals, and building materials, which contribute only 20 percent to the industrial value-added.15 Industry contributes 46 percent to China’s GNP but consumes 70 percent of energy and emits 70 percent of its C02.16 The residential sector accounts for 10 percent of energy demand, transportation for 7 percent, and the commercial sector for 2 percent.17 Restructuring of China’s reliance on energy-intensive industries—characterized by huge outputs, fast growth, and low efficiency—is the important goal to pursue.
11 Shen, “International Cooperation.”
12 Economy, The River Runs Black, pp. 60-63; NDRC, PRC, “China’s National Climate Change Programme.”
13 Levine, Testimony before the U.S.-China Economic and Security Review Commission. 14 See Jain, “Japan to Shift Aid Focus.”
15 Rosen and Houser, China Energy, pp. 5-9. 16 Wang, “Energy Efficiency,” p. 9.
17 Rosen and Houser, “China Energy,” pp. 5-9; Zhou, “Five Steps to Prevent Future Energy Woes.”
Some progress has been made in industrial consumption patterns. In 2006 energy intensity fell 1.23 percent per unit of GDP, but this figure was below the government's target to meet its 20 percent decline goal by 2010.18 Data covering January-September 2007 show that energy use per unit of industrial output for large companies dropped by 3.87 percent. Coal mining saw a fall of 7.76 percent , steel 6.49 percent , construction material makers 7.84 percent , the chemical industry 5.17 percent , and power companies 2.57 percent, while oil, petrochemicals, and nonferrous metal producers increased more than 1 percent. In the first half of 2007 the government reported that the electric power industry closed 10 million kilowatts of small-sized power generators and that the steel and iron industries halted 8.7 million tons of unnecessary steel production and 11.4 million tons of iron. Key energy-conserving projects have saved around 30 million tons of coal.19 As part of its industrial policy, the government taxes exports of energy-intensive industries, such as its 15 percent tax on copper, nickel, and
aluminum; 10 percent on steel; and 5 percent on petroleum, coal, and coke. Chinese officials also placed import tariffs on energy and resource products such as coal, petroleum, and minerals.20
Despite these taxes and other NDRC-issued guidelines to stop the blind investment in energy-intensive sectors, it has been hard to stop investment in areas where there is high demand.21 Part of this demand comes from the government, which spends disproportionately to build large infrastructure projects rather than focusing on energy conservation. Government investments in new buildings, highway construction, and railways promote market demands on cement, steel, aluminum, and other energy-intensive industrial products. Building and residential units account for 23 percent of Beijing’s fixed investment at around $270 billion. After real estate, the next-largest destination for fixed-asset investment is in the transportation
infrastructure, which stands at $140 billion, with half of the investment going to highways. The auto industry and China’s growing car culture foster the building of new highways and work to block efforts to develop mass transit. In this environment, energy savings rely on improvements in efficiency standards and China’s ability to leapfrog old industry and vehicle technology.22
Nicholas Lardy from the Peterson Institute of International Economics states that Beijing must adjust its export-led growth model by deemphasizing manufacturing exports and expanding domestic consumption. He argues that such a change would reduce increases in energy
consumption as well as help China sustain its growth, create new jobs, and slow the rising income gap as it reduces global economic imbalances. While Chinese leaders rhetorically acknowledge the need to rebalance the country growth model, to date only small (and inconsistent) steps have been taken to increase spending on the environment and energy-consumption side. The central drivers for this acceleration in energy demand are China’s increasing population, growth in its industry, the building and manufacturing sectors, and the greater wealth in a rising middle class that is driven by globalized markets. In addition, 18 Fu, “Accuracy under the Spotlight.”
19 “Workable Measures Adopted”; Fu, “Accuracy under the Spotlight”; Sun, “China’s Energy Use.”
20 Lewis, Testimony before the U.S.-China Economic and Security Review Commission, p. 4. 21 Wang, “Energy Efficiency,” pp. 10-17.
22 Rosen and Houser, “China Energy,” pp. 12-16. Zhou, “Five Steps to Prevent Future Energy Woes.”
transportation is a looming problem; estimates are that cars in China will increase in number from 40 million today to 150 million by 2020.23
The IEA notes that to stick to these targets, China will need to embark on major new investments to reverse current energy-use trends that are dominated by dirty fossil fuels. The Chinese will particularly need to address their use of coal-fired plants in the power-generation sector.24
Addressing the Power-Generation Challenge
China’s inefficient power-generation sector represents the fundamental pollution trade-off that comes with China’s coal use. As coal’s use doubled during the Deng Xiaoping reform period, with it came air pollution problems, so that coal is responsible for 70 percent of the dust and smoke in the air, 90 percent of the sulfur dioxide, and a majority of the carbon.25 Despite this, coal will remain the central source of China’s power-generation sector (see Figure 1.1).26
Figure 1.1
Source: IEA, World Energy Outlook 2007.
*Other Energy: hydropower 4.6%, biomass and waste 1.7%,
other renewables 0.7%.
Coal is forecast to remain dominant in the power-generation sector at about these same levels to 2030. Coal demand will remain high because from national security and economic perspectives, coal continues to make sense for China in the short and mid-term. China relies on coal because of its large coal reserves and coal’s historically cheap price (about $1 per million 23 Brookings Roundtable, “A Climate of Change.” In the U.S. context, Ogden, Podesta, and Deutch call for an integrated approach to energy technology innovation including a multi-year national energy RD&D strategy and increasing budgets. See Ogden et al., “A New Strategy to Spur Energy Innovation”; and Lampton and Kong, “China Comes in from the Cold.”
24 See Li, “China's Energy Intensity Climbs.” Zhou Dadi, director of the NDRC, argues that this growth is driven by local officials’ desire for outstanding growth rates. Such breakneck growth, however, is unsustainable because surplus capacity continues to expand in highly energy-consumptive sectors such as steel and metal.
25 Economy, The River Runs Black, pp. 72-76.
British thermal units27) compared to imported natural gas, about $6 or $7 per million British thermal units—especially when a carbon price is not factored into the mix. Other sources of power cannot meet China’s energy demands in the near future; for example, nuclear power is projected to provide less than 10 percent of China’s energy in 2030, and natural gas less still. Coal power plants will make up the difference. In 2005 China built seventy-five coal-fired plants, which each emitted 15,000 metric tons of CO2 daily. The high level of carbon emissions that will result will be exacerbated by the third-largest car market, which is expected to increase six times by 2020.28
One problem is that China’s rapidly expanding coal-fired capacity remains inefficient relative to the developed world. In 2007 China’s coal-fired capacity increased by 110 gigawatts and was set to increase by 80 gigawatts in 2008. Based on IEA estimates, subcritical
technologies (those only 30-36 percent efficient), which cost $500-600 per kilowatt, will remain the base of China’s current fleet. Supercritical technologies that can reach 41 percent efficiency at a cost of $600-900 per kilowatt will be about half of current new orders and ultra-supercritical that can reach 43 percent efficiency level at a cost of $600-900 per kilowatt will have two 1000 megawatt plants in operation. The most efficient, integrated gas combined cycle (IGCC) technology can reach 45-55 percent efficiency at a cost of $1100-1400 per kilowatt. In 2008 there were twelve units waiting NDRC approval. However, IGCC technology faces high costs and needs more research, development, and deployment to be adopted more widely. If China’s coal fleet adopts these changes, the average efficiency of coal-fired generation could improve from 32 percent in 2005 to 39 percent by 2030. By prioritizing efficiency, China can save the power equivalent of two Three Gorges Dam projects by 2030. Reaching its goals becomes an issue of cost and enforcement.29
Increased efficiency, a function of technology, will mean that plants will generate more power using less coal while producing lower emissions. In OECD countries coal plants average a thermal efficiency of 36 percent, while the number is only 30 percent in developing states such as China. In climate-change terms, developing states emit 20 percent more CO2 per electricity unit produced than an average unit of electricity in developed states. In November 2007 the China Huaneng Group put into operation China’s largest coal-fired plant equipped with four 1,000-megawatt generating units. It is the world’s largest coal-fired plant built with the most efficient ultra-supercritical technologies. It was built at a cost of $2.1 billion. If all coal-fueled plants used this technology, 200 million tons of coal and 540 million tons of carbon dioxide could be saved each year.30
27 A British thermal unit (BTU) is the amount of heat required to increase the temperature of a pint of water (which weighs 16 ounces) by one degree Fahrenheit. Since BTUs are
measurements of energy consumption, they can be converted directly to kilowatt hours (3,412 BTUs = 1 kilowatt hour) or joules (1 BTU = 1,055.06 joules).
28 Deutch et al., “China’s Energy Challenge,” p. 55. 29 IEA, World Energy Outlook 2007.
30 “China’s Largest Coal-Fired Power Plant Starts Operation.” Background discussions with U.S. and Chinese sources confirm how difficult it is to close small coal mines when the coal is
For China’s coal use to become more efficient, Beijing seeks to consolidate its
fragmented coal sector. According to a 2007 coal-industry policy, China would use its vast coal reserves more efficiently by consolidating mining operations, promoting the best technology, pursuing efficient and safe mining practices, and simultaneously addressing development and environmental priorities.31 Chinese officials seek to consolidate a major portion of the coal sector into six-eight large coal companies with an output of 100 million tons and eight-ten operators with a capacity of 50 million tons by 2010.32 These targets are part of the goal to close 50 million kilowatts of thermal power capacity across the eleventh five-year planning period. In 2007 the government closed 533 small thermal power generators.33
With China’s growing car culture and increased oil dependence, strategies to change the transportation energy mix fit squarely into the discussion of China’s coal usage. China’s
government has prioritized coal liquefaction processes (also known as coal-to-liquids, or CtL) to help wean the country away from imported oil. Until recently CtL was hindered by the low crude oil price and its wide availability, but this has changed with recent price spikes and shortages. Existing CtL practices create diesel fuel to replace conventional oil but emit more than twice the GHGs as oil production does.34 Despite the potential carbon spike, China looks set to become the world leader in CtL production, with eighty-eight CtL projects included in the eleventh five-year plan (2006-2010) and a further twenty to thirty in the works.
Assuming that the price of again oil rises significantly, and these CtL projects are successful, production of oil substitutes may account for 10-15 percent of China’s coal
consumption by 2015. It will provide the equivalent of up to 2 million bpd of oil products in an environment in which China currently consumes about 7 million bpd. CtL transport fuels can address China’s energy security challenge, but because these fuels have a significant carbon footprint, they do not address the GHG challenge. The driving factor behind investment in CtL is to make more efficient use of coal supplies rather than to offset climate change.
Despite some mixed investment signals, China has encouraged outside investment in its domestic energy sector more than in the past. Companies such as Royal Dutch Shell Plc, South Africa-based Sasol Ltd, and General Electric (GE) have track records of working with Chinese companies to produce electricity and substitutes for crude oil derivatives from coal. Once proved feasible industrially and commercially, joint coal projects and large coal chemical projects are 31 See “China Coal Industry Policy 2007.”
32 Ng, “China Coal Buying Mine from Parent.” 33 “Coal Fired Power on the Way Out.”
34 Furman et al., “An Economic Strategy to Address Climate Change,” pp. 5-7. Coal gasification involves reacting coal with steam and oxygen at high temperatures to produce a synthetic gas (syngas) that contains 80 percent of the original energy in the coal. The syngas is then used to manufacture industrial gases such as hydrogen or is liquefied to form a feedstock for liquid fuels and fertilizers. CtL advocates argue that although the process releases carbon dioxide, this can be more easily captured than in a conventional coal plant; see Miller, “Asia-Pacific.” Direct
liquefaction, in contrast to the conventional indirect process, yields a higher thermal efficiency. However, environmentalists oppose the technology because, by cutting out the gasification process, direct liquefaction produces a much dirtier liquid that is higher in pollutants such as sulphur.
expected to start in China's coal-rich western regions. Peabody Energy, for one, has opened a Beijing office to facilitate its investments, while Sasol Ltd has plans to develop two CtL plants in cooperation with China's Shenhua Ningxia Coal Group and Shenhua Coal Group. Chinese commerce minister Bo Xilai states that foreign companies with clean coal technologies and who work with Chinese counterparts can get good returns on their investments. Even skeptics see clean coal investment as an important means for China to ease its reliance on foreign oil and curtail its GHG emissions.35
Energy Policy Implementation Challenges
Although China’s conservation laws and the NDRC attempt to change China’s energy practices, progress has been slow. The government has tried to shut down energy-intensive industries and to force consolidation so that China reduces energy consumption and can compete with firms in Japan, South Korea, and elsewhere, but these enterprises are sheltered by localities. For example, the number of steel enterprises doubled between 2002 and 2006 as profits
increased. There are seven thousand steel enterprises in China, with the largest three accounting for only 14 percent of total production in 2005 (the top three in the United States control over half of production). Campaigns to consolidate coal production face resistance because over half of China’s coal is still produced in ten thousand small local mines. Of cement enterprises, although the central government asks that all small projects be shut down for energy efficiency purposes (and to slow economic development), those that have been closed were soon reopened because of the strong demand for cement.
Similarly, China’s power-generation sector remains dirty and inefficient, in part, due to the deliberate actions by local officials to keep open plants that provide local jobs and that keep cheap energy readily available. Around 80 percent of China’s electricity comes from coal-fired plants, but less than 15 percent of them have systems to remove SO2 installed or running. As the central government attempts to consolidate energy suppliers into larger power plants where environmental technologies are employed, local governments have encouraged the proliferation of small plants under 50 megawatts (which in practice usually release three to eight times more particulates, consume 60 percent more coal, and add negatively to health and environmental concerns).36 They use a loophole in the law that allows local officials to approve the building of small plants (less than 50 megawatts) that do not need NDRC approval or State Council
approval. Ironically, these are precisely the ones the central government tries to shut down.37 Companies and local officials often work together to resist any new standards and central government mandates because they increase costs. When threatened with environmental
enforcement, industry complains to sympathetic local officials of a loss of competitiveness with provinces next door (that is, jobs and tax revenue).38 Some areas are more open than others. The areas whose wealth is derived from foreign investment are much more progressive and open to change. Communities with ties to the international community and financiers such as the World 35 “Foreign Coal Firms to Profit More.”
36 Economy, The River Runs Black, pp. 72-76.
37 The previous examples came up in discussions with U.S. government sources in November 2007.
38 Rosen and Houser, “China Energy,” pp. 11-13; author discussions with various expert sources in Beijing May 2007.
Bank or the Asian Development Bank and countries such as Japan have been the direct
beneficiaries of attempts to increase energy conservation. For example, Beijing is in line for one U.S. Department of Energy demonstration project focusing on developing best practices and energy savings standards precisely because the U.S. government has close contacts with
Beijing’s planning agency that is receptive to these changes.39 Further, provinces differ on their openness to changing their practices. While the central government actively encourages foreign investment, some provinces have taken a different tact. For example, some local governments restrict foreign ownership in coal mines; such ownership is restricted to 40 percent in Shanxi Province.40
Exacerbating the problem, growth-at-any-cost remains the push at the local level, and growing global trade surpluses remain in place.41 Getting China’s local government on board is essential to promoting broad energy efficiency programs (or any changes in energy use) because these are the officials in charge of implementing any such plans. For example, the LBNL
partnership with the city of Shanghai to promote building efficiency due to Shanghai’s building boom provides a successful model. However, the real challenge is gaining traction outside the major east coast cities.42
In a report prepared for the OECD, Wang Yanjia from Tsinghua University notes that Beijing adopts mainly administrative methods to limit outdated production processes and to shut down inefficient small-scaled enterprises. In general, she believes that most policies are clear in principles but short on implementation. They provide guidelines or directives rather than
enforceable measures. Further, financial support for energy efficiency is part of many policies, but funding allocation is separate from the policy itself and has been low.43 In other words, estimates of specific targets for efficiency gains and C02 emissions have not been included, monitored, or reviewed. She argues that these are weak points in China’s policy-making in energy efficiency.44
Exacerbating this situation is the fragmented and weak central government administration regarding energy policy. An unanticipated consequence of Deng Xiaoping’s reforms of the 1980s has been the ongoing fragmentation in policy-making that corresponds to his push for decentralization in authority in China’s central government, including in the energy sector. Since the 1980s several government ministries have been eliminated and transformed into state-owned enterprises (SOEs) that serve many of the administrative and policy functions of the former government ministries. As authority within the central government fragmented, the provinces also gained greater authority and became directly responsible for maintaining economic growth. 39 Author discussions with U.S. government personnel, Washington, DC, October-November 2007
40 Yang and Zhao, “Forums Show the Way”; Lewis, “China’s Strategic Priorities,” p. 164. 41 Lardy, China. Lardy argues, “Despite much lip service to increasing the provision of social services financed through the budget, there is little evidence that a fundamental shift in govern-ment spending priorities is under way (p. 12).” See also “China's Economic Puzzle.”
42 See Jain, “Japan to Shift Aid Focus.”
43 Wang, “Energy Efficiency,” pp. 1-2. See also Deutch et al.,“China’s Energy Challenge,” p. 54; and “China's Economic Puzzle.”
Kenneth Lieberthal and David Lampton label this matrix of competing bureaucracies and the growing influence of the provinces “fragmented authoritarianism.”45 In this system no single leader dominates policy-making, but key bureaucracies gain authority to coordinate foreign policy responses.46
Some coherence has been gained through the formation of leading small groups (LSGs) at the State Council and Politburo level that develop in order to provide better policy
coordination of policy goals across bureaucracies. Such coordinating bodies assume a greater role because of the diverse domestic and foreign aspects of many policy issues—energy among them—where it is difficult to reconcile competing interests. Through meetings and by generating official documents, these groups attempt to build policy consensus.47 Because leaders at the highest levels generally set only key strategic guidelines or long-term policy goals, latitude is left tactically for agencies to make specific policy choices and plans to implement policy goals. In this context, there are competing stakeholders with vested interests ready to play bureaucratic politics. As such, China’s energy policy has resulted from balancing interests and bargaining among a number of stakeholders. For some, energy is a development concern; for others, environmental concerns are triggered; and for others still, access to technology and sovereignty issues emerge. Each perspective carries with it different policy prescriptions.
A broad range of bureaucracies have a say in the energy-environmental puzzle. A sample includes the state planning agency, or the National Reform and Development Commission (NDRC) that focuses on broad development goals (and issues such as energy intensity and conservation); the Ministry of Commerce (MOC), which champions economic and trade issues; the Ministry of Foreign Affairs (MFA), which advocates sovereignty over natural resources (as well as diplomatic processes); the Ministry of Finance, which sets fines; and the State
Environmental Protection Agency, or SEPA (now the Ministry of Environmental Protection, or MEP), which holds regulatory powers in the environment.48 The bureaucracy regarding energy policy remains fragmented to this day.
45 See Lieberthal and Lampton, eds., Bureaucracy, Politics, and Decision Making.
46 For a more comprehensive discussion of China’s energy policymaking bureaucracy see chapter 2 in Jean Garrison, China and the Energy Equation in Asia: Determinants of Policy Choice (forthcoming 2009, First Forum Press – a division of Lynne Rienner Publishers).
47 Traditionally the most important leaders have controlled the Foreign (LSG) and the Taiwan Affairs LSG. These interagency coordinating bodies oversee the flow of information and options presented to the politburo. This is their framing mechanism. See Lampton, Same Bed Different
Dreams, p. 292; "Wen Jiabao Convenes First Meeting of the State Leading Group.”
48 More broadly, Elizabeth Economy argues that the greatest reticence in international negotiations regarding environmental issues has come from the MFA and NDRC, which emphasize sovereignty over natural resources and development needs, while others such as SEPA prioritize environmental goals, and the State Economic and Trade Commission (SETC) emphasizes losses to new technology and technical know-how if China does not participate. The consistent position in international environmental negotiations that the West should take primary responsibility and restructure and reform their wasteful practices first seems to illustrate the influence of the MFA and NDRC. See Economy, The River Runs Black, pp. 178-185; and Lampton, “China’s Foreign and National Security Policy-Making Process,” pp. 10-20.
In response to energy shortages and blackouts across China in 2003, China again attempted to reorganize its energy bureaucracy. It established a new Energy Bureau under the auspices of the NDRC to address future problems. Since this reorganization, the NDRC has become the central player in energy policy-making. It remains China’s lead in bilateral energy dialogues such as that with the United States; is the lead in the 5-Party Energy Talks involving Japan, the U.S., Korea, and India; and sits at the table with the MFA in climate-change
negotiations.49
Officials in the NDRC Energy Bureau, however, faced the same difficulties as previous energy agencies had because they lacked the authority to coordinate policy among various stakeholders. In this instance, the administrative level of the Energy Bureau was lower than the ministry or vice-ministry level agencies and state-owned enterprises, such as Sinopec, that they tried to regulate.50 In 2005 the government created the National Energy Leading Group (NELG) under Premier Wen Jiabao and a state energy office under the state council to centralize energy policy-making even more. The goal was to elevate energy decisions to better manage the energy industry with the NDRC acting as the office director.51 Even with the NDRC lead, however, many administrative functions were still handled by a variety of ministries, leading to a lack of planning for energy exploration, consumption, savings, and reserves. Thus coordination efforts faced their own bureaucratic resistance from influential stakeholders, such as the various energy and foreign policy ministries. The NDRC was left in a weak position vis-à-vis the energy
industry and the Energy Bureau under the NDRC was crippled by administrative power scattered across different government organs and SOEs.52
Discussions in 2007 surrounding the draft of China’s first comprehensive energy law (see below) led to increasing voices to reestablish a Ministry of Energy to address overlaps in energy administration. The law’s purpose is to standardize supervision over all aspects of China’s energy policy and programs, including exploration, efficiency, security, and emergency
responses as well as international cooperation. Creation of a new ministry came to be seen as a way to create a uniform body for macrocontrol and supervision.53 The new effort at integration evolved into an effort to form a high-level consultation and coordination commission, the National Energy Commission (NEC), to report to the NDRC. The NEC would become responsible for drafting an energy development strategy, would consider energy security and development issues, and would monitor implementation. One change is that the NEC has ministerial rank and is somewhat separate from the National Energy Administration (NEA), which replaced the energy bureau in the NDRC and consolidated other functions. The NEA was formed under the NDRC to be the standing body to do the commission’s day-to-day work, including setting policies and standards, developing energy industry programs, and promoting new and alternative energy and conservation. The NEA integrates the NDRC’s energy functions, 49 Naughton, “The New Common Economic Program.”
50 Government approval is necessary for deals over $30 million from China’s central planning bureaucracy, the NDRC, and from the State Council for investments over $200 million (see Downs, China, p. 40).
51 "Wen Jiabao Convenes First Meeting of the State Leading Group.” 52 Downs, China, pp.16-24.
53Author discussion with various China and government experts in fall 2007, Washington, DC; Lan, “Who’ll Turn on the Lights.”
specifically its energy offices, the office of the NELG, and the nuclear power administration of the Commission of Science, Technology and Industry for National Defense, and promotes energy development and conservation. Its mandate is to manage China’s energy industries, draft energy plans and policies, negotiate with international energy agencies, and approve foreign energy investments.
However, without accepted lines of authority and resources, the new NEC will follow the 1993 fate of the preceding ministry. At the time of reorganization experts acknowledged that it would succeed only by overcoming the parochial interests of powerful ministries who want to keep control. This new arrangement still struggles to fulfill its mandate because it does not have the tools to address the challenges. First, as of fall 2008 the NEC remained unformed, making it an unfinished experiment in creating an authoritative department responsible for enacting a uniform energy strategy.54 As such, no high-level coordinating body exists to shape broad energy policy. Second, the new NEA has not been given sufficient authority to coordinate the interests of the ministries, commissions, and state-owned companies. Erica Downs argues that
bureaucratic politics is obvious in the failed reorganization of the energy apparatus. The NDRC and SOEs opposed establishing a ministry, and so the NEC became the compromise. If a new ministry had formed, it would have deprived the NDRC of a large piece of its portfolio and tools of macrocontrol. The SOEs opposed the ministry’s formation because they saw it as limiting their direct access to China’s top leaders with a new layer of bureaucracy.55
Thus without a strong center to serve as advocate, monitor, and enforcer of conservation practices, development at-any-cost interests prevail and the status quo persists.
The Domestic Effort to Prioritize Conservation—A Look at China’s 2007 Energy Conservation Law
The Energy Conservation Law of 2007 is the Chinese government’s latest effort to implement an energy-saving society and overcome local resistance.56 In 2007 Xu Dingming, vice chairman of the Office of the NELG, argued that China's rapid economic development had led to a situation where conserving energy and improving energy efficiency were now an agreed-upon priority within society. However, to make real progress, “all levels of government from central to local must put more emphasis on the work of energy conservation … and afford this work a more prominent place.”57
The 2007 law put in place for the first time overarching guidelines for efficiency to be coordinated by the office of the NELG (now the NEC) and put some regulatory teeth with the policy. Anticipated to replace the previous diverse set of energy laws, it defined China’s energy 54 “China Announces Overhaul of Energy Agencies, Management”; Kadak, testimony before the China Economic and Security Review Commission; Downs, testimony before the U.S.-China Economic and Security Review Commission, pp. 1-2.
55 Downs, testimony before the U.S.-China Economic and Security Review Commission, p. 3. 56 Wang, “Changes to Energy Conservation Law.”
security in terms of energy management, development, supply, storage, and preservation
covering energy technologies, international cooperation, and fiscal and tax policies.58 One report notes that a 7-billion-yuan ($933 million) reward scheme encouraged companies to conserve energy and reduce emissions. This is part of a 23.5-billion-yuan ($3.09 billion) program by the Ministry of Finance to promote energy efficiency and reduce pollution. Rewards go to
enterprises that fulfill emission-reduction requirements to promote technological innovation. In 2007 3 billion yuan ($394 million) was set aside to improve data collection and environmental monitoring. Two billion yuan ($200 million) will be used to compensate and retrain workers from inefficient enterprises that were closed down. A Ministry of Finance official states that there has been a change in local practices to the extent that provinces such as Jiangsu, Shanxi, and Shandong have committed up to half of their revenue for energy conservation. Only enterprises and governments that make effective expenditures in energy conservation will be rewarded. A public campaign takes this message to the grassroots to build support for energy-conservation policies. As part of its new “scientific concept of development,” the government also set mandatory targets and said it will monitor nationwide efforts to conserve energy and reduce emissions to enforce its targets. It threatens to block the promotion of officials and SOE heads who do not meet the targets.59
National environmental protection officials argue that violators will be shamed and subject to state supervision as part of the new energy conservation plan. Further, the government will not approve high polluting and energy consuming projects, and their access to bank loans will be affected by a “green-credit” policy that had SEPA, now MEP, hand over lists of polluters to the central bank and regulatory commission.60 If the central government monitors the
performance of provincial governments in one thousand key energy-intensive companies as it claims, an effective accountability system may come into practice. Just increasing the accuracy of energy consumption figures is an important part of China’s meeting its energy consumption and environmental goals.61 Repeatedly experts note the insufficient supervisory system and government enforcement ability. The law does not end the problem. In fall 2008 China considered going a step further by imposing a green tax on polluters to cut emissions. The ministry would work with banks and insurers to accelerate the growth of clean energy while making energy-intensive industries less appealing.62
The reshuffling of China’s energy bureaucracy in 2008 corresponds to changes in its environmental bureaucracy that raised the old State Environmental Protection Agency to ministerial rank. It is an open question whether this reshuffling has strengthened the weak state of China’s environmental bureaucracy. Most of its efforts have been weak, and the
environmental bureaucracy was kept out of many of these policy discussions. MEP officials may vow to get tough on local officials and companies who fail to meet energy-saving and pollution-reduction targets, but in practice they have faced an uphill battle in terms of access and
resources.63 On a practical level, past enforcement was hindered by cuts in SEPA’s personnel 58 “China to Seek Public Opinions.”
59 “China Offers Rewards.” 60 Oon, “China Must Do More.”
61 Fu, “Accuracy under the Spotlight”; Oon, “China Must Do More.” 62 “China Mulls Green Tax.”
from six hundred to three hundred, which came after the government reorganized in the
mid-2000s. Similar cuts in related ministries have made it difficult to coordinate or enforce high-level environmental policy.64 With the March 2008 reorganization of the environmental
bureaucracy into a new MEP, the organization may gain greater authority to enforce
environmental mandates. Before the reorganization, Pan Yue, vice minister of SEPA, argued that without a strategic environmental evaluation system, “China will not solve the problem of its too high resource and environmental price for economic growth. Without strategic environmental evaluation, more energy-consuming and heavy-polluting industries [will] spring up.”65 The most important tasks of the new MEP are to enforce environmental standards and to oversee
compliance of firms.66
Another tool available to the central government is to use the international system as an outside maneuver to push for local change. Bilateral negotiations such as the China-U.S. energy-policy dialogues lead to agreements to cooperate on increasing energy efficiency in China’s industrial sector, which creates mandates that the Chinese government can blame for local change. The agreement in September 2007 to jointly conduct audits to increase national, regional, and local energy efficiency at as many as twelve facilities may be controversial and need the “national interest” frame to overcome local resistance.67 International actors also have used their influence to persuade Chinese colleagues to experiment with market-based
mechanisms such as reforms in pricing of natural resources, tradable permits, and environmental service companies.68
These multilateral mechanisms provide new expert networks and broaden the domestic debate. Each new international environmental effort has led to the development of expert communities in China with international ties to outside experts. Increasingly, Beijing has diversified the sources of policy analysis to target these expert scholars and analysts.69 In time these experts have become advocates with strong ties to international scientific communities who are committed to enhance China’s international image and to avoid sanctions for not
participating in environmental regimes.70 Such contacts keep the aid and technology flowing, which, in turn, incentivizes the change to become more energy conscious. Looming as the next significant issue and opportunity for investment is the climate crisis that energizes the outside world to look more closely at China’s energy practices.
64 Ibid., pp. 104-107.
65 Pan, “Working toward a Better Environment.”
66 Cunningham, Testimony before the U.S.-China Economic and Security Review Commission, p. 6.
67 “China and US Sign Energy Accord.” The MOU serves as a conduit for American companies to export environment-friendly, U.S.-made equipment and services to China. The MOU signing is an example of the kind of partnerships available to increase energy efficiency and remove barriers to private investment in clean-energy technologies in China
68 Economy, The River Runs Black, pp. 258-263.
69 Medeiros and Taylor, “China's New Diplomacy.” In May 2007 this author met with such experts at think tanks and universities in Beijing to discuss China’s energy policy and regional relationships.
China’s Energy Security Challenge as seen through the Climate Security Lens
Given that current energy-use practices and CO2 are highly correlated (in that the more fossil fuels consumed, the more CO2 emitted and the more GHGs in the atmosphere), China’s development path fuels a GHG nightmare.71 On one level, the climate change crisis raises the harbinger for competition over dwindling natural resources, which at its most dire increases the possibility of conflict over resources such as energy, water, and land.72 However, the real challenge arises from the long-term consequences if energy use behavior does not change and particularly from the link to economic development. Energy security and climate problems are interconnected because they share economic consequences and potential solutions on both the supply and demand side. However, despite the dire predictions and calls for immediate action by the Intergovernmental Panel on Climate Change (IPCC), there is still no agreement on a post-Kyoto roadmap for emissions reductions or an accompanying energy-use plan.
Any carbon solution must involve the two leading emitters and fossil-fuel consumers – China and the United States. Figures 1.2 and 1.3 illustrate China and U.S. CO2 emissions based on fossil fuel use.73
71 In this chapter the focus remains on carbon dioxide, which is the leading greenhouse gas. 72 See Schwartz and Randall, “Abrupt Climate Change Scenario.”
73 IEA, World Energy Outlook 2007.
16
Figure 1.2 China's CO2 Emissions by Energy
4199 7067 8977 811 1342 2059 91 223 413 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 2005 2015 2030 Me g a T o n s Coal Oil Gas
Figure 1.3 U.S. CO2 Emissions by Energy Type
2131 2403 2657 2457 2658 2847 1202 1330 1387 500 1000 1500 2000 2500 3000 Me g a T o n s Coal Oil Gas Source: International Energy Agency, World Energy Outlook 2007.
From a GHG emissions perspective, all three fossil fuels are problematic, particularly without the adoption of new technologies to mitigate carbon emissions. Mitigating carbon successfully requires a change in behavior in the power-generation and transport sectors, in particular, because demand for electricity and transportation accounts for 66 percent of the globe’s total CO2 emissions. In China power generation and industry are the main culprits. Given the large coal deposits in China, it will remain important to their energy security strategies. Even if China reaches its nuclear and renewable-energy goals, coal will still represent the majority of China’s energy mix by 2030. In the industrial sector steel and cement are the main drivers of emissions, and steel production is expected to double and cement to more than double by 2030.74
Despite all the debate, coal is set to remain China’s primary energy source well into the century. With the country’s world-leading coal reserves and two-thirds of its total energy consumption coming from burning coal, China’s economic growth is very polluting. A major adjustment is needed to create a low-carbon economy, and greater efficiency in power generation is an obvious place to start. Replacing old plants more rapidly with more efficient integrated gasification combined cycle (IGCC) technologies with carbon capture and storage (CCS) could raise efficiency levels to 45 percent and address GHG emission levels.75 CCS technology makes it possible to separate the gas emitted when fuels are burned into liquid or solid form and
transport it to where it can be stored. In theory, any coal plant can be retrofitted for CCS, but IGCC plants are the most adaptable to this technology and the lowest cost option. However, finding the financing for big front-loaded investments in new technology in the context of higher risk investment presents obstacles to technology deployment. New IGCC plants cost up to $1 billion more than conventional plants, and CCS is estimated to increase operational costs of electricity generation by 35-60 percent. CCS has been slow to deploy, and there will be only eleven such plants operating by 2015, saving only .7 percent of total coal-fired power
emissions.76 A comparison of China’s coal-fired power fleet’s carbon dioxide emissions to those of the global standard and newer technologies shows just how far China has to go—today the Chinese carbon dioxide fleet averages 1140 grams per kilowatt hour while the global standard is 22 percent lower at 892 grams per kilowatt hour. With supercritical coal technology with CCS it is estimated that the Chinese carbon dioxide fleet averages could be reduced by 92 percent to 94 grams per kilowatt hour.77 By adopting newer technology, China could significantly increase its 74 Globally transport is one of the major consumers of energy and producers of CO2 emissions (representing between 20 and 25 percent of the total), so getting a handle on this sector is also critical. The forestry sector in developing countries has a large abatement potential because deforestation causes 14 percent of emissions (by IPCC estimates it is up to 20 percent of emissions). Abatement comes from slowing deforestation and successful reforestation in the developing world. Further, the agriculture and waste sectors emit about 18 percent of global GHG emissions from sources such as fertilizers, livestock, landfills, wastewater, and rice, with a projected growth of 37 percent by 2030, which is driven by population growth in the developing world. See Vattenfall, Vattenfall’s Climate Map 2030, pp. 9-25. See also Revkin, “A Shift in the Debate over Global Warming,” p. 3.
75 UNDP, Human Development Report, pp. 149-150. 76 Ibid., pp. 145-146.
77 This chart is adapted from data presented in Watson, “Financing the Transition to a Low Carbon Economy.”
efficiency and reduce its GHG emissions. However, these technologies are more expensive, and some, such as CCS, have yet to be commercialized fully.78
China is currently constructing the equivalent of two 500-megawatt coal-fired power plants per week and a capacity comparable to the entire United Kingdom power grid each year. To make inroads on this demand, the priority objective with respect to coal must be the
successful large-scale demonstration of the technical, economic, and environmental performance of the technologies that make a large-scale integrated CCS system. Such projects are a
prerequisite for broad deployment at the scale needed to respond to pressures to adopt a carbon mitigation policy, as well as to meet the world’s future energy needs. The pace of deployment of coal-fired power plants with CCS depends both on the timing and level of CO2 emission prices and on the commercial viability of CCS technology.79
The necessary CCS technologies have been in use for years, but not with the intent to reduce CO2 emissions. For example, enhanced oil recovery projects have been an important early carbon market that may serve as a model. The immediate need in the world is to speed the pace of these projects. Carbon needs a monetary value for research and development to move forward and needs a huge investment if the estimated deployment of around six thousand new projects is to reach the goal of sequestering one million tons of CO2 per year. In addition, new
infrastructure in terms of pipelines and facilities for CCS are necessary for CO2 transport.80 Announced in 2003, FutureGen was to be the model multilateral clean coal project. This 275 megawatts-gasification (IGCC) syngas conversion, separation, and capture project estimated to cost $1 billion was to be coordinated multilaterally (within the United States by the
Department of Energy) with government and industry partners from China, Japan, Korea, and India. It would operate as a voluntary public-private partnership with a purpose to design, build, and operate the world’s first coal-fueled, zero-emissions power plant to tackle climate change. The prototype plant was slated to come online by 2012, but cost overruns led to its cancelation in January 2008.81 This cancelation has some important ripple effects. It wasted the long-term connections and capital that had been built up between the Chinese and the Americans and signaled that American commitments could not be trusted. This point is critical because such joint projects are essential to changing China’s behavior because they provide the financial incentives and needed partner linkages for China to move toward adopting clean energy technologies.
78 One problem is that adopting CCS can also decrease plant efficiency, which raises the cost per kilowatthour. A November 2008 MIT study argues that a system using partial capture could get CO2 emissions from coalfired plants down to the emissions levels of natural gas plants. See
Ehrlich, “Carbon Capture Lite Could Cut Costs for ‘Clean Coal’.” 79 Massachusetts Institute of Technology (MIT), The Future of Coal.
80 CSLF, “Near-Term Opportunities for Carbon Dioxide Capture and Storage,” pp. 1-20. See also MIT, The Future of Coal.
81 See Office of Policy and International Affairs, U.S. Department of Energy, “DOE-China Energy Cooperation.”
The U.S.-led Asia-Pacific Partnership on Clean Development and Climate (APP) is another multilateral partnership that can stimulate joint ventures and investment in various sectors to create a lower-carbon economy.82 The Bush-initiated APP has working groups focusing on areas from clean coal and renewable energy to buildings, appliances, cement, and steel. Griff Thompson, program manager for the APP at the Department of State, notes that the partnership works with public- and private-sector partners to meet goals for “energy security, national air pollution reduction, and climate change in ways that promote sustainable economic growth and poverty reduction.”83 The challenge in the APP structure has been the development and deployment of specific projects to its Chinese and Indian partners. The communiqué from the second ministerial meeting from October 2007 calls the organization an innovative
partnership that focuses “on practical solutions” and accomplishments in terms of detailed action plans and collaborative projects84 “to promote and create an enabling environment for the
development, diffusion, deployment and transfer of existing and emerging cost-effective, cleaner technologies and practices, through concrete and substantial cooperation so as to achieve
practical results.”85 The partners work to integrate climate and development goals to find practical win-win opportunities for clean growth. In addition, they collaborate in a voluntary initiative across the public and private sector and implement through a sectoral, bottom-up approach.86
Sideline discussions at these bilateral meetings reveal persistent challenges to this
partnership model. Funding has been sporadic, with the U.S. APP funding coming online only in late 2007. The Chinese find it problematic that most joint projects focus on “soft” activities such as information sharing, capacity building, and standardization. Director General Gao
Guangsheng, from the Office of National Climate Change Committee, notes that “there are almost no joint R&D projects between developed and developing Partnership countries.” To him, the core issue is “the price of technology transfer and dissemination.”87 For China, there needs to be a financial mechanism to facilitate cooperation among the private sectors of partner countries.
82 For more information on the U.S. Department of Energy’s Carbon Sequestration Leadership Forum, see http://www.fe.doe.gov/programs/sequestration/cslf/. For information on the Asia-Pacific Partnership, see http://www.state.gov/r/pa/scp/2006/60852.htm.
83 Thompson, “Asia-Pacific Partnership on Clean Development and Climate.”
84 Asia-Pacific Partnership (APP), “Communiqué from the Second Ministerial Meeting.” The Asia-Pacific Partnership Web site has various documents, communiqués, action plans, and reports available as well.
85 APP, “About the Asia-Pacific Partnership on Clean Development and Climate.” My observations and discussions with U.S. government sources reveal that Australia has been a central actor, providing around $150 million in Australian dollars for joint projects. The U.S. overall contribution has been $45 million, with $5-8 million set aside for projects in China. Japan has been a more cautious actor and slow to provide funding. China is receptive to the joint
projects, while India fears that its participation risks current funding from the World Bank and Asian Development Bank.
86 Thompson, “Asia-Pacific Partnership on Clean Development and Climate.”
87 Gao Guangsheng, speech delivered at the 2nd ministerial meeting of the Asian-Pacific Partnership.
Project deployment faces three broad challenges. First, China expects technology at a reduced rate or at cost. However, this is not an option in the modest budget set aside for projects in China or in the current budget environment within the U.S. Congress. Underlying this need is the imperative for funding at appropriate stages that include development and deployment of projects. Projects need to go through these steps to test their commercial viability. Second, issues of intellectual property rights arise with any investment in China. Producers of technology need guarantees that their technology will not be stolen. Third, both sides have national security sensitivities to keep in mind. For example, China frequently asks for technology (that is, high-resolution satellites to map coal fires) that the U.S. considers dual use and will not make available to the Chinese. For its part, China remains sensitive about its geological information and sees mapping as a national security issue.88
As noted, China’s calls for financial incentives and help to finance technology transfer cause the greatest friction. One of the problems may be linked to China’s fundamental identity crisis as either a developing or developed nation, which is apparent in its shifting global rhetoric. In negotiations for FutureGen, in the Asia-Pacific Partnership, and in other forums, there is a repeated call by China for reduced-priced technology transfer to the developing world to address its growing energy and environmental problems. China has proposed a Technology Development and Transfer Board to oversee and implement technology transfer to the developing world.89 China’s clean economic development is dependent on the global integration of the energy system making it costly to become technologically isolated or institutionally isolated in energy or
climate change negotiations.90
China’s recent focus on assistance has been advanced coal technologies, but energy-efficient buildings, clean-vehicle technology, and advanced industrial technology also have great mitigation potential. Energy efficiency is considered appealing because it represents the “low hanging fruit” in that making these changes burns no fuel, emits no pollution, and costs from one-sixth to one-third the cost of generating power in China. It also avoids the need for additional generation facilities and infrastructure. As such, it can contribute to both short- and long-term energy goals. Bo Shen from the National Resources Defense Council in Beijing states that energy efficiency could meet between 29 and 56 percent of China’s forecast 2014 electric load growth. The council is working with the NDRC and the newly established National Energy Administration to initiate a yearlong nationwide training program on energy efficiency to build human and technical capacity.91
Further addressing the inefficiency of China’s industry through an energy-efficiency policy could mitigate CO2 emissions tremendously. China’s industrial contribution to GDP hovers around 40 percent, and industry consumed 67 percent of total final energy in 2003, producing a corresponding amount of CO2.92 Energy-efficiency gains in carbon-intensive 88 The author saw these issues raised in task-force meetings in 2007. The importance of these issues has been confirmed in the author’s conversations with knowledgeable government personnel from October to November 2007 in Washington, DC.
89 Lewis, “China’s Strategic Priorities in International Climate Change Negotiations.” 90 See Steinfeld, “Climate Change—International Issues.”
91 Shen, “International Cooperation to Promote Energy Efficiency.” 92 Wang, “Energy Efficiency and CO2 in China’s Industry,” pp. 1-2.
industry and technological innovations as well as increased use of natural gas and renewable energy can lower China’s carbon signature considerably. At the head of these efforts to mitigate the carbon signature of traditional fossil fuels is the call for economic incentives needed to move this goal forward.93
The challenge that climate change poses for China and others is the need to balance the economic value of fossil fuels with pressing environmental concerns that call for the use of environmentally friendly energy.In June 2007 Premier Wen Jiabao stressed the hard work that has been done to adjust China’s economic structure with plans for energy conservation and correspondingly a reduction in emissions to cope with climate change.94 The goal in China’s National Climate Change Program, released in June 2007, pushed the eleventh five-year plan to quadruple economic growth but only double energy consumption.95Various strategies such as
increased energy efficiency, cleaner fuels, greener power generation with carbon capture, and
more efficient transportation may lead to a low-carbon world with sustainable economic growth.96 Leading economists such as Jeffrey Sachs and climate-change experts argue that aggressive investments beyond what has been allowed for in research, development, and deployment and aggressive deployment of new technologies must occur if global warming is to be addressed. Without this deployment in the next twenty-five years catastrophe cannot be averted.97
Conclusion
The rise of energy security concerns as seen through a domestic development or climate lens can have important consequences for global energy stability and coordinated environmental response. Essentially, China and others must substantially reduce consumption of fossil fuels (or clean up their use), increase efficiency, and explore ways to capture and bury the carbon by-products of the fossil fuels that are consumed. In the United States the largest share of carbon comes from consumption of petroleum, which suggests that practices that reduce oil
consumption, such as motor vehicle fuel-efficiency standards, incentives for hybrids, and public transportation, should be a priority. Coal, as the major source of carbon in China, necessitates improving power plant efficiency and filtering out harmful emissions and sequestering carbon.98
Decision-makers need to wake up and recognize the scale of change that is needed to achieve energy security and climate security. Given the slow pace of financing and deployment in China and beyond, there is a risk of carbon lock-in if a number of actions are not taken now. For China to truly embrace “clean energy” and, by definition, a lower-carbon economy that would include implementing policies to address climate change more directly, its concerns over the cost of moving toward higher-efficiency coal technology and CCS technology will have to be addressed.
93 UNDP, Human Development Report, pp. 149-150. 94 "Wen Jiabao Convenes First Meeting.”
95 Lewis, testimony before the U.S.-China Economic and Security Review Commission, p. 3. 96 Carbon Sequestration Leadership Forum(CSLF), “Near-Term Opportunities for Carbon Dioxide Capture and Storage,” pp. 1-20; WEC, “The Energy Industry Unveils Its Blueprint for Tackling Climate Change,” pp. 1-6.
97 Revkin, “A Shift in the Debate over Global Warming,” p. 3. 98 Klare, “Global Warming.”
Because China’s goal is to address its real pollution and sustainable development problems and to be seen as a responsible stakeholder in the world system, it has incentive to cooperate. Over time it has adopted environmental standards, an environmental bureaucracy has developed, and the economy has become more efficient. China has made this progress with the constructive cooperation of states such as Japan and the United States. However, the United States can play a more constructive role in China’s future energy transformation by leading by example and helping China meet its energy intensity targets, by encouraging clean-energy technology transfers, by focusing on constructing demonstration projects aimed at efficiency and carbon control, and by providing financial incentives. However, commitment to a post-Kyoto framework and a real carbon-control policy that could make real progress has awaited the accession of Barack Obama to the presidency.99
The previous discussion illustrates that China does not follow a predictable or rational (in the traditional security sense) course of action to improve its energy security. The focus on energy policy-making and the resulting bureaucratic processes illustrates an eclectic crisis-driven policy-making process. China’s leaders grapple with political, social, and economic changes brought about by rapid domestic growth that both limit and create opportunities in its foreign policy. In the energy sector, China faces the dilemma of reconciling powerful domestic groups and local governments with its broad national priorities. As such, the issues involved in the energy issue blur the distinction between foreign and domestic policy and create intermestic policy conditions that have both foreign and domestic policy aspects.
Those in the United States and elsewhere who ignore China’s domestic political drivers and define China’s quest for energy security solely in terms of its growing equity positions around the world ignore the competing interests at play in China and possible areas of bilateral and multilateral collaboration. We must avoid the too-simple analysis of China’s goals and intentions that emphasize growing energy vulnerabilities and define energy security narrowly in terms of geopolitical threats.
