Power can be derived from a country’s ability to leverage its resources toward economic and political gains. Conversely, dependency on foreign resources—such as energy—restricts policy options, thereby reducing the avenues through which a country can cultivate its national power. Sudden shifts in the energy market and overseas political instability may also diminish access to foreign energy sources or dramatically increase the cost of energy imports, further compromising the ability of import-dependent countries to pursue their national objectives.
Decades of rapid economic growth have dramatically expanded China’s energy needs. China is now the world’s largest consumer of energy, the largest producer and consumer of coal, and the largest emitter of carbon dioxide. Although China also generates more energy domestically than any other country, its consumption has long since outpaced domestic supply, forcing China’s leaders to increasingly rely on foreign sources of energy.
China must secure its energy needs to fuel its ongoing development. In order to diversify its oil portfolio, Chinese leaders have constructed overland oil and gas pipelines. To further safeguard its energy needs, China has begun to stockpile a strategic petroleum reserve. China has also made significant investments in renewable forms of energy, which has transformed the country into a global leader in hydroelectric, solar, and wind power. Nevertheless, China still runs primarily on fossil fuels, the burning of which comes at a steep environmental cost. This question explores the intersection of China’s energy needs, its changing energy footprint, and the environmental impact of China’s rise.
What’s fueling China?
China’s large manufacturing-based economy is primarily fueled by coal. In 2014, 71 percent of China’s emissions came from coal, compared to just 31 percent in the United States and 33 percent in the European Union. From 2000 to 2014, China increased its coal consumption from 1,365 metric tons (Mt) to 3,473 Mt. China now consumes more coal than the rest of the world combined.
China’s heavy reliance on coal for industrial power generation has significantly contributed to its urban air pollution problem. Making matters worse, China burns coal in a dirty and inefficient manner, as China maintains heavy investments in “subcritical” coal plants, which produce high levels of pollution. Coal and oil account for the vast majority of China’s energy consumption. According to a 2015 Energy Information Administration (EIA) study, 86 percent of China’s energy consumption in 2012 came from these two fossil fuels. The remaining 14 percent stemmed from a combination of natural gas and renewables.
In recent years, China has increased its consumption of renewable energy. In a 2012 white paper, the Chinese government emphasized the need for “vigorously developing new and renewable energy.” China has committed to making non-fossil fuel energy 20 percent of its energy consumption by 2030. In particular, China has placed emphasis on the development of wind and solar photovoltaic (PV) energy. Chinese companies invested a nationally unprecedented $89 billion in renewable energy projects in 2014, which marked a 31 percent increase over 2013 investments. These factors have contributed to China becoming the largest market for renewables, and it is now estimated that 1 in every 4 gigawatt of global renewable energy will be generated by China through 2040.
A Conversation With Sarah Ladislaw
0:05 - How vulnerable is China to imported energy? What is China doing to secure its energy needs?
2:20 - How might efforts to stimulate the Chinese economy and stave off an economic slowdown boost energy consumption?
3:59 - Can China realistically achieve the goals it has set for producing a greater percentage of its energy from renewable sources?
6:03 - What role is China playing in South-South energy and climate issues?
Due to large-scale investments in massive infrastructure projects, hydroelectric power has become China’s main source of renewable energy production. The controversial Three Gorges Dam, completed in 2012 at a cost of over $37 billion, is the largest hydroelectric dam in the world and boasts a generation capacity of 22,500 MW. The dam generates 60 percent more electricity than the second-largest hydropower dam, the Itaipu dam in Brazil and Paraguay. Including the Three Gorges Dam, China has constructed 4 of the top 10 largest energy-producing hydroelectric dams in the world. From 2003 to 2013, China increased its hydroelectric energy-generation capacity by an impressive 224 percent. As a result of the Three Gorges Dam and other projects, China became the world leader in hydropower in 2014.
When you look at a one percentage delta in terms of Chinese GDP growth rate in either direction, that one percent change in their GDP growth rate can translate into the energy consumption of a large country like Brazil.
Over the past decade China has also emerged as a global leader in wind energy and solar PV. From 2005 to 2015, China averaged a 66 percent annual increase in wind-power capacity. In 2015, China accounted for one-third of global wind-energy capacity. However, China’s electricity generated from wind power accounted for just 2.1 percent of its total consumption in 2012, compared to 3.7 in the United States and 9.4 percent in Germany. In solar PV, China is both the leading supplier and consumer. Due to rapidly decreasing costs, aggressive policy incentives, and low-interest loans from local governments, China has increased its production of solar panels, and was the world’s largest producer in 2014. China increased its cumulative solar PV capacity by a factor of 54 from 2010 to 2015. This rapid acceleration resulted in China surpassing Germany as the country with the greatest capacity for solar power generation in the world in 2015.
China is also turning to nuclear power to decrease its reliance on fossil fuels. At the start of 2016, China operated 30 nuclear power plants, which generated 26,849 megawatts (MW) of energy. At present China trails only Japan, France, and the United States in terms of nuclear electricity generation. China’s 13th Five-Year Plan reaffirmed the country’s commitment to nuclear energy and outlined plans to construct 40 additional plants by 2020.
How does China secure its energy needs?
Much of China’s foreign energy supply comes from politically unstable regions and must travel through narrow straits and contested waterways before reaching China. Securing guaranteed access to foreign sources of energy is vital for China’s ongoing growth and development.
China’s demand for crude oil outpaces its domestic production, which has forced China to be a net importer of oil since 1993. In 2015, China surpassed the United States as the top global importer of crude oil, importing a record 7.85 million barrels per day in December. As of September 2015, 60 percent of China’s crude oil supply comes from imports. While China has managed to create a diverse oil portfolio (see pie chart), it still must confront potential bottlenecks to access. Technology may also play a part in reducing China’s dependence on foreign oil. Over the past two decades, new extraction techniques made shale gas (natural gas trapped in sedimentary rock) a viable energy source. Although the United States and Canada are currently the only countries where shale gas is a significant part of their gas supply, the U.S. Energy Information Agency has estimated that China holds the world’s largest shale gas reserves. Nevertheless, oil prices would need to be much higher for shale gas investments to be a cost-effective solution for China.
Given its political instability, the Middle East represents an important energy security concern for China, as over half of China’s oil imports come from the troubled region. China’s reliance on Middle Eastern oil is only likely to increase in the future. The International Energy Agency predicts that China will double its Middle East imports by 2035. Sanctions against Iran in response to its nuclear program had restricted Chinese access to Iranian oil. When the preliminary agreement on Iran’s weapons program was reached in November 2013, however, China quickly expanded its energy relations with Iran. Accordingly, Chinese imports of Iranian oil in the first six months of 2014 surged by 48 percent from the same period the previous year. This rate slowed in the latter half of 2014, but the year-on-year change still accounted for a 28 percent increase.
China has diversified its oil portfolio by investing heavily in Africa. Africa only possesses around 9 percent of global proven petroleum reserves (compared to 62 percent in the Middle East), but there is considerable potential for gaining access to untapped resources. China has pursued a strategy of offering economic development loans to African states, such as Angola, in exchange for favorable access to oil reserves. Additionally, in 2015 China sent troops to support UN peacekeeping operations in South Sudan, where China has considerable oil investments. While South Sudan’s oil represents only 2 percent of China’s total imports, 86 percent of Sudan and South Sudan’s oil exports are sent to China.
Securing maritime energy shipments is another critical energy-security priority for China. Currently, 82 percent of Chinese maritime oil imports pass through the Strait of Malacca. As a result, this strategic waterway represents a potential risk to China should it be unable to protect its shipping interests in the narrow strait. Chinese leaders have acknowledged the strategic vulnerability of the country’s dependence on maritime energy shipments and have increased their commitment to developing overland pipelines. Between 2008 and 2015, China constructed three natural gas pipelines in Central Asia, flowing from Turkmenistan, Uzbekistan, and Kazakhstan into western China. The three lines provide a combined 20 percent of China’s natural gas consumption. Overland sources of natural gas now account for approximately 50 percent of China’s natural gas imports. The share of overland energy sources is likely to increase in coming years. In 2014, China and Russia signed a 30-year, $400 billion deal to deliver Russian natural gas to China starting in 2018. This was followed by a 2015 agreement between China and Myanmar that opened a $2.5 billion oil and gas pipeline.
I think China is a real leader when it comes to South-South energy and climate discussions.
Another means through which China is seeking to mitigate its dependence on foreign oil is by building a strategic petroleum reserve (SPR), which is designed to insulate China from external market shocks. In November 2014, China’s Bureau of Statistics announced for the first time the size of China’s SPR, claiming to have 91 million barrels, or around nine days of reserves. China aims to accumulate 600 million barrels of oil, which would meet the OECD standard of 90 days of import reserves.
How does China’s energy emissions compare with other countries?
China’s contribution to global climate change is directly tied to its massive fossil-fuel consumption, which has propelled China to the lead position on a notorious list of top carbon dioxide (CO2)-emitting countries. Notwithstanding the volume of China’s CO2 emissions, it is important to also consider other reporting metrics, such as emissions per capita and emissions intensity, when comparing China’s emissions with both developed and developing countries.
Carbon emissions data from the past few decades reflects China’s dramatic economic transformation. In 1990, China was the world’s second-largest emitter of CO2 in the world. In that year, the United States was the largest emitter, with just over twice China’s emissions. By 2014, the situation had reversed. After surpassing the United States to become the world’s largest emitter in 2005, China now emits twice as much CO2 as the United States. In the United States, European Union, India, Japan, and Russia, yearly emissions have either remained consistent or declined slightly from 1990 levels.
In addition to this rapid increase in emissions, China’s cumulative carbon contribution has become one of the largest in the world. Between 1990 and 2011, China and the US were responsible for 15 and 16 percent, respectively, of total global emissions. During this period China’s global carbon input was larger than all other developed countries, and was roughly the combined emissions total of the other BRICS nations. World Resources Institute estimates that China’s cumulative emissions since 1990 will surpass the United States in 2016 with 151 billion tons of carbon dioxide.
Although China leads the world in the quantity of its emissions, China only ranks 39th in per capita emissions, behind many developed countries, including Canada, the United States, Japan, Germany, and South Korea. This number has significantly increased from 1990, when China ranked a mere 89th in per capita emissions. While per capita emissions have declined since 1990 in the United States and Germany, they continue to rise in China and South Korea. Increasing demand from China’s growing middle class will likely push China’s per capita emissions higher in the coming decades.
In terms of emissions intensity (defined as the level of emissions per a country’s GDP) China ranks 11th, just behind Russia and South Africa. The Chinese government has pledged a 60 to 65 percent cut on carbon intensity from 2005 levels by 2030. While China’s emissions intensity has significantly declined since 1990 (when it ranked 6th), this is due to a disproportionate increase in GDP relative to carbon emissions. Between 1990 and 2014, China’s GDP increased by a factor of 28, compared to a factor of 4 for carbon emissions. To further mitigate its emissions problem, China agreed in 2015 to establish a national cap-and-trade emissions marketplace for the power-generation, steel, and cement industries.