China’s Energy Policy from National and International Perspectives：The Energy Revolution and One Belt One Road Initiative

Basic Information about China’s

Energy Development

The introduction of a carbon trading market in China shows that

environmental concerns are not only a restraint on Chinese energy policy,

but they are becoming one of the three key aspects in energy policy.

These aspects are energy security; environment and climate; and foreign

relations. The three are interrelated and mutually supportive of each other

with the main purpose of maintaining the sustainable development of the

Chinese economy.

Since the end of 2012, China has been one of the world’s largest energy

producer. As its economic status rises dramatically, China has become

the focus of the world, feeling more strongly its citizens’ yearning for

environmental safety while experiencing the challenges of coping with

climate change.

By the end of the Eleventh Five-Year Plan in 2010, China’s energy

industry had seen substantial development: total production quantity of

primary energy had increased from 2.16 billion tons of standard coal in

2005 to 2.97 billion tons. The energy self-supply rate had reached 91%. The

proportion of renewable energy in primary energy had risen from 7.4%

in 2005 to 9.4% in 2010, and non-fossil fueled energy from 6.8% to 8.6%.

China had developed its overseas oil and gas cooperation with Central Asia,

Russia, the Middle East, Africa, South America and the Asia-Pacific region,

and gradual growth had been seen in overseas equity oil production.

Energy intensity had decreased by 19.1%.

Regarding the coal industry, China’s difficulty is that the coalfields are

located far away from the consuming areas. Transportation has been a great

challenge for energy security. China has also started to import coal from

Southeast Asia and in significant amounts from Australia, which improves overseas cooperation. As a result, China has become more dependent

on overseas coal. With regard to the power supply industry, investment

in electric power has reached 1,200 billion yuan, with the completion of

a 653.8 kilometer extra-high-voltage model electric network from Shanxi

to Hubei via Henan. However, further testing of its safety, economic value,

technical obstacles and reliability is required. In the oil and gas industry,

dependence on overseas supply of crude oil has reached nearly 60%.

The present petroleum reserve capacity is 28.6 million square meters

(National Bureau of Statistics of the People’s Republic of China) (from 16.4

million square meters) after the second construction phase was finished

in mid-2015. The resulting net import of petroleum has been increased to

approximately forty days, still far from the ninety days suggested by the

International Energy Agency. China started to import natural gas in 2006

and the year 2007 saw its net import of natural gas. Coping with climate

change, environmental protection and a market-oriented energy industry

motivated China to develop natural gas imports, including liquid natural

gas (LNG), and reduce coal use. The growing dependence on natural gas

imports has caused concern from the domestic coal industry, and from

those who advocate continuous development of nuclear power and shale

gas to reduce the dependence on overseas natural gas.

A variety of energy cultures exist in the world due to the different

development levels of economies and energy industries, ways of using

energy, diverse cultural and historic backgrounds, living and production

environments, foreign strategies, and political and economic systems.

China has its own special interpretation of some key terms and concepts

like energy security, energy efficiency, energy law, energy independence,

dependence on overseas supply, foreign policy on energy, state-owned

company, international energy cooperation and energy shortage etc.,

which display a profoundly distinct Chinese energy culture.

There was no change in the nature of the Chinese energy structure from

1993 to 2011, and no obvious increase in total production of domestic

green energy. The security of supply of petroleum and natural gas became

a prominent issue, which was to be resolved by the energy policies of the Twelfth Five-Year Plan (FYP). With the aid of low oil and gas prices and

the optimization of energy mix with the increased ratio of NRE (new and

renewable energy) during the Twelfth FYP period, the problem of supply

security was alleviated in the short-term, however, for long-term security,

China is still awaiting the real energy revolution.

There are regional differences in the changes in Chinese energy

efficiency, which are also reflected in the different levels of carbon

emissions. The improvement of energy efficiency has indeed had a

positive influence on the environment. Regarding power generation, the

Chinese government has implemented four policies. The first is to reduce

thermal coal use in power plants and increase natural gas use, leading to a

continuous decrease in oil power generation and a rapid increase in other

fuels. This trend is clearly evident in the central, eastern and southern parts

of China but is less obvious in the northern part. The second is to advocate

energy-saving and emission reduction technology in power plants, such as

the use of smoke and gas desulphurization etc. The third is to encourage

the building of power plants over 600,000 kilowatts (kW) in scale, to

replace small and low efficiency generating units. The fourth is to impose

incentives like emissions taxation. Increased energy efficiency and energymix

change reduced carbon emissions by 10.7% and 10.41% respectively

from 2004 to 2010. The transport sector has played the most important

role in reducing greenhouse gases. The authorities responsible for different

types of transportation (sea, air, road and railway) have issued various laws

to improve efficiency and decrease emissions. These laws are less effective

in the eastern region due to its denser population than in the central and

western regions, and in particular more effective in the central region than

the western region whose transportation infrastructure is less developed.

The greatest overall improvement in energy efficiency has been in

power generation, and less improvement has been made in mining,

chemical, steel, iron and non-metal industries. In the Twelfth Five-Year Plan,

China aimed to achieve an 8% decrease in sulphur dioxide emissions, 10%

in nitrogen monoxide and 17% in carbon intensity compared with 2010.

Of all the areas of energy consumption, transportation has the greatest potential for emissions reduction. According to official data (xinhuanet.

com) these aims were fulfilled: 18.0% decrease in sulphur dioxide; 18.6%

decrease in nitrogen monoxide; 20% decrease in carbon intensity.

The Chinese government plans three phases for future energy

development. Up to 2030, energy consumption will be mainly derived

from fossil fuels with new and renewable energy sources playing an

increasingly close second. From 2030 to 2050, consumption will be split

evenly between fossil fuels and renewable energy sources. After 2050,

renewable energy will prevail while fossil energy will play a secondary role.

To fulfil this grand plan, optimizing energy structure, improving energy

efficiency and advocating clean energy use will be key strategies of the

Chinese government.

For many years now, China has faced three types of structural conflicts

in energy development, namely the conflict between sustainable energy

needs and severe shortage of resources per capita, the long-term conflict

between coal-oriented energy and low carbon development, and the

conflict between the high energy intensity of fossil fuel usage and the

more demanding requirements of the ecological environment. The Twelfth

Five-Year Plan was considered as an important phase for the Chinese

government to adjust economic development patterns. These conflicts

will be more prominent in the process of economic transition in which “the

market plays the decisive role”, as stated in the proclamation of the Third

Plenary Session of the 18th Central Committee.

The Twelfth Five-Year Plan of Chinese Energy Development issued on

January 1, 2013 confirmed the key goals and gave priority to clean energy

use and increased energy efficiency: energy intensity was planned to be

reduced by 16% from 2010 to 2015. Energy consumption was planned

to be 400 million tons of standard coal, 366 millions of which was for selfsupply.

Power consumption was planned to be 6,150 billion kilowatt hours

(kWh). Energy efficiency was planned to increase by 38%. The proportion

of non-fossil fuels in primary energy was planned to grow to 11.4%, with

natural gas accounting for 7.5%. Carbon emissions were planned to be reduced by 17% compared with 2005, and pollutant emissions to fall by

10%.

It was hard for China to achieve its ambitious increase of renewable

energy production by 2015, for most of the renewable energy is used

in power generation. As a result, 11.4% growth in renewables requires

an increase of 200% in alternative sources such as nuclear, wind power,

bioenergy and solar energy. The planned 16% decrease in energy not

only required local governments’ efficient enforcement of the central

government policies but also for GDP growth to remain around 8%. In the

near future, coal will still dominate, representing approximately half of the

Chinese energy structure. Environmental profits from the energy policy

will depend on the implementation of the policy. However, it was reported

that China’s solar and wind energy capacity increased by 74% and 34%,

respectively, in 2015 (cleantechnica.com).

The supply of China’s petroleum and natural gas has, for a long time,

been insufficient to meet consumption demands. China became a net

importer of refined oil products in 1993 and of crude oil in 1996. Since

the 1990s, Chinese enterprises have followed the Going Out strategy and

proactively developed a global plan in order to fulfil the requirements of

“making full use of two kinds of resources and two markets” imposed by

the central government. Over 100 international cooperation projects in oil

and gas have been carried out in thirty-three countries, broadly organized

into five large international oil and gas cooperation zones. A preliminary

import and export trading system was built for petroleum, LNG, natural

gas, coal and uranium. Transportation is mainly by oil tankers, assisted by

pipelines and railway freight. Multiple financial measures like spot, futures

and long-term purchase agreements exist in international markets. Chinese

state-owned energy companies have greatly increased their international

competitiveness.

There have been fundamental changes in the formulation of China’s

external energy policy. Changes can be seen in the official energy

security policy issued by the government, in the economic activities of energy companies and in their involvement in international cooperation;

the change in the conception of energy safety has caused a series of

multilateral trends in energy cooperation. It has helped that Chinese

energy companies play an important part in external energy cooperation,

and have abandoned the formality that “government takes the lead and

paves the way for enterprises”.

China’s active foreign energy policy guarantees its own energy safety to

some extent, undertakes the responsibility of safeguarding global energy

safety, and eases some geopolitical conflicts, all of which exert a positive

influence. However, the more the Going Out Policy is implemented, the

more risks China has to face. This can have a negative effect on diplomatic

relations, tagging the “energy” label on the normal bilateral relationships

and intensifying speculation about “resource plundering” by China. After

twenty years of international energy cooperation, China has repositioned

its foreign energy policy, and this reposition is based on China’s facing up

to its position and significance in the global energy order for the first time.

Considering the issues surrounding oil, gas, and national safety, China’s

foreign energy policy will continue its global energy policy based on the

principle of emphasizing relations with Central Asia and Russia, increasing

investment in the Middle East, strengthening cooperation in Africa,

boosting South America and consolidating developments in the Asia-

Pacific region.

Basic Information about China’s

Energy Development

The introduction of a carbon trading market in China shows that

environmental concerns are not only a restraint on Chinese energy policy,

but they are becoming one of the three key aspects in energy policy.

These aspects are energy security; environment and climate; and foreign

relations. The three are interrelated and mutually supportive of each other

with the main purpose of maintaining the sustainable development of the

Chinese econo...

We live in a world of turmoil. Acid rain, deforestation, earthquakes and tsunamis are just some of the many natural catastrophes that have become part of our daily lives. It is believed that at least some of these events are due to climate change. Whether wholly responsible or not, efforts are being made to try and combat climate change. In 2015, the whole world came together in Paris for COP21 (the United Nations Conference on Climate Change) to try to find a way to work together to counter these issues. This convocation alone was a mighty accomplishment, regardless of what else came out of it. Despite the great differences between many of the attending nations, leaders from every corner of the world gathered to address issues of high complexity and vital importance. As one of the biggest economies in the world, China participated to do its part in working towards a solution.

More willing than ever before to act as a responsible stakeholder, China is becoming a key and active contributor in international treaty arrangements. It is not surprising, therefore, that closer relations between the BASIC countries (Brazil, South Africa, India and China) were one of the byproducts of the Copenhagen Summit. Not only on the international scene, but in its national policy also, China is constantly improving. This raises its own challenges. With a rapidly growing economy and the need to maintain these growth rates, China has to balance its green efforts in a sustainable way. This high-wire balancing act has led to a unique Chinese way of action, which caters to China’s green efforts as well as economic stability.

China has made tremendous efforts to grow its clean energy sector and has had significant success in reaching its reduction targets and increasing its commitment to R&D projects in this area. Consequently, today, Chinese enterprises are the world’s dominant players in hydropower, and the largest installers of wind power and solar energy plants. Nevertheless, China is still a developing nation which needs the support of the international community to continue its progression to a low-carbon economy. The fact is that China is faced with a challenging future, in which it will become ever harder to strike a balance between the rapidly increasing demand for energy, the responsibility to preserve environmental limits and the need to develop its economy to meet its people’s expanding demands.

In the first months of 2013, Beijing suffered from a very serious pollution haze. Even the delegates to the National People’s Congress (NPC) in March criticized the government over the city’s poor air and water quality, also expressing deep-felt concern about the lack of information on environmental issues. From top-down and bottom-up, people asked the government to take measures to prevent this happening again.

In order to make significant changes, China has established a very efficient and multilayered plan to deal with the economy’s growing energy demands. Not only does the government introduce and monitor requirements for energy efficiency, but it also closes facilities that cannot reach those requirements and gives financial incentives to companies to be more energy efficient. Information is distributed at all levels of government and among the general public on these issues, and pilot projects have been initiated to look for new solutions.

This volume endeavors to continue to discuss China’s energy policies in order to facilitate the study of anyone who is interested in China’s energy and environmental issues, filling the gap between the information provided by academics, energy industrial parishioners, policy makers and IR/IPE scholars.

In addition, following the publication of our book China Energy Policy in National and International Perspective: A Study Fore-and-Aft 18th National Congress in 2014, we aim to show the most important issues and policies currently occurring in Chinese energy, placing them in both a domestic and international context, from which we can offer a better understanding of China’s energy policies. Furthermore, as energy cooperation is a priority in China’s One Belt One Road (OBOR) Initiative, this volume will also discuss this initiative and the Chinese energy revolution, what the implications of the energy revolution are and the nature of the energy relationship between China and Russia, the latter being a core area in China’s foreign energy cooperation under the OBOR framework.

We live in a world of turmoil. Acid rain, deforestation, earthquakes and tsunamis are just some of the many natural catastrophes that have become part of our daily lives. It is believed that at least some of these events are due to climate change. Whether wholly responsible or not, efforts are being made to try and combat climate change. In 2015, the whole world came together in Paris for COP21 (the United Nations Conference on Climate Change) to try to find a way to work together to counter the...

Chapter 1 Introduction
1. Background and Motivation
2. Preliminaries
3. Gaps in Understanding Key Notions

Chapter 2 The Energy System and Policies before the Twelfth Five-Year Plan
1. Energy Development by Sector
2. Past Five-Year Plans and Energy Policies
3. Change in Energy Mix, Energy Intensity and Environmental Effects

Chapter 3 Effects of the Twelfth Five-Year Plan Energy Policy
1. Understanding the Background to theTwelfth Five-Year Plan Energy Policies
2. Energy Mix, Energy Intensity and Environmental Effects

Chapter 4 China’s Energy Evolution and Revolution
1. The Hard Road of Reforming the Power and Natural Gas Sectors
2. China’s Energy Revolution
3. Conclusion

Chapter 5 The Evolution of China’s Foreign Energy Policy
1. The National Energy Security Situation and the Effect on Foreign Energy Policy
2. Changes in Foreign Energy Policy
3. Twenty-Year Review of China’s Foreign Energy Policy Implementation
4. China’s Foreign Energy Policies by Region
5. Remarks

Chapter 6 Energy Cooperation under the Belt and Road Initiative
1. Major Changes in the Global Oil Market and its Implications for China
2. China-Russia Oil and Natural Gas Cooperation: the Geopolitical Impact
3. Expected Benefits and Potential Risks of Energy Cooperation under the Belt and Road Initiative

Chapter 1 Introduction
1. Background and Motivation
2. Preliminaries
3. Gaps in Understanding Key Notions

Chapter 2 The Energy System and Policies before the Twelfth Five-Year Plan
1. Energy Development by Sector
2. Past Five-Year Plans and Energy Policies
3. Change in Energy Mix, Energy Intensity and Environmental Effects

Chapter 3 Effects of the Twelfth Five-Year Plan Energy Policy
1. Understanding the Background to theTwelfth Five-Year Plan Energy Policies ...