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Energy Security and Sustainable Economic Growth in China

Energy Security and Sustainable Economic Growth in China

Martin Lavicka30 Jun 2015Leave a comment

Written by Adam Horálek

Yao, Shujie, Herrerias, Maria J. (eds., 2014): Energy Security and Sustainable Economic Growth in China. Palgrave Macmillan, Houndmills. ISBN 978-1-137-37204-8. 338 p.

Since 1993, the People’s Republic of China is a net importer of oil which is vital for its rising economy. Since then, in two decades, China has become dependent on overseas/foreign sources of oil from 60 percent; that makes China one of the fastest growing dependents on foreign oil resources in the world. Not only is oil, however, a major source of energy. China is the biggest producer and at the same time by far the largest consumer of coal – for 2013 it was over 42 % of the world production and consumption. However, to fulfill the energetic needs of its growing economy, China has had to almost double its coal production over the last decade. That is completely opposite to the general global trend in the reduction of coal mining in order to reduce the amount of emissions, especially those causing the greenhouse effect. It seems that China’s energy policy diminishes the whole world’s attempt in this matter. Therefore, to understand the crucial processes in China’s energy security policy is vital for understanding overall worldwide trends in energy as well as in environmental protection.

The book edited by Shujia Yao and Maria Jesus Herrerias is one of many examples trying to analyze, explain and understand this topic. It is a book from a series of the Nottingham China Policy Institutes and includes fourteen chapters or case studies, and on this volume 22 coauthors collaborated. Even though there is already quite extensive research and several published studies on the topic (such as China’s International Petroleum Policy by Bo Kong, recently Security and Profit in China’s Energy Policy by Oystein Tunsjo, or China, Oil and Global Politics by Philip Andrews-Speed and Roland Dannreuther), the presented book Energy Security and Sustainable Economic Growth in China is still worth reading. What contemporary China’s energy policy faces the most is the lack of enough foreign resources as well as the need for reduction in the consumption of energy in China itself – though not in absolute numbers but in the relative terms. China has still very inefficient energy and heavy industry, an outdated or non-existing transmission network and considerable environmental impacts of its energy needs have emerged partly due to its natural environmental limits (climate, geomorphology, distribution of resources and population, etc.). The regional disparities, international relations, plus capable and available foreign as well as internal energy resources, are all topics the book discusses. That is what makes this book more comprehensive compared to others which are mostly focused on either international relations regarding energy policy or even more specifically on the foreign oil policy of the PRC. However, the focus of the presented volume tries to cover a more holistic perspective on the topic.

Carlos Aller and Lorenzo Ductor compare the energy sector of China with fourteen other countries and show that despite the fact China is the largest producer, has the largest population and is the second largest economy in the World, its energy consumption and energy dependency is enormous. Compared to India with a similar population, China has triple the energy consumption and because of extreme consumption of coal compared to the rest of the world it produces four times more CO2 emissions. Compared to all fourteen countries, it consumes only 10 percent less energy but has 40 percent less population. Moreover, the fourteen other countries are developing countries like China, not the developed ones, which makes these numbers even more striking. It is just coal production that makes China still a very low dependent on foreign energy resources with only 7.6 percent of its total energy consumption needing to be imported, but over 6O percent of its oil consumption. To support this, the authors show that despite the fact that China’s fossil fuel share on energy consumption is very comparable to the other fourteen countries, its coal consumption as a percentage of the fossil fuels is by far the biggest.

Atanu Ghoshray and Javier Ordónez explain this by the energy intensive growth model of China. Between 1980 and 2010, China’s economy grew almost three times quicker than the economy of the U.S. or India (sic!), however, in the same period, the total energy consumption rose over 5.4 times. That explains that Chinese industry is very energy-consuming compared to others. Chinese industry employs only 27 percent of the economically active population which is only less than five percentage points less than in the OECD countries. At the same time, industry share on the GDP of China is over 50 percent.

Such a growing and demanding economy has to secure its energy needs via energy diplomacy. The general strategy China has held for decades is the stratification and geographical diversification of energy resources. In the late 1990s, China’s energy diplomacy focused mostly on overseas countries. But in reality, one of the biggest energy resources and biggest available energy capacities lies just behind China’s land borders – in Russia and in Central Asia. Therefore, as Elzbieta Maria Pron shows, the Shanghai Cooperation Organization, coordinating all Central Asian post-Soviet countries (except Turkmenistan), China, and Russia, is the crucial diplomatic tool for securing China in energetic terms. The organization was established as the “Shanghai Five Group” in 1996 by China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan and was joined in 2001 by Uzbekistan. The organization aims to develop economic and political ties between the countries, but in reality, its major focus is on cooperation in the energy market and coordination of both China’s and Russia’s geopolitical interests in the Central Asian region. However, as the figures show, cooperation with Russia and Central Asia and securing their energy (especially oil and natural gas) resources for the Chinese market is worthy and effective. In the last decade (2000s), China tripled its crude oil import and from a very important part thanks to the Shanghai Cooperation Organization achievements.

Karolina Wysoczanska focuses on China’s energy policy from a much longer historical perspective – since 1949. But what she implies most vividly is that there have been three major shifts in China’s energy policy – in 1983, 1993 and in the early 2000s. The first shift was due to the change of the whole industry and economy (newly focused on the market economy and opened to the world); the second was the change in China’s foreign energy policy due to the fact that China became a net crude oil importer and had to start to secure its energy needs abroad. Lastly, the terrorist attacks in 2001 in the U.S. caused a new “reorganization” of the world’s energy market and China stepped into it efficiently becoming a new competitor to other major energy importers on the world stage.

However, China’s energy policy not only focused on foreign resources, but also on the inland ones. As Dan Luo and Shujie Yao show, China’s government realized that security lies “at home” and that they had to diversify their energy resources. Not only did China focus on massive utilization of hydropower, symbolized by the completion of the San Xia (Three Gorges) Dam, and increased its construction of coal power stations (with a subsequent increase in the production of coal itself), but also on alternative energy resources. China has significant deposits of uranium, however, as the very first nuclear power station was only completed in 1995, and though to date seventeen projects have been finished, nuclear power comprises only a very marginal portion of total energy consumption. Also, other alternative and renewable sources of energy are undergoing massive growth in China, especially solar, wind, and biomass power usage. Despite huge efforts of the central as well as of local governments, all these new and alternative sources of energy cannot catch up with the speed of the increasing energy consumption. As David Broadstock argues, despite its difficulties and increasing foreign dependency, oil as an alternative solution for, at least environmental, problems of China’s energy consumption is the only capable choice. As María J. García explains, China has extremely large energy resources which can still cover over 90 percent of its consumption. However, this is due to an enormous consumption of coal. However, the government in its eagerness to lower greenhouse gas emissions supports incomparably large and nationwide renewable energy projects. However, only extensive production of alternative energy resources will not fix the situation.

 The next three chapters focus on regional differences and regionalization of production, use and structure of energy resources. By very empirical analyses the authors show that there are significant regional disparities, and transmission of energy throughout China is also one of the very crucial challenges and tasks for local and central governments. As Ana Cuadros and Vicente Orts show, the intensification of China’s industry and following reduction on transmission and amount of energy consumed is one of the crucial and only capable routes to both secure energy sufficiency and environmental stability.

The last two chapters focus on the environmental aspects of the whole energy market. And as both chapters conclude, China has no alternative but to stick to the reduction of its dependency on its coal deposits. Despite the fact that the authors expect China to be still mostly dependent on coal by 2050, its share of the total energy production is expected to drop by almost half. The rest should be replaced by alternative and renewable resources, especially by hydropower in which China is already the leading economy both in capacity and in usage.

As shown in this brief overview of the content of the book, this volume covers all the main issues readers should reflect on when thinking about China’s energy security. It is neither a question of pure policy or geopolitics, neither is it only an energetic or purely ecological topic. All these perspectives must be taken into account and this book does it. Thanks to the fourteen different chapters or rather perspectives, and because of extensive collaboration of the twenty two authors, this book will remain a significant reading and inspiration for further research even though the data used in this book will be outdated. That is already the problem of the book anyway. The book from 2014 uses no younger data than from 2010. China, due to its rapid economic development, has moved from the state of energy usage in 2010 quite significantly. But the data used are very important for the general understanding and illustration of the situation, exact numbers are not the aim of the book. We can only hope, that a similar group of researchers will meet again in the future and will continue in monitoring and explaining China’s energy development which, without overestimation, is so vital in the everyday life of every person in the world.

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