Strategizing for Energy Policy: China's Drive to Reduce Dependence

Article excerpt

In 2011, China emerged as the largest consumer of energy globally, and is projected to be a main driver of global energy demand increases for the foreseeable future. Under the IEA's most recent long-term scenarios, over the next quarter century, China would account for about half of the rise in global demand for oil, coal and nuclear power, more than a quarter of new natural gas use, and a significant share of renewables expansion. This raises the significant question of energy security, not just for China itself, but also for all participants in global energy markets. In seeking to ensure its energy security. China will need to take strong action in a variety of energy sectors--including investment at home and abroad--to expand the energy supplies needed to meet its contribution to global demand growth.

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Ensuring that such investments, and other steps China may take, are coordinated with the needs and interests of other nations will require greater participation by China in mechanisms for international energy governance. China is already beginning to play a more active part in existing international institutions for energy governance, and it is crucial that other nations now encourage further constructive contributions by China to the evolution of an international energy governance system that equally serves the needs of all energy market participants.

Diversifying Energy Sources

Energy security has long been a preoccupation of China, going back to the earliest days of the People's Republic. Expanding supplies of coal for industrial development was a major focus of energy policy in the 1980s, and led to significant liberalization of coal markets. Moderating demand growth through energy efficiency also became a permanent feature of energy policy in the 1980s as well. But until the early 1990s, when China became a net importer of oil, the nation's energy self-sufficiency was considered a given. Now, key to China's energy strategy is a push to boost security by limiting the growth of energy imports, largely by developing the country's considerable domestic resources. Its first comprehensive Five-Year Plan for the energy sector, approved in January 2013, serves this strategy. That drive will contribute to China's ranking among global leaders in deployment of renewable energy and unconventional gas production--and reinforce its position as the world's largest miner of coal.

As a leader in these sectors, China will become more exposed to disagreement over trade and other disputes, as recent spats concerning renewable energy equipment have shown. This is normal for any country that is taking a role as large as China's, and for one that is so integral to the global economy. The country will be challenged to handle a brighter political spotlight than it has previously, and to treat relatively minor quarrels as such.

The sheer magnitude of demand growth, however, means that imports are broadly set to rise, rendering complete energy self-sufficiency an unlikely prospect. China's increasing reliance on international markets means that it is now facing similar challenges as industrialized countries, and pressure is growing for it to take a role in international energy governance commensurate with its market presence. There is, of course, concern in some quarters that certain mechanisms and actions to stabilize global energy markets may be less effective without the participation of large emerging nations. But there is an argument to be made from the point of view of emerging nations as well: as they become more exposed to the vagaries of international markets, it is in their interest to have seats at the table of the major institutions that are engaged in looking after those markets. Moreover, as many of the countries that emerging nations will need to cooperate with already existing institutions, it would seem to be much more feasible to seek evolution of existing frameworks, rather than to ask current participants to abandon existing institutions and to create new ones. …