Academic journal article Energy Law Journal

China's Power Sector: Global Economic and Environmental Implications

Academic journal article Energy Law Journal

China's Power Sector: Global Economic and Environmental Implications

Article excerpt


As China's economy grows, so does its need for greater volumes of electric power, fueled primarily by low-grade coal resources. This poses a challenge both for itself and the world by virtue of the escalation of traditional pollutants and greenhouse gas emissions. Although prior to 1991, China's energy consumption had been highly efficient when measured against growth of its gross domestic product (GDP), since then its energy use has become increasingly inefficient. To reverse these trends while still maintaining economic growth, China's central government has attempted to implement a number of reforms, including increasing energy efficiency and encouraging development of renewable and environmentally sustainable forms of power generation. As it grapples with this Herculean task of reconfiguring its resource mix, over the last several years the central government also has been attempting to reform its power sector to allow limited private ownership of power generation and experimentation with regional power trading markets. But serious obstacles stand in the way of all of these reforms, including the absence of: (a) strong institutional leadership, (b) transparency in decision making, and (c) rule of law observance that would serve to encourage participants to abide by the government's policies.4


The economic ascension of the People's Republic of China will be one of the most significant events of the 21st century for the entire world. Already the staging point for the most massive construction boom in modern times, China's demand for natural resources to fuel its economy and industrial revolution is unparalleled. Over the last twenty years, its economy has grown an average of nearly 10% per year.5 It "consumes half [of] the world's cement, a quarter of all steel, and two-fifths of all copper."6 Currently, it is

the second largest oil consumer in the world and the third largest oil importer . . . [Its] oil demand growth has accounted for nearly one-third of the world's total oil demand growth during the past decade, and is adding the equivalent of a medium-size country to world oil demand each year.7

In light of this significance, the mainstream trade press has devoted considerable attention to China's quest for oil and other energy resources to fuel its economic engine and to address its increasing vulnerability to energy security. This is understandable given the escalation of automobile manufacturing and use in China and the increasing importance that the petroleum sector plays in growing its entire economy.

China's power sector has also played a significant role in helping it maintain this economic juggernaut, and its reliance on coal resources for power generation has been of increasing concern because of its heightened environmental impact. From 2004 through year-end 2007, it is estimated that China will have added annually an average of seventy gigawatts (GW) of new installed coal capacity, or roughly the equivalent-in each year-of the entire generation capacity of Great Britain8.

The International Energy Agency (IEA) estimated that China would surpass the United States in annual greenhouse gas emissions by around 2010.9 However, a recent Dutch study pronounced that China already exceeded the U.S. in 2006, primarily through its reliance on coal and production of cement.10

Against this backdrop, China has placed sustainable development at the forefront of its policy priorities. An integral part of that policy must be the modernization of its energy policies, which includes reformation and modernization of its power generation and delivery system. Accordingly, China has introduced some limited market reforms to this sector, and has announced various initiatives that move toward addressing the twin goals of strong economic growth and environmental stewardship. The purpose of this article will be to address the practical hurdles confronting China in meeting the aims of those initiatives and to examine their implications for the United States and the developed world. …

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