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Environment

China’s Energy Transition

Nov 18, 2021
  • Xiao Bin

    Deputy Secretary-general , Center of SCO Studies

The UN Climate Change Conference, COP26, was convened in Glasgow, Scotland on Oct. 31, and the participants held discussions on legacy issues regarding Paris agreement implementation, global climate goals and other issues related to climate governance. Before the conference, China formally submitted to the UNFCCC secretariat its achievements, new goals and new measures for its nationally determined contributions, along with its strategy for mid-century long-term low greenhouse gas emission development, in which it aims to increase its nationally determined contribution, strive to peak CO2 emissions by 2030 and reach carbon neutrality by 2060. Achieving these goals means more investment in energy transition, a process that will be costly for China given its current energy security structure.

As a concept, energy security by extension involves aspects such as energy, economic growth and political power. In a narrow sense, energy security refers to efforts to secure access to energy supplies at reasonable and stable prices in the interest of sustained and stable economic development. However, as the global response to climate change evolves, the concept of energy security has become intertwined with national development, survival and environment, and has a significant bearing on political affairs. Against the current political environment, the ability to align energy security and energy transition is crucial to China’s response to climate change.

China has long prioritized climate change and embarked on an energy transition that entails an array of energy security issues. According to a white paper in late October — China’s Policies and Actions to Address Climate Change — nationally driven energy transition projects commenced in 2011, when the reduction of carbon dioxide emissions per unit of GDP (or carbon emission intensity) was included as a binding target in the outline of national economic and social development planning. As the energy transition continues, China’s primary energy self-sufficiency rate has stayed at around 80 percent, but in the process of its energy transition, issues affecting energy security are increasing. They stem from structural problems:

First, high dependence on overseas energy underscores the constraints on national development. When major power relationships are stable, the impact of this dependency tends to be moderated. The reverse is true as well. According to the Energy Bureau of China, the country’s dependence on overseas oil, natural gas and nuclear raw materials stands above 70 percent, 43 percent and 90 percent, respectively, and are distributed in regions and countries susceptible to fluctuations in great power relations. Therefore, the game level of the relationship between major powers has a direct impact on China’s energy security.

Second, addressing structural shortages and optimizing the situation remains a challenge. Despite China’s active response to the Paris agreement, which was adopted at the Paris Climate Conference in December 2015 — and accordingly reduced the share of coal consumption from 70 percent in 2010 to 56 percent in 2021 — coal remains the mainstay of China’s primary energy consumption. Over the course of the energy transition, rural China bears the brunt. Coal-to-electricity conversion constitutes an important policy in China’s energy transformation in rural areas, with about 27.15 million rural households in areas such as Beijing, Hebei, Tianjin and Henan alone.

At the beginning of the coal-to-electricity conversion, the lack of power infrastructure, high electricity costs and perceptions caused many problems in rural areas. In a gratifying development, China’s installed power capacity of non-fossil fuel has exceeded that of coal power, thanks to the efforts of Chinese power companies.  However, in the short term, coal will remain the primary source of power in China. In addition, staggered production also adds to the production costs of Chinese enterprises and to costs for consumers.

Third, China’s foreign trade is in a state of carbon deficit. According to data released by the Ministry of Ecology and Environment, the country’s carbon intensity in 2020 was 48.84 percent lower than in 2005. Although China’s total carbon emissions still top the world, the United States, Japan, Canada, Germany, Australia and Russia are much higher in per capita terms. Export trade accounts for about 20 percent of China's carbon emissions. China will phase out high-emission exports, which will pose a drag on its foreign exchange, finances and employment. 

At COP26, China was denied the chance to voice its position via video link, although Queen Elizabeth II was given the courtesy of addressing the meeting via video link. At the same time, dignitaries, executives of financial institutions and corporations jetted off to the climate summit with large security teams, squarely at odds with the original purpose of the summit — to reduce emissions and address climate change. The summit has to some extent become a political show and a high-carbon-consumption.

Developed countries seem to have overlooked one thing: As China reduces carbon content in foreign trade to address climate change, high-carbon production will only be diverted to other countries if there are no affordable low-carbon alternatives. As a matter of fact, many high-carbon products are transferred from developed countries to developing countries, but developed countries remain the largest consumers. The carbon border tax levied by developed countries, while hailed as promoting emissions reduction through economic means, is in essence a deceptive means to “have the cake and eat it too” at the expense of developing countries.

In sum, China needs to respond to climate change and promote energy transition based on its actual capacity, ensure a reasonable level of energy security, avoid drastic or campaign-style energy transitions, take part in international cooperation in a way that aligns with its own strategic interests and play an active role in global climate governance. 

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