China as the World's Number One Energy Consumer... and World Leader in Clean Energy

The International Energy Agency recently reported that, based on its preliminary data, China surpassed the United States as the world’s biggest energy consumer in 2009 (see IEA announcement here and WSJ article here.)  According to the IEA, China consumed the equivalent of 2.252 billion tons of oil in 2009, 4 percent more than the United States’ consumption of 2.170 billion tons of oil equivalent. (As the WSJ article notes, “the oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear power, coal, natural gas and renewable sources such as hydropower.”) 

According to the WSJ article, this milestone (much like China’s passing the US as the world’s largest greenhouse gas emitter in 2006) came earlier than experts had expected, mainly because China’s economy has been less affected by the economic downturn than the US.  Chinese officials have also questioned the reliability of the IEA’s calculations, stating that that China had actually consumed the equivalent of 2.132 billion tons of oil equivalent in 2009, and that the IEA had overlooked China’s substantial efforts in energy efficiency and renewable and low-carbon energy (noting that China has the world’s largest hydropower capacity, solar thermal water heating capacity, and nuclear power capacity under construction).

Regardless of whose numbers are correct, the trends regarding China’s energy demand growth have been clear for some time.  While US energy consumption has remained basically flat over the last decade, China’s energy consumption has seen double digit annual growth rates, rising from half that of the US in 2000 to being on par with the US at present (as seen in this chart.) Whether China passed the US as the world’s largest energy consumer last year or does so this year, the moment is significant and marks a dubious passing of a torch: the US has been the world’s largest energy consumer since the early 1900s.  That said, we should remember that China has 4 times the population of the US, that its per capita emissions (6.1 tons in 2009), while growing, are still far below those of the US (17.2 tons in 2009), and that much of its emissions (something like 20-30 percent) can be attributed to manufacturing products for export to the West.

While we can be sure that China’s primary energy consumption will continue to rise well above US levels in the future (see the IEA’s most recent reference forecast below), the more important question we should be asking of both countries is what steps they are taking to ensure that the energy they are consuming and producing is clean and sustainable, and not the dirty fossil fuels that are polluting the water, land and atmosphere around us. 

Source: IEA World Energy Outlook 2009, Reference Scenario

As the world’s two largest energy consumers, China and the US bear a crucial responsibility towards the rest of the world and towards future generations. The extent to which China and the US move towards clean energy will have important consequences for the global environment and for our health and future.

This milestone shouldn’t distract us from the bigger picture of what China is doing to address the environmental impacts of its energy consumption by rapidly expanding its renewable and alternative energy resources, and the sustained effort it is making to become a world leader in clean energy, not just energy consumption.  Even as its consumption of energy continues to rise, China is moving proactively to reduce the share of dirty fossil fuels (especially coal) in its energy mix and to grow its renewable industries, while in the US the Senate has so far been unable forge the consensus needed to move the country forward to a clean energy future. 

In just the last few weeks, for example, we have seen the following developments coming out of China: 

• A 5 trillion RMB ($738 billion dollars) alternative energy plan to develop renewables and low-carbon energy sources: China’s National Energy Administration (NEA) has developed a new energy plan for 2011-20 that will invest 5 trillion RMB in a range of renewable and low carbon energy sources (wind, solar, biomass, nuclear, geothermal, and unconventional natural gas) as well as “clean coal”, smart grid, distributed energy and alternative-fuel vehicle technologies.  The plan includes ambitious targets such as doubling the share of natural gas in China’s energy mix (from 4 to 8 percent) and increasing the share of non-fossil energy to 15 percent by 2020.  The NEA estimates that the alternative energy plan will reduce CO2 emissions by 1.2 billion tons and SO2 emissions by 7.8 million tons per year, contribute 1.5 trillion yuan in added value, and create 15 million new jobs in China. 

Those who have been watching the international clean energy race know that China is already on its way to becoming a world leader in clean energy, having invested nearly twice the US in clean energy in 2009 ($34.6 billion compared to $18.6 billion) and more than the US and Europe combined in the second quarter of 2010 ($11.5 billion compared to $4.9 and $4.5 billion respectively.   

• Planning for carbon trading in the next Five Year Plan: As my colleague Jake Schmidt blogged about last week, China is planning to include carbon trading in its 12th Five Year Plan, which starts next year. Although the details have yet to be worked out, this will likely occur in the power sector or within certain industries, and is being pushed by the government as a more cost-effective measure to reduce carbon emissions than the current administrative regulations-only approach.  According to a recent interview with NEA Deputy Director Wu Yin (English article here, original Chinese interview here), China may even cap its production of coal by 2015 in order to reduce its reliance on coal from the current 70% to 65%, and may limit energy consumption for certain industries or regions.

• China announced a new national feed-in tariff (FIT) for biomass-fired electricity on July 23 (official notice in Chinese here ), set at .75 RMB ($0.11) per kilowatt hour.  China had already set a national wind feed-in tariff last year, and the new biomass FIT should enable biomass to become profitable in more rural areas where biomass is plentiful but coal is cheap. Before the establishment of the nationwide biomass FIT, under a policy set in 2007, biomass power producers received a 0.25 yuan per kilowatt hour subsidy over the local benchmark price for coal-fired power, which was too low for some biomass power generators to be profitable, even in some of the areas with the best biomass resources in the country.  Biomass incentives always require safeguard provisions to ensure that the biomass is produced in a sustainable way (as my colleagues have argued here and here), but overall, China’s new biomass FIT shows the government's commitment to developing biomass as a clean source of energy.  The government announcement also notes that a 30 MW biomass power plant can displace 80,000 tons of coal, avoid 180,000 tons of CO2 and 1,000 tons of SO2, increase rural employment by 500,000 work days, and increase rural incomes by 50-60 million RMB.

The news coming out of China stands in sharp contrast to the developments (or lack thereof) in the US, which still has no coordinated national plan to develop its clean energy resources by putting a price on carbon and creating unified incentives for renewables.  Even as China has (or will soon) become the world’s largest energy consumer, it is also taking important steps in the right direction by making its energy use more sustainable and efficient, supporting the development of its renewables industry and incentivizing clean energy. 

 This post was coauthored by David Cohen-Tanugi and Alvin Lin.

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