Evaluation of China's Energy Strategy Options

China faces a challenge similar to that it did two decades ago—it aims to quadruple GDP before 2020 while only doubling energy use to meet energy security, social welfare, and environmental imperatives. At the same time, the country seeks to shift towards cleaner fuels. Current trends, however, run contrary to these goals. Energy use has grown faster than GDP over the past three years (Figure 1), andover two thirds of the increment in primary energy supply has been coal. Meanwhile, oil use is rising rapidly, with nearly all new demand fulfilled with increasingly expensive imports.

In 2004, the Development Research Center concluded a study exploring options for a national energy strategy: China National Energy Strategy and Policy 2020 (NESP). As decision makers consider how to proceed, an outside, comparative perspective may be useful for evaluating the range of policy options. To that end, this report builds on the recommendations of the NESP and provides ideas about how China's government might connect high level policy goals—energy security, economic growth, equity, and improved well-being—with specific changes in energy investment, supply, and efficiency.

To that end, this report builds on level policy goals—energy security, economic growth, equity, and improved well-being—with specific changes in energy investment, supply, and efficiency. This report prioritizes energy policy goals,reviews the role of the state in achieving them, and provides specific recommendations for key energy subsectors. We reaffirm that energy efficiency is central to meeting objectives of equitable development, economic growth, and energy supply security. As China moves to improve overall energy efficiency and move to a more-sustainable energy supply mix, the government can play three key roles:

• Finance of socially and environmentally preferable energy options through investment incentives and low-cost loans;
• Advocacy of sustainable energy development through education and by example, e.g., through government procurement programs;
• Regulation of the boundaries of market activities, for example setting incentives through price signals, laws, and enforced financial penalties.

This report provides specific recommendations in these areas that are oriented toward improving efficiency and driving energy elasticity of GDP backdown to an average of 0.3, helping maintain balance between supply and demand, and encouraging transition to cleaner energy supplies.

for example setting incentives through price signals, laws, and enforced financial penalties. This report provides specific recommendations in these areas that are oriented toward improving efficiency and driving energy elasticity of GDP backdown to an average of 0.3, helping maintain balance between supply and demand, and encouraging transition to cleaner energy supplies.--