Mind the Gap: New Developments and Outlook for China’s Transport Sector to 2030

Since 2000, China has experienced a 7-fold increase in passenger vehicles and 4-fold increase in freight turnover and the government is placing greater policy emphasis on its rapidly expanding transport sector. Over the next twenty years, China’s transportation energy use is expected to significantly increase from its current 10% share of national energy consumption. To help slow this unprecedented import-dependent growth in transport demand for oil, China has adopted more stringent fuel economy standards to improve passenger and freight vehicle efficiency, promoted natural gas vehicles and established pilot subsidy programs for high efficiency, plug-in hybrid and electric vehicles. However, it is unclear how much these policies will contribute to the national energy efficiency and CO₂ reduction targets and to reducing the growth in oil use.

This paper begins by reviewing the progress and challenges of China’s most recent transport policies – particularly its hybrid and electric vehicle pilot subsidy program – and the latest transport fleet developments through 2013. On the basis of these recent developments, we developed a comprehensive, technology and end-use based energy demand and CO₂ emission outlook of China’s passenger and freight transport and used it to evaluate the impact of transport efficiency and fuel switching on China’s growing domestic oil and gas supply-demand gap. We find that a fast-growing transport sector will more than double demand for oil and will constitute an important component to the growth of national energy demand, despite significant efficiency improvements, electrification and growing shares of natural gas vehicles. Surprisingly, freight road transport – and not private passenger transport – will be the largest driver of future transport energy demand, with heavy-duty trucks alone consuming more energy than all passenger vehicles by 2030. These results suggest that more policies are needed to address freight transport energy use, as an alternative scenario of more aggressive electrification, diesel to natural gas switch for heavy-duty trucks and improved logistics can displace 21% of annual diesel consumption by 2030.