The emergence of China as an economic power has important implications for energy use and environmental outcomes at the local, regional and global levels. China is currently the world’s third largest energy producer and the second largest energy consumer. As shown in Table 1, in 2002, China accounted for 10% of world energy use and is projected by 2025 to account for 15% of global energy use. China is the world’s largest coal producer accounting for 28% of world coal production and 26% of world coal consumption. China is the third largest consumer of oil and is estimated to have the world’s sixth largest proven reserves of oil. China has roughly 9.4% of the worlds installed electricity generation capacity (second only to the United States) and over the next three decades is predicted to be responsible for up to 25% of the increase in global energy generation. China’s size and compositions of energy use is reflected in carbon dioxide emissions. China is estimated to emit 13% of global carbon emission from fossil fuels (second only to the United States) and this share is projected to rise to 18% by 2025 (see Table 1). In an attempt to move away from fossil fuel reliance, China currently has plans for another thirty in the next two decades to supplement the nine nuclear reactors already existing. It is estimated that China has the largest hydroelectric capacity in the world (largely in the south west of the country) which is currently generating 20% of Chinese electricity. The Three Gorges hydroelectric dam on the Yangtze River will be the world’s largest power plant when completed around 2009. In March 2005, the National Development and Reform Commission (NDRC) approved the largest wind farm in Asia to begin construction in 2006. Although impressive in scale, the emergence of renewable energy will only slightly dent the overall dominance of coal in the foreseeable future in China. This means that China will need to respond to a range of environmental problems resulting from burning fossil fuels, including air quality (including black carbon emissions), acid rain (from Sulphur dioxide and Nitrogen oxides emissions) and climate change (from carbon dioxide emissions).
Although China has for several decades started to address environmental problems, the focus on energy as a source of economic growth has dominated the energy debate in China. This is beginning to change as income levels in China make the environment a more important issue and as environmental quality continues to deteriorate.
This paper gives an overview of the environmental consequences of energy use in China with a focus on what responses might alleviate current and future problems. The first set of issues relate to how local action to reduce local environmental issues such as emissions of sulphur dioxide and the emission of black carbon can make an important contribution to regional problems such as acid rain, as well as global efforts to tackle greenhouse emissions. Importantly this action will likely have significant impacts on Chinese economic growth and the wellbeing of the Chinese people. A number of existing policies that China has already put in place to tackle local and regional environmental problems are also discussed. Other issues relate to rising energy use, rising greenhouse emissions and the implications for China of serious global climate change policy. This paper outlines a response to carbon dioxide emissions that could be implemented in China in coming years but has not yet entered the Chinese debate. This approach focuses on creating long term property rights and clear incentives in pricing carbon emissions in an effort to reduce greenhouse gas emissions over time. It is in many ways similar to experiments already underway in China with trading sulphur emission permits. However, it is important to note that dealing with sulphur emissions is very different to dealing with carbon dioxide emissions. This difference is particularly important for China as a large country that has ratified the Kyoto Protocol and would be expected at some stage in the future to take on binding targets for carbon emissions or at least a commitment to some target. China has already shown a commitment to tackle local environmental problems with encouraging outcomes, but is there is still much to be done.
This paper is structured as follows. Section 2 summarizes the history of energy use and projections out to 2020 of energy use in China. The environmental consequences of energy use are summarized in section 3. Policy responses are considered in section 4 and a conclusion is summarized in section 5.