China’s quest for energy

China is always in the news for its spectacular success in terms of economic development, urbanisation and its dominating manufacturing sector. However, a grave matter of concern for Beijing is that China is facing an energy crisis. Large parts of the country, including the financial center, Shanghai, are likely to face power cuts this summer as energy demand peaks. Due to the energy crisis, Chinese economy could be in trouble. Energy demand in China has dramatically increased over the past few decades because China has industrialised and become one of the major manufacturing centers of the world. The Asian power has been working to resolve the energy crisis and has invested massively in hydroelectric power to cope up with the rising energy demand.
Ever increasing energy demand
China is proud of its rapid economic development. Its real problem today, and the most important driver of the nation’s energy and environmental footprint, is not a geostrategic ambition but rather a glaring deficit of governmental regulatory and administrative capacity. Appetite, ambition and state strategy; all are present to some degree in China. Over the last few years, a number of societal actors have been involved in making decisions regarding fuel choice, technology, infrastructure development and environmental protection, which are key factors in economic development of the economy.
In just ten years, China has turned from a petroleum exporter to the second largest oil consumer in the world, burning seven million barrels of oil per day. US, being a competitor of China, consumes 20 million barrels per day whereas China is projected to reach a daily level of ten million barrels within the next two decades. China is alone responsible for 40 per cent of the global increase in oil demand since 2000; many analysts take it as a driving factor for rising oil prices. The Chinese government has countered the claim by saying that the country is not the decisive factor in the rise of oil prices, as it accounts for only 6.3 per cent of the world’s total oil consumption and less than three per cent of the world’s total oil trade. China’s oil import volume is far below than that of Japan; and China is also the second largest overall energy producer in the world. There is no doubt that China’s huge demand for energy resources has changed the traditional oil and energy market. Once dependent on the industrialised countries for markets, energy-producing countries are now increasingly turning to the growing Asian markets particularly to that of China. The 11th Five Year Plan (2006–2011) was approved which took a more realistic look at economic growth targets set in the 10th Plan. It called for GDP growth of 7.5 per cent from the earlier 8.8–9 per cent and for greater emphasis on saving energy and efficiency, specifying a target cut of 20 per cent in energy consumption per GDP by 2010 and the development of domestic and alternative energy resources. China’s current oil imports comprise of less than 10 per cent of total global imports, its projected import growth and, more importantly, its supply strategy is a matter of great importance and concern for the global oil market. Rapid movement of economy typically requires more energy, but China’s modernisation has produced a manufacturing structure that requires huge increases in energy consumption, creating an inefficient energy consumption system and a consumer trend that is difficult to sustain.
Environmental aspects
The heavy industrial structure and a fast-growing auto industry have also made China one of the worst polluters on earth. While the United States remains the biggest producer of carbon dioxide emissions, China is catching up fast. Being a signatory of the Kyoto Protocol, but not subject to its emission reduction standards as a developing country, China is releasing a large amount of greenhouse gases into the atmosphere. China’s obsession with cars has led to more traffic jams and higher pollution levels. According to UPI Energy Watch, the annual average fuel consumption per car in China is 2.28 tonnes, 10 to 20 per cent higher than the United States and 100 per cent higher than Japan.
No one should deny China’s right to use more energy, but even the Chinese themselves are now questioning how to best to deal with the country’s energy situation. It is argued that China’s dependence on foreign oil will increase from today’s 36 per cent to 60 per cent in the next ten years. As a part of China’s “go-out” strategy, it has paid attention to Canada’s vast energy and other resources. During his recent visit to Canada, Chinese President Hu Jintao and then-Prime Minister Paul Martin announced that the two countries have upgraded their relationship from “Cooperative partnership” to “Strategic partnership”. An important element of the deepening cooperation is in energy and related sectors. At the People’s Congress in March 2006, Beijing identified a number of challenges in the energy sector. As reported by Vice Premier Zeng Peiyan to the People’s Congress, China faces the following problems in the energy sector:
n Sustained strong energy demand that places pressure on supply
n Shortage in resources that limits growth of energy industry
n Coal-centered supply structure that is detrimental to the environment
n Obsolete technologies that inhibit efficient supply of energy
n International market fluctuations that negatively impact domestic energy supply.
A global agenda
Though it is difficult to predict with accuracy which way China’s search for economic and energy security will take it, there are a number of ways in which China can be encouraged to play a more participatory and cooperative role. However, this is premised on the need to understand the significance that energy security holds for China. Similarly, China too must understand that by following an independent, even aggressive, strategy, suspicions about its intentions will only increase and its security will be compromised.
Therefore, it is necessary that Beijing adopts a more transparent policy with regards to its energy security and defense policy and strategy. Secondly, it must work with other consumers and the international community at large to solve common energy-related problems, instead of seeking preferential access to resources in politically unstable regions and states. Holding regular dialogue on resolving nettlesome issues could resolve such problems to a large extent.
Thirdly, if China were to work with the IEA or other regional consuming countries to develop a system on managing demand-supply issues, including coordination of strategic oil reserves during emergencies and disruptions, it would indicate that China is ready to work in conjunction with other players in resolving global energy problems. Last, all nations need to work together to remove barriers on trade of energy efficient and renewable technologies. Energy and environmental security is a common agenda for all countries, and should be tackled likewise.
The fact that energy security is becoming increasingly important in foreign policy agendas makes it imperative that individual states not be perceived as adopting conflictual and aggressive policies to resolve their energy security dilemmas. Long term cooperation between Western countries especially Canada and the United States and China in the energy and environmental sectors has profound strategic implications; it will benefit all parties economically. The West should pursue a cooperative approach in solving common energy securities concerns between China and itself, thus easing the task of solving tough issues on the global agenda.