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China’s Energy: New Ambitions Lead to New Opportunities

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With the world focused on becoming more environmentally friendly, China has been under the spotlight for their efforts in moving towards a more green and sustainable future. For many years China has been under scrutiny regarding their pollution practices and climate policies. In recent years they have outlined a plan to move them in the direction of becoming more environmentally active and aware.

What are the Causes of Carbon Emissions?

Carbon dioxide emissions occur through both natural and human activities. Man made activities have caused a sharp increase since the industrial revolution and constantly increasing contributions have now led us to environmentally dangerous levels.

Some of the leading causes include the burning of fossil fuels like coal, oil, and natural gasses. Deforestation is also a large contributing factor that has caused an increase in carbon dioxide emissions.

Carbon Emissions Leaders

Each country in the world emits different quantities of gasses that contain heat. These gasses emit carbon dioxide (CO2) which are created by the combustion of coal, oil, natural gas and other types of fuel. According to the International Energy Agency the following countries had emitted the most CO2 in 2018:

  1. China
  2. United States
  3. India
  4. Russia
  5. Japan

China’s Energy Use  

With the world’s largest population, China’s drive towards growing the economy and its manufacturing practices, have led to them consuming an enormous amount of energy, which far exceeds that of any other country. According to a statistical review done by BP, China accounted for 24% of global energy consumption in 2018.

One of the biggest side effects of China’s rise to being a major world power has been its energy consumption. In their efforts to modernize and increase living standards, China has become reliant on coal as its primary source of energy. As mentioned above, the use of coal as an energy source has extremely harsh environmental effects.

While western countries have either fully or partially replaced coal usage with other more efficient sources of energy – like gas, oil and nuclear electric power – China has still remained quite reliant on coal. There has been a slight decrease in their coal usage, with the share of coal usage decreasing to 58% in 2018, from 60% a year before (BP). However, a monumental shift in practices would be required in order to drastically reduce their coal reliance. Two prominent reasons for the high carbon emissions include production and urban contributions.

Production

China’s manufacturing has for a long time had an extraordinarily high consumption of industrial energy per industrial output. The manufacturing focused economy, which included industries like cement and steel, required large amounts of energy and as such contributed greatly to carbon dioxide emissions. Beyond that, what contributed even further was the poorly regulated practices of many factories and plants, the use of old equipment, and inefficient use of energy by small scale operations.

While the GDP in China has steadily increased over the past few decades, their energy consumption has seen an even greater increase. The growth of the economy has a direct link to the increase in energy consumption. With a manufacturing-based economy, China has had a large amount of factories, consuming energy at a great cost to the environment.

Urban Consumption

Many of China’s cities have suffered from severe air pollution over the past few decades, with smog levels often exceeding health standards. The increase in number of vehicles on the roads and lower emissions standards for vehicles had been a major contributor to urban pollution in the 1990’s.

The rapid development of cities and migration of people to the cities have also caused a sharp increase in urban air pollution. The effects of the air pollution are serious and have caused various health problems for local residents which include premature death; a loss in life expectancy; and an increase in cardiovascular and pulmonary diseases.

China’s Relationship with Coal

One of the biggest reasons for China’s exorbitant use of coal is that, one could say, it happens to be the default choice. More efficient options like gas and oil have proved difficult to obtain and is not nearly enough in quantity to meet the country’s continually increasing demand. In contrast, China has large deposits of coal resources that appear near the surface, especially in the northern areas and surrounding the Shanxi province.

There was once hope to switch reliance from coal to oil in the 1960’s after the Daqing and Shengli oilfields were discovered. This hope was short lived, as by the late 80’s production from these plants had peaked and no alternative was found. China had to move there focus back to coal. Up until recently, China relied on coal for more than an astounding 70% of its energy.

Due to the lack of gas and oil resources, China has had to rely on imports to meet their needs.

By 2019 China had become the largest importer of oil in the world. In 2019 they imported a reported 10 million barrels a day. At the same time, China is one of the largest importers of natural gas, with imports meeting more than 40% of domestic requirement.

China’s 10 Year Plan

In the most recent 5-year plan laid out in a document by the Chinese government, they have extended their strategy from the previous 5-year plan, instead of coming with a completely reformulated strategy. The plan shows intent to reduce energy consumption that is considered wasteful, curb carbon emissions, and improve energy security.

The plan highlights efforts in the following areas to reduce their carbon footprint:

  • Optimize and restructure existing energy structures.
  • Transform the current energy structure and increase clean energy supply.
  • Improve environmental economic policies.
  • Improve efforts in control and realize a reduction in the emission of multipollutants.
  • Establish effective monitoring systems in order to better deal with pollution.

In line with their ambitions, there are various policies and actions that have emerged. One of the major policies is the implementation of measures to control coal burning. The promotion of coal alternatives like natural gas, wind, and solar power; a ban on new coal fired capacity; and new SO2 and NOx controls at power plants that are coal fired, have highlighted some of the actions being taken.

There has also been an increase in incentives for local officials to better monitor air pollution, prioritize pollution as a problem and have stricter enforcement, has also led to a decrease in certain environmental violations.

The Paris Agreement

The Paris Agreement is a legally binding international treaty, which came into force on November 4th, 2016. The main purpose of this agreement is to improve response to the threats that are presented by climate change.

The goals and targets set out by the agreement are to keep global tempretures below 2.0C (degrees Celsius); to put a limit on the amount of greenhouse gases emitted through our activities to the same amounts that soil, trees, and the ocean can absorb naturally; to encourage member countries to commit to emission-reduction targets; and to assist nations in switching to more renewable energy.

As a member of the Paris Agreement, it was important for China to align their intentions and actions with the goals of the Agreement. China has certainly stepped up to the challenge of getting their emissions inline with that of international standards and proceeded to take very defining steps when outlining their ambitions.

China’s Major Ambitions

Despite being the world’s leading carbon emitter, in September of 2020 China pledged to stop releasing carbon emission before 2060. This came as a surprise as it sets their ambitions even higher than that of the United States, which is a bold step considering this is one of the first times they have committed to a long-term goal. Reaching the target set will require a complete makeover of China’s economy.

China’s bold statement of ending emissions, may help influence other major developing economies, like India, to reduce their emissions. In order to decrease their coal dependency, they have had to rely on importing natural gasses and oil. This has led to China now becoming the largest importer of natural oil and gasses in the world.

In order for China to reach its goals they have set targets to reduce emissions, increase energy efficiency, ensure the energy remains affordable, reduce air pollution, and increase energy security, among other things. The ultimate goal of producing clean energy is also aligned with ensuring economic growth and raising living standards.

Opportunity in Green Energy

With the outbreak of the COVID-19 pandemic we have seen governments rethink their policies, strategies, and investment decisions. It is important for governments to keep in mind the overall benefits of increasing focus on renewable sources of energy, while they reduce carbon emissions and encourage growth in technological innovation.

Despite all the negative effects seen from the energy generating practices of yesterday, tomorrow comes with new promise and enhanced focus on generating clean energy. China remains open to foreign investments with regards to importing foreign renewable technology. The ‘Industry Catalogue Guiding Foreign Investment, published by the Chinese ministry of commerce in 2017, listed renewable energy as an encouraged area of investment. This allowed for foreign investors to establish wholly owned foreign enterprises in China (learn more about wholly owned foreign enterprises in China here).

Foreign companies investing in the renewable energy sector in China are however concerned of their intellectual property rights as they feel their IP may be appropriated without the fair compensation being made.

According to the Center for Strategic & International Studies the incentives for foreign companies to invest in China is changing. There are 2 primary motivations according to CSIS: first, other countries may fall behind technologically if a partnership is not formed with China in the renewable energy sector. The second is that there are increasing strategic benefits of investing China and partnering with China in the field of research and developments, and these benefits may outweigh the potential risks involved.

Although China has garnished the reputation of being a large energy consumer and major contributor to the global climate crises, they have taken bold steps in the commitment to reduce their carbon footprint. The actions and policies that are being implemented provide new opportunities for players in the renewable energy industry. For companies providing cleaner energy alternatives, China offers the necessary support, in order to reach their environmental targets.

How We Can Help You

As a leading HR solutions company, we are able to assist your business in entering and growing in the Chinese marketplace. We have helped hundreds of clients in a number of different industries including engineering and manufacturing, setup their enterprise with little administrative barriers. Whether you are looking to setup an entity, hire staff, or look for top talent, INS Global is your ideal expansion partner. Contact us today and let our consultants make your global expansion easy.

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