Print

Abstract

The recent slowdown in China’s energy demand, primarily driven by decelerating economic growth and structural changes to its economy, has opened a window of opportunity for reforms aiming to establish a more sustainable energy sector and to increase the role of markets. These initiatives could have a significant impact on the country’s future energy consumption and the structure of the energy sector, in turn affecting the global energy markets. They could also have an impact on China’s environmental, energy security and long-term economic development goals.

The joint Institute of Industrial Economics, Chinese Academy of Social Sciences (IIE-CASS) and KAPSARC workshop “China’s Policy Drivers of Future Energy Demand” held in July 2018 highlighted the following issues pertaining to the future of China’s energy demand:

  • Despite the consensus that China’s future energy demand growth will decline, potential disruptive policy impacts and varying sectoral dynamics make estimating the peak demand level and the timing of the decline difficult.
  • The decline in China’s energy demand is unlikely to occur before 2030 due to macroeconomic trends and the significant costs associated with rapid fundamental changes to its energy mix. Until that time, China will have to continue relying on fossil fuels and focus on optimizing their use (see Figure 1 below for the graphical representation of this scenario).
  • Efficient and sustainable development of China’s oil, gas and transportation sectors is hindered by structural problems and the remaining elements of the command-and-control system. Although deregulation may cause a short-term disruption, continued investment misallocation and growing discrepancies between the actual costs and regulated prices will increase the risks associated with executing such reforms in the future.
  • China’s evolving approach to international energy collaboration, from securing supplies towards a more comprehensive collaboration, will have an increasing impact on its domestic energy demand. The transfer of China’s industrial capacity and labor to Belt and Road Initiative countries and the establishment of new international supply chains and infrastructure will affect absolute energy consumption levels. Additionally, industrializing China’s inland and border regions and the enhanced development of its low-carbon energy industry can shift its geographical patterns of energy demand and the structure of its energy mix.
Share

Stay informed

I'm interested in

Select the updates you'd like to receive from us

About

A bit about you