China Energy Outlook 2020

China Energy Outlook 2020

China Energy Outlook Report CoverChina's Energy and Emissions Trends

China is the world’s largest consumer and producer of primary energy as well as the world’s largest emitter of energy-related carbon dioxide (CO2). China surpassed the U.S. in primary energy consumption in 2010 and in CO2 emissions in 2006. In 2018, China was responsible for 21% of total global primary energy use (IEA, 2019a) and about 29% of global energy-related CO2 emissions (IEA, 2019b).

China’s 1.4 billion people consume energy to meet their daily needs, including heating and cooling of their living and working places, fuel for cooking their meals, electricity to power their appliances and equipment, and fuels for both their own personal transportation as well as the products they purchase.

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Chapter 1 | China's Current Energy and Emissions Trends

Chapter 1 presents the most recent data available on China’s Current Energy and Emissions Trends, covering energy consumption, energy production, and energy-related CO2 emissions. Berkeley Lab’s China Energy Group has published the China Energy Databook, a fully relational database of national and provincial energy balances, plus detailed sectoral energy end-use tables developed in Microsoft Access containing over 120,000 data points, since 1992. Berkeley Lab’s China Energy Group has also published an accompanying Key China Energy Statistics booklet with selected figures and tables from the Databook that summarizes key energy data.

Chapter One Details

Residential and commercial buildings have consumed roughly 20% of primary energy use for more than two decades, with building energy consumption nearly tripling since 2000. China has been rapidly building new urban residential and commercial buildings over the past two decades. Energy used to heat, cool, cook, and power appliances and equipment in residential and commercial buildings increased during this period due to China’s growing middle-class, improved standard of living, and rapid urbanization.

Energy use to transport China’s residents as well as raw materials (e.g. coal), manufactured products, and other goods has increased significantly, growing from consumption of 28.95 million tons of coal equivalent (Mtce) - a 5% share - in 1980 to 368.54 Mtce – a 9% share - in 2018, or 9.7% on an adjusted basis. China’s electric vehicle market began to grow in 2011, gained momentum in 2014, and was further boosted in 2015 with significant government financial support. The sales of new energy vehicles (NEVs), which includes battery electric vehicles, hybrid vehicles, fuel-cell electric vehicles, hydrogen vehicles, and other new energy vehicles grew 114% per year on average from 2011 to 2018 and now account for almost 6% of China’s passenger car market.

Energy is further used in China to manufacture vehicles and consumer products, along with construction materials that are used to build China’s buildings, roadways, bridges, and other infrastructure. While China exports manufactured products and consumer goods, the majority of these are consumed in China to support domestic demand. China’s industrial sector is not only the largest economic sector by far in terms of primary energy consumption but its share of total energy use has remained relatively constant, fluctuating between 67% and 73% since 1980 and settling at 70% from 2013 to 2018.

The energy required to meet these consumer demands is both produced domestically and imported. China is rich in domestic coal resources and coal is China’s dominant fuel source, not only for production of electricity but also as a source of energy for China’s vast industrial sector, which has been responsible for roughly 70% of China’s primary energy consumption for decades. But use of natural gas and oil is growing rapidly, especially in the buildings and transport sectors.

Overall, China’s energy structure is electrifying, growing from a share of 19% electricity in total final energy use in 2010 to 23% in 2017. The buildings sector is approaching 30% electrification – up from 25% in 2010 – followed by industry at nearly 25%, with transport at a mere 4% in 2017.  While still dominated by fossil fuels, recent growth in China’s electricity generation capacity has mostly been in solar, wind, hydro, and nuclear power - also to meet the growing demands of the industrial, buildings, and transport sectors. The share of non-fossil energy (renewable electricity plus nuclear) in total primary energy consumption has grown from 6.2% in 2000 to 12.3% in 2017, and it is reported to have reached 14.3% in 2018 (Liu, 2019).

These trends also mean that China is decarbonizing, with CO2 emissions per unit of energy consumption – which held steady at a rate of about 2.5 gCO2/gce from 1980 to 1995 and then fluctuated between 2.5 and 2.4 gCO2/gce until 2010 – recently declining at a relatively rapid rate to the current value of 2.19 gCO2/gce, the lowest it has been in China. China’s value is still high when compared to the global average (1.63 gCO2/gce), the U.S. (1.53 gCO2/gce), and Europe (1.37 gCO2/gce) (IEA, 2019c).
 

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Chapter 2 | China's Key Targets, Policies, and Programs

Chapter 2 presents the most recent information available on China’s Key Energy Targets, Policies, and Programs, covering China’s energy and energy-related emissions commitments in the 13th Five-Year Plan (2016-2020), the Nationally Determined Contributions to the Paris Agreement, and other documents as well as providing an update on 42 policies and programs currently in place in China focused on energy and related emissions. This chapter builds on the China Energy Group’s 30+ years of policy and program development, implementation, and analysis in China and is augmented by information provided through 18 interviews with research staff and policymakers in China.

Chapter Two Details

During China’s 13th FYP period (2016-2020), energy intensity and CO2 emission intensity reduction targets of 15% and 18%, respectively, were established for 2020 along with a goal of having approximately 15% of total primary energy from non-fossil sources. After the release of the 13th FYP, an energy development plan under the 13th FYP was announced (NDRC, 2016a). This plan established several key goals for 2020, including limiting China’s total energy consumption to under 5 billion tonnes of coal equivalent (Btce) and capping the total coal consumption within 4.1 Btce by 2020. The plan also calls for increasing the share of non-fossil energy consumption to 15% and above by 2020 while reducing the share of coal in total energy use to below 58%.

China appears to be on track to meet all of its key 13th FYP 2020 energy and CO2 emissions goals, except the services sector share of value added which was 52.2% in 2018, just slightly behind the value needed to keep on a steady pace to the goal of 56%.

China appears to be on track to meet all of its key 13th FYP 2020 energy and CO2 emissions goals, except the services sector share of value added which was 52.2% in 2018, just slightly behind the value needed to keep on a steady pace to the goal of 56%. Regarding installed capacity for renewable electricity sources, China installed 175 GW of solar by 2018, exceeding the 2020 goal of 110 GW. China is on track to meet or exceed the hydropower capacity goal (352 GW installed; 2020 goal of 380 GW), wind power capacity goal (184 GW installed; 2020 goal of 210 GW), and the nuclear power capacity goal (45 GW installed; 2020 goals of 58 GW). 

In April 2017, China released the Energy Supply and Consumption Revolution Strategy (2016-2030) that reiterates a number of its 2020 national energy goals and also sets additional goals for 2030 (NDRC and NEA, 2016). The new 2030 goals are to cap China’s absolute primary energy consumption at or below 6,000 Mtce, increase the share of non-fossil energy in total primary energy to 20%, increase the share of natural gas in total primary energy consumption to 15%, and strive to have 50% of total power generation from non-fossil sources.

China’s specific Paris Agreement commitments, as conveyed through its Nationally Determined Contributions (NDCs), include peaking CO2 emissions around 2030 and making best efforts to peak early as well as increasing the share of non-fossil fuels in primary energy consumption to around 20% by 2030. 

In September 2016, China ratified the Paris Agreement which commits participating parties to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels” (UN, 2018a). China’s specific Paris Agreement commitments, as conveyed through its Nationally Determined Contributions (NDCs), include peaking CO2 emissions around 2030 and making best efforts to peak early as well as increasing the share of non-fossil fuels in primary energy consumption to around 20% by 2030. 

China is steadily making progress on both the non-fossil share and CO2 emissions intensity goals. In 2018, the share of non-fossil fuels in primary energy consumption – using China’s power plant coal consumption conversion methodology – was 13.8%, which is on pace to reach the 2020 goal of 15%. China’s energy-related CO2 emissions per unit of GDP relative to 2005 have dropped an estimated 47% as of the end of 2018, which is on track to meet the goal of reducing CO2 emissions intensity by 60%-65% by 2030. 

As of the end of 2018, China’s energy-related CO2 emissions have continued to grow, predominately due to increased combustion of fossil fuels during the 2017 to 2018 period and are currently estimated to have just surpassed 10 GtCO2, a 4% increase over the 2015 value. This recent growth in energy-related CO2 emissions will need to peak and begin to decline in the next decade if China is going to realize a peak in CO2 emissions by 2030 or earlier.

To achieve its myriad domestic and international energy-related goals, China has established many policies and programs at the national, subnational, and sectoral levels. Some of these are relatively new while others are continuations of long-standing efforts. Some are just now in the pilot stage while others started as pilots and are now larger efforts.

A review of 42 selected policies and programs currently in place in China focused on energy and related emissions found that China relies on a wide variety of instruments to achieve its goals, including regulatory/administrative, economic, informational, voluntary, and motivational policies and programs.

More than half of the 42 reviewed policies are predominately regulatory/administrative in nature. These 24 mandatory policies are found in all sectors and have been generally successful, although some are struggling while others are just in the pilot phase. Examples of mandatory policies include the appliance energy efficiency standards and fuel economy standards for light- and heavy-duty vehicles. To complement these mandatory approaches, China also is using voluntary components in 15 policies to encourage participation in a more flexible manner. Examples of policies with voluntary components include the low carbon pilot cities and provinces and the Energy Efficiency Top-Runner program. Fifteen policies are either predominately economic or include economic components, such as subsidies, in support of the overall programmatic goal. Examples include the national emissions trading scheme, Made in China 2025, and subsidies for New Energy Vehicles. Other strategies are also deployed including informational (18) with the goal of influencing consumer choices and motivational (11) to encourage program participation.


 

Chapter 3 | China's Future Energy Outlook

Chapter 3 presents a Continuous Improvement Scenario of China’s Future Energy Outlook to 2050, modeling what China can achieve in terms of energy use and energy-related CO2 emissions with adoption of the maximum shares of commercially available, cost-effective energy efficiency and renewable energy supply by 2050. This scenario is built using the China Energy Group’s China 2050 Demand Resources Energy Analysis Model (DREAM) which was developed in collaboration with many international and Chinese researchers over the past 15 years.

Chapter Three Details

Looking forward to 2050, a Continuous Improvement Scenario of China’s future energy outlook is developed using a detailed bottom-up energy end-use model (China 2050 DREAM) and assuming China adopts the maximum shares of today’s commercially available, cost-effective energy efficiency and renewable energy supply by 2050. Under this scenario, China’s primary energy consumption peaks in 2029 at 5,400 Mtce and reaches a non-fossil share of 29% in primary energy by 2050 using the direct equivalent method for conversion.

By sector, primary energy use peaks by 2025 for industry, 2034 for buildings, and 2035 for transport. In the power sector, generation from renewables and other non-fossil fuels replace thermal generation when environmental merit dispatch is utilized, with non-fossil sources generating 89% of China’s electricity in 2050. With energy efficiency and fuel switching (especially electrification) in the energy end use sectors and decarbonization of the power system, China’s CO2 emissions peaks in 2025 at a level of 10,930 MtCO2 and declines to 5,010 MtCO2 by 2050. CO2 emissions from industry peak before 2019, around 2030 for buildings, and by 2035 for transport.

Chapter 3 Charts-Web_v1_Figure 3-7.jpg

Compared to similarly defined scenarios in the latest projections by 9 other international and China-based organizations, the 2050 Continuous Improvement Scenario has a notably different shape in primary energy use trend than other projections, with plateauing in the mid-2025s, peak in 2029, and significant declines thereafter. Only two other Chinese studies project a peak in primary energy use between 2025-2030, and none of the other similar scenarios show a marked decline in energy use prior to 2050. Given similar trends in the near-term, this divergence in trend is likely due to more aggressive efficiency and fuel switching assumptions and accounting of more saturation effects in the China Energy Outlook 2050 Continuous Improvement Scenario.

In terms of energy-related CO2 emissions, the Continuous Improvement Scenario finds a 2025 CO2 peak year consistent with projections by two other international and a Chinese organization, but at a higher peak level. Similar to projections by two Chinese organizations, the Continuous Improvement Scenario also finds rapid decline in CO2 emissions after 2030, but with a 2050 CO2 level that is lower than nearly all the other studies. The Continuous Improvement Scenario’s projected non-fossil shares of total power generation are very similar to two other international projections for 2025 and 2030, but 10 percentage points higher in 2040 and 2050 than other studies.

Overall, this report shows that following the 2015-2016 period when energy use and energy-related emissions were leveling off or slightly declining, China’s energy consumption and CO2 emissions are increasing again as demand grows to meet the needs of China’s urbanizing consumers. China has many policies and programs in place to address this growth that rely on all sorts of approaches from mandatory to voluntary and including economic instruments, informational campaigns, and motivational tactics. Considering the varying effectiveness of these policies and programs, a scenario of continuous improvement shows that indeed, Chinese energy use and CO2 emissions will continue to increase until 2029 and 2025, respectively.

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Suggested Citation: Zhou, N., Lu, H., Khanna, N., Liu, X., Fridley, D., Price, L., Shen, B., Feng, W., Lin, J., Szum, C., Ding, C., 2020. China Energy Outlook: Understanding China’s Energy and Emissions Trends. Berkeley, CA: Lawrence Berkeley National Laboratory.

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