New and renewable energies were put onto China’s national agenda of technological upgrading in view of the vulnerabilities accompanying its economic success. Aside from the consideration of rich clean energy resources and huge market potential, new energy sectors ascended to a prominent position in the country’s long-term plan of industrialization due to the challenges stemmed from growing demand for energy, worsening environmental pollution, and opening to
4 There is no one agreed definition for “alternative energy”. This research uses this term interchangeably with “non-fossil energy”, “clean energy”, “green energy”, “new energy” or “new and renewable energy”. In China, the term generally refers to energy resources alternative to fossil fuels, including both renewables (such as solar, wind, hydroelectric, tidal waves and biofuels) and non-renewables (such as nuclear, geothermal, and hydrogen). Similarly in the China Energy Statistical Yearbook, the category of “non-fossil energy” encompasses nuclear energy in addition to the “renewable energies”, which means energies that come from naturally replenishable resources.
Chapter 3: Techno-nationalism in China’s new energy industries
the global economy. China entered the new century with two decades of rapid economic growth, which brought with it a huge cost in the form of environmental degradation. In addition, the growing appetite for energy to fuel its accelerating economic growth became a major concern looking to the future. Energy security was becoming increasingly a critical issue in China as its dependence on foreign oil increased over years after its oil self-sufficiency ended in 1993. In order to mitigate the problems related to energy supply and environmental protection, China joined many other countries in making the energy resources with little or zero emission a major component of its energy strategies. In doing so, the targeting of new energy sectors provided a new source of growth that might help buffer the negative impact of foreign competition on Chinese companies in traditional energy industries after WTO accession.
Among all the factors the concern over energy security was the major driving force for new energy development in China. Considering the oil crises in the twentieth century, the Chinese government regarded the possible interruption of sufficient supply of energy sources as one of the greatest challenge for the country to maintain sustainable economic growth in the new century. Along with the rapid economic growth was a surging demand for energy and other natural resources. Despite the improvement of energy efficiency, energy consumption in China increased annually by 15.3%, 16.1% and 10.6% in three consecutive years from 2003 to 2005, and the increase rate in 2003 surpassed that of GDP growth of 12.9% in the same year (NBSC 2014).5 In the year 2003, fossil fuels accounted for 93.5% of total energy consumption in China, of which roughly 70% came from coal, 21% from oil and 2.5% from natural gas (Figure 3-2).
Because of the heavy dependence on fossil fuels, China was vulnerable to the uncertainty of energy markets and political instability of energy producing countries (Andrews-Speed, Liao and Dannreuther 2002; Andrews-Speed, Liao and Dannreuther 2005; Downs 2000; Downs 2004;
Downs 2006; Harris and Naughten 2007; Lieberthal and Herberg 2006; Zha 2005a; Zha 2005b;
Zha 2006). Therefore, aside from the effort of securing traditional energy supply, the government made concrete steps to diversify the energy structure and buffer against fluctuations in global energy prices by promoting alternative sources of energy. In 2003, a decade after becoming a net importer of oil, China made a long-term strategic decision to reduce the dependence on energy import by developing alternative sources of energy, which are expected to become the mainstream power supply in China by 2050 (Sun 2009).
The pressing task of environment protection also pressed China to move toward a low-carbon economy fueled by clean energies. Apart from energy security, another concern related to the fossil-based energy structure was greenhouse gas emissions mainly from coal and oil. In China, the burning of coal contributed to around 85 percent of carbon dioxide (CO2) emissions,
5 Calculated based on Table 9-2: Total Consumption of Energy and Its Composition, and Table 3-1: Gross Domestic Product.
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74 percent of Sulphur dioxide (SO2), 60 percent of Nitrogen oxides (NOx) and 70 percent of soot in the air (Shi 2009). As coal consumption continued to grow, oil consumption also increased as a result of the rapid expansion of automobile production and sales since the 2000s, which made China the largest automobile market in the world. One direct result of the rising energy demand was deteriorating air quality that exceeded safe levels and put people at health risks. As shown in Figure 3-3, China’s CO2 emissions more than quadrupled from 2,473 million tons in 1990 to 10,281 million tons in 2013, and the share of global total CO2 emissions increased from 10.9 percent to 29.1 percent during the same period. Environmental problems became politically sensitive and incited growing mass protests, especially against the building of coal-fired power plants, chemical plants, oil refineries, and so on. The number of complaints to the environment authorities increased by 30 percent annually from 2002 to 2007 (Ma 2007),6 and pollution replaced land disputes as the main cause of social unrest in China since 2013 (Bloomberg News 2013). In order to “maintain stability”, the Chinese government had to decarbonize its energy consumption structure by encouraging the use of non-fossil fuels in power generation, residential heating, industrial production and transport.
Figure 3-2 Structure of China’s energy consumption, 1990-2013
Source: National Bureau of Statistics of China (NBSC), China Statistical Yearbook 2014, available at http://www.stats.gov.cn/tjsj/ndsj/2014/indexeh.htm, accessed on 25 May 25, 2015. See Table 9-2: Total Consumption of Energy and Its Composition.
6 Ma Jun is a Beijing-based environmentalist and founder of the Institute of Public and Environmental Affairs.
Chapter 3: Techno-nationalism in China’s new energy industries
Figure 3-3 CO2 emissions from fossil fuel use and cement production, 1970-2013
Source: Emission Database for Global Atmospheric Research, release version 4.2 (EDGARv4.2), European Commission, Joint Research Centre (JRC) and PBL Netherlands Environmental Assessment Agency, available at http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2013, accessed on 25 May 2015.
Aside from domestic environmental crisis, China has been under enormous external pressure to cut CO2 emissions because of the new agenda on global climate change. With a succession of double-digit growth rates since the 2000s, China overtook the United States to become the world’s biggest CO2 emitter in 2006 and the top energy consumer in 2009.7 While greenhouse gas emissions were believed to be responsible for global warming, China “has become the focus of scrutiny as climate change has become ever more important as a global issue” (Dai and Ren 2005: 6; Lewis 2008). As a result of the increased international attention, the Chinese government had to take on onerous targets of emission cuts through international negotiations surrounding the United Nations Framework Convention on Climate Change (UNFCCC). China has ratified the primary international treaties including the Kyoto Protocol in 1998 and the Copenhagen climate change conference in 2009. In particular, the country pledged in the Copenhagen summit to reduce its “carbon intensity” (carbon emission per unit of GDP) by 40-45 percent by the year 2020 based on the 2005 level (Eilperin 2009). In order to achieve the goals, the Chinese government adopted measures to enhance energy efficiency and green the energy structure through the use of clean energy.
7 According to the data from PBL Netherlands Environmental Assessment Agency and the International Energy Agency.
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Most importantly, clean energy was a new growth point to make up for, at least partially, the opportunity cost related to alleviating environmental damages. The greatest predicament of the Chinese state was seeking to implement the obligations and fulfil the commitments without sacrificing economic growth. A “growth-first” philosophy was at work here because “a major slowdown could incite social unrest, alienate business interests and threaten the party’s rule”
(Kahn and Yardley 2007). And the development of alternative energy resources was a potential way out. For Beijing, the commercialization of new energies was expected to help reduce the reliance on fossil fuels and rein in the damaging environmental effect, and more importantly, it had the potential to become a powerful new boost to industrial upgrading and economic growth.
At a time when industries were largely driven by inefficient energy consumption and low value-added production activities, emerging industries such as new energies could increase the chance of making breakthroughs in this sense, let alone the other effects such as job creation and revenue generation (Dai and Ren 2005: 7; Zhang 2011). In particular, these industries were expected to facilitate the “Western Development Program” because the western regions of China accounted for over 70 percent of the country’s renewable energy resources, and development of the industries would bring stimulus to the region’s economy (Zhou 2005).
Improving living standards through electrification was another consideration: renewable power generation would help make electricity available in remote areas where there was no access to electricity (Wang 2002).
Like other emerging industries, new energies were expected to provide a cushion to absorb the impact of WTO entry on traditional energy sectors. With opening to the outside world, barriers were gradually removed and domestic energy markets were exposed to the increasing pressures of competition from transnational oil corporations. Chinese production of coal, oil and natural gas was not competitive compared to other countries because of outdated technologies, low productivity and poor management (Zhang et al. 2002). While the loss of industrial competitiveness might be the cost, the commercialization of new energies could be a cure to the problems during the transitions. It might bring new job opportunities and close the gap with industrialized countries by diverting the focus of competition to something new (Li et al. 2004).
Admittedly, in a short period of time the country could not count on new energies as a panacea for all the tasks of climate change mitigation, energy mix optimization, and sustainable economic growth. However, these adverse circumstances were indeed the considerations that drove China onto the national development of new and renewable energy sectors: the Chinese government expected that these sectors would make significant contributions to the country by addressing the above-mentioned problems (NDRC 2007b; SETC 2001b).
Chapter 3: Techno-nationalism in China’s new energy industries