Why China Is Acting on Clean Energy

The Environmental and Energy Study Institute (EESI) and the ChinaFAQs Project of the World Resources Institute (WRI) held a briefing about the issues driving China’s renewable energy, energy efficiency, and climate policies. While China and the United States differ in important respects, they have some similar challenges and opportunities relating to energy. Both face economic, employment, energy security, and environmental challenges. The United States and China both cooperate and compete with each other on clean energy initiatives and technology.

Speakers discussed recent energy sector developments in China and bilateral relations, highlighting key factors driving China’s approach to clean energy and climate policy, and the resulting challenges and opportunities for U.S. efforts to develop clean energy and tackle climate change.

• China had the highest renewable energy investment in the world in the 2009-2011 period, investing $36.4 billion, $48.9 billion, and $52 billion respectively.
• China is the leading manufacturer of the following clean energy technologies: wind turbines, solar PV, solar hot water, and hydropower.
• Assistant Professor Joanna Lewis of Georgetown University's School of Foreign Service stated that China has the most companies in the global top ten for wind turbine manufacturing. The majority of Chinese turbines go to domestic use, not export, though this is changing.
• China has the largest installed wind capacity in the world with more than 62 gigawatts (GW) at the end of 2011.
• China has set aggressive goals for renewable energy production, specifically in solar and wind. China aims to increase installed wind capacity to 100 GW in 2015 and then double it to 200 GW by 2020. China also plans to increase solar capacity to 20 GW in 2015, and then more than double it to 50 GW by 2020.
• China’s 12th Five-Year Plan for development lists energy-saving and environmental protection technologies, new energy technologies (nuclear, solar, wind, and biomass), and clean energy vehicles as its top “pillar industries,” replacing coal, oil, and national defense.
• The 12th Five-Year Plan sets a goal of 11.4 percent of total energy use to be non-fossil fuel based by 2015. The Plan also targets an energy intensity reduction of 16 percent from 2010 levels by 2015, and a carbon intensity reduction of 17 percent from 2010 levels by 2015.
• China’s renewable energy law sets renewable energy targets, creates renewable power purchasing obligations for utilities, authorizes feed-in tariffs for wind and solar, and creates a mechanism for cost sharing by spreading the cost of incentives for renewables to both producers and consumers of electricity.
• Though China has steadily increased renewable electricity generation and has set aggressive targets for renewable energy, non-hydro renewables currently account for only 6.2 percent of installed electricity capacity.
• About 70 percent of China’s primary energy comes from coal. China is the largest global producer and consumer of coal, and since 2009 it has been a net importer.
• However, according to Senior Associate Ailun Yan of the World Resources Institute, many coal-fired plants are now losing money due to poor design, low efficiency, and the rising price of coal. One-third of new coal-fired plants that have been approved have not started construction due to economic viability issues. 2011 investment in coal-fired plants was less than half of what it was in 2008.
• Yang stated that another major trend affecting coal-fired electricity production is the increasing engagement of Chinese citizens, especially the young, on issues of public health and the environment. The growing role of social media and access to online information, such as the air quality reports tweeted by the U.S. Embassy in Beijing from its onsite monitoring station, have helped spur citizen action on such issues.
• According to Bloomberg New Energy Finance Analyst Stephen Munro, the rise in Chinese renewable manufacturing has raised trade issues: 1) The United States has set countervailing and anti-dumping duties on solar photovoltaic cells from China; 2) The United States has imposed preliminary countervailing and anti-dumping duties on wind towers from China; 3) China has opened an investigation into dumping of solar-grade polysilicon from the United States; 4) The United States, European Union, and Japan have asked the World Trade Organization to rule on Chinese restrictions of exports of rare earth minerals which are essential to renewable technologies such as wind turbines and batteries.
• Munro stated that the effect of the duties and continuing investigations into unfair trade practices will lead to: 1) Possible new Chinese duties on imports from the United States; 2) A slowdown in the rate of decrease of solar module prices in the U.S. market (down 29 percent over the past 12 months); and 3) The possibility of a greater and wider trade war leading to more barriers and tariffs in other markets not associated with renewables.
• Bob Simon, staff director of the Senate Committee on Energy and Natural Resources, stated that though the top-down, central economic planning model of China does produce results, it must contend with the country's “Wild West” style capitalism and with local authorities whose actions can lead to unintended consequences.
• A case-in-point: when China set forth its goal of increasing wind power production, 70 wind turbine companies, often sponsored by local authorities in search of prestige, rushed to market. The resulting collapse in prices lead to a volatile shake-out leaving only a few surviving companies.
• Simon also noted that China’s political model allows it to pioneer new things such as the ability to design cities from scratch, with energy efficiency and renewables an integral part of the planning process. These new cities provide a fertile test bed for new designs, inventions, and innovations.