China's energy economy: A survey of the literature

Abstract

This paper reviews literature on China's energy economics, focusing especially on: i) the relationship between energy consumption and economic growth, ii) China's changing energy intensity, iii) energy demand and energy -capital and -labor substitution, iv) the emergence of energy markets in China, vi) and policy reforms in the energy industry. After reviewing the literature, the study presents the main findings and suggests some topics for further study. Raw coal production accounts for most of China's primary energy supply and electricity production is mainly generated from coal. This raises considerable environmental issues. One of the features of China's energy consumption is its overwhelming share of raw coal in aggregate energy consumption. During the past three decades, China's share of raw coal consumption remained steady at 70% of aggregate primary energy consumption (Table 1, column 1). By 2006 this had risen to approximately 77% (column 2). Raw coal is the most important source of electricity where in the last three decades over 80% of electricity consumed was generated from burning raw coal (column 3). Electricity from hydro, nuclear and wind accounted for only 8%.Following three decades of rapid economic growth and rising demand for energy products, Chinese residents are now becoming more environmentally aware.Consequently, policy makers have begun to acknowledge the need for cleaner sources of energy, such as natural gas and hydro. Continued movements in this direction will see the share of coal in total energy consumption decline further, with the share of oil, gas, and hydro increasing rapidly. This will push China to import more oil with significant effects on global energy markets (Crompton and Wu, 2005).However, raw coal remains the most important energy source in China. Therefore, China may face more severe challenges in dealing with future environmental issues than 6 most rapidly developing countries. Given the size of the economy and its current growth rates and its special features of energy economy, any changes in industrial structure, energy price deregulation, technological progress and improvements in energy efficiency in China will produce a significant effect on the global energy market. Therefore, China's energy economy does matter nationally and globally. China's energy economics is still in its infancyCompared with its global importance, China's energy economy is less developed and less fully understood in an international sense. Despite some areas having been extensively investigated for example, the relationship between energy consumption and economic growth, and changes in energy intensity, many other important issues, including energy price convergence; energy demand; energy-other factor substitution, and energy economic studies at the disaggregate level, have not been extensively studied or, in some cases, considered at all. in an ad hoc and partial, non integrated, way. The need for a survey of China's energy sectorGiven the importance and rapid pace of economic gr...

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