THE PAST TWO YEARS have been a sharp reminder to China of the risks of fossil fuel dependence. While fossil fuels have powered its rapidly growing economy, the country has been left vulnerable to the volatility of oil, gas, and coal markets. In September 2021, most of China’s provinces experienced major blackouts, catalyzed in part by disruptions in coal markets. The Chinese government blamed greedy speculators for high coal prices and the subsequent power shortages, but the problem had more to do with an inefficient grid and the disconnect between deregulated coal and regulated power tariffs. In February, Russia’s invasion of Ukraine sent oil and liquified natural gas prices skyrocketing to $100 per barrel and $40 per Mcf (1,000 cubic feet) respectively. As the world’s largest importer of oil and a major importer of gas, the economic disruptions that resulted reinforced China’s concerns about energy security—concerns that will continue to influence its energy policies over the remainder of this decade.
Does this mean that China will slow its decarbonization efforts? If you look at recent pronouncements from Beijing, one might say yes. In March, the National Development and Reform Commission, China’s central planning agency, cautioned provincial officials against the “overly simplistic and mechanical” implementation of climate policies. However, on examination, the policies China is pursuing to wean itself off reliance on fossil fuels may also benefit its quest for greater energy security.
“The more China can couple its climate initiatives with its security initiatives, the faster it can reap the environmental and economic benefits of a cleaner and more sustainable country.”
China leads the world in the deployment of wind and solar generation. As its renewable energy investments expand over the next 20 years, China will have greater flexibility to accelerate its transition away from dependence on coal. In the transportation sector, it has surpassed the rest of the world in electric vehicle sales, which will increase as automobile manufacturers face new regulatory requirements to sell ever greater percentages of electric vehicles. Electrifying industrial processes and the heating of buildings is gaining increased attention at both the national and provincial levels. All of these actions will reduce fossil fuel use—particularly the imports of oil and natural gas. A greener China will be a more energy-secure China.
In Foundations for a Low-Carbon Energy System in China, a recent book I edited with Harvard Professor Daniel Schrag, with chapters written by a talented group of young scholars, we pointed out that China’s ability to meet its climate targets—and by extension its energy security targets—depended on reforming its electricity sector. Specifically, China will need to address the structural rigidities that currently hamper its electricity system. These include outdated governance structures; an inefficient dispatch protocol that leads to overreliance on the least efficient generating facilities; and pricing policies that disincentivize investments in renewables. In addition, greater investments in demand management, ancillary services, and storage will be essential so that the grid can continue to operate when renewable generators are not available. China will also need to actively develop the capacity to capture and sequester carbon emissions from the coal facilities that are not retired. Finally, China will have to manage the human dislocations that occur as fossil fuel industry jobs disappear. Disproportionately large shares of these jobs are in a few provinces that do not have the fiscal bandwidth to provide a safety net for these workers. Cooperative efforts between Beijing and fossil-fuel-intensive provinces, such as Shanxi and Inner Mongolia, to retrain and relocate dislocated workers will be required, as will new investments to innovate and deploy new clean technologies.
These reforms will not only put China on the road to meet its climate goals but will also reduce its dependence on imported fossil fuels, making China more energy secure. The more China can couple its climate initiatives with its security initiatives, the faster it can reap the environmental and economic benefits of a cleaner and more sustainable country.
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Henry Lee, a senior lecturer in public policy, is the director of HKS’s Environmental and Natural Resources Program.
Photograph by Hong Xiaodong/VCG via Getty Images