Working out the Kinks: Understanding the Fall and Rise of Energy Use in China

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At 67%, the share of coal in China's primary energy consumption is at its lowest level since the founding of the People's Republic in 1949. In just four years, from 1996 to2000, reported output of coal fell by nearly 400 million metric tons [Mt] (from 1397Mt to 998 Mt), while consumption fell by over 200 Mt, (from 1447 Mt to 1245 Mt). During the same period, the economy reportedly expanded by 8% per year. In 2001, both production and consumption of coal rebounded and rose further through 2002.

This is a remarkable change of fortune for a sector that has traditionally been the backbone of China's energy economy. Since coal dominates the energy structure, the sharp fall in coal use resulted in an overall decline in Chinese energy consumption as well as in CO2 emissions. The fall was so large it caused global CO2 emissions to shrink in both 1998 and 1999.

As most of the developed world implements the Kyoto Protocol to reduce CO2 emissions, China's experience in the late 1990s raises questions regarding policies, processes and programs to mitigate emissions, for both developed and developing countries. China is not bound by Kyoto targets, but as the largest developing country and the second largest energy consumer, China's emissions path has global implications.

The causes of China's energy decline have been difficult to analyze because of deficiencies in China's energy statistical system. Energy demand data lag by several years, and the outdated statistical system has difficulty characterizing the expanding non-state sector. Restructuring of the coal sector—discussed further below—also led to uncertainty in the accuracy of production and consumption data.

It is clear from energy statistics and surveys that the decline in energy consumption between 1996 and 2000 stemmed entirely from a precipitous decline in end-use of coal. Demand for other energy forms—petroleum, natural gas, hydroelectricity and nuclear power—all grew, in some cases rapidly. Indeed, even demand for coal for power generation and heat production, about 40% of total coal use, expanded during this period.

Households and industry accounted for nearly all the change in demand. By 2000, 400 million households consumed 66 Mt less coal than in 1996, having substituted it with cleaner, more efficient fuels such as LPG, town gas, natural gas, and electricity. Coal use fell even faster than consumption of biofuels, which most rural households use for part or all of their fuel needs. While sales of household appliances and consumer electronics continued to grow at a double-digit pace throughout the late 1990s, total household energy use was no higher in 2000 than in 1995. This phenomenon is rarely seen internationally today, and derives from China's high dependence on coal in the residential sector.

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