Energy Security in China’s 13th Five Years Plan: What to expect from there?

Energy security, usually defined as the availability, reliability and affordability of the energy resources, has become a primary concern for the survival and well-being of both developed and developing nations. 

From the mid-1960s until 1993, China was energy self-sufficient. Since 2011, China has become the largest global energy consumer, the world's second-largest oil consumer behind the United States, the world's top coal producer, consumer, and importer, the third largest natural gas producer, and the world's largest power generator. (U.S. EIA, 2015: 1)

The International Energy Agency estimated that from 2010 to 2035, global energy demand may increase by 30%, in which China and India will contribute to 50% of the growth (IEA, 2011). What happens in China’s energy sector and China’s energy security strategy has a major impact on the world’s sustainable development. Presently, China tries to harmonize its energy need with the environment sustainability. So, what are the energy targets of China’s 13^th Five-Year Plan and what to expect from there?

Figure 1: Global energy demand 2010-2035

China’s Energy Security Policy

Energy has long been considered by the Chinese government an important national strategic issue. Since the late 1990s, several law and regulations have been issued targeting on the energy industry and environmental protection. 

For example, in March 2003, the Chinese government created the National Energy Bureau (NEB) under the National Development and Reform Commission (NDRC). In June 2005, President Wen Jiabao created the National Energy Leading Group (NELG), and, in 2010, the Chinese government created the National Energy Commission (NEC). 

All these structures had their contribution for China’s energy security policy. In 2004, the Development Research Centre of the State Council and the NDRC Energy Research Institute issued the China National Energy Strategy and Policy 2020 report. The report outlined the main priorities for China’s energy policy, such as energy efficiency and better control of domestic demand, nevertheless, it also pointed out a number of institutional weaknesses within China’s energy sector. (Christoffersen, 2010: 848).

In December 2007, China released its first White Paper on energy - China’s Energy Conditions and Policies – in which it expressed the need to reform the energy sector by centralizing control and improving coordination between government agencies and local governments. (Christoffersen, 2010: 883).  In April 2010, President Wen Jiabao laid out the guidelines for the “energy strategy of the new era”, which sets priority to energy conservation and domestic energy exploration.

As a result of these developments, Chinese policy makers have adopted a “state-centred” approach to energy security, including revised targets of energy efficiency in the 11^th, 12^th, and the 13^th Five-Year Plans. (Yao & Luo, 2012: 3)

China’s 12th Five-Year Plan

China’s 12^th Five-Year Plan (12^th FYP), adopted by the Chinese government in March 2011, gave considerable attention to energy and climate change, with the aim of gradually establishing a carbon trade market. Key targets set by the 12^th FYP included:

• 16% reduction in energy intensity (energy consumption per unit of GDP)
• 17 % reduction in carbon intensity (carbon emissions per unit of GDP)
• 11.4% increase of non-fossil energy within the total energy use.
• Another notable announcement, although not formally enshrined, was a cap on total energy consumption of 4 billion tons of coal equivalent (TCE) in 2015.

To achieve this goal, annual energy growth needed to slow as well as the GDP growth rates. 

 “Natural gas is seen as a pretty clean energy in China. Future natural gas demand, according to China National Petroleum Corporation, will “grow by about 8 percent annually accounting for 10-12 percent of China's primary energy consumption” 

In August 2009, the Chinese Academy of Sciences (CAS) released the Chinese Energy Development Plan, which elaborates various options for the development of the energy sector in China until 2050. In that context, a new long-term scenario assumes that the economy’s energy intensity would reach (down) to the world average by 2020 and converge with that of Japan by 2050. 

Table 1: Key Energy Targets and Outcomes

China’s 12^th Five-Year Plan for Energy Industry Development, published in early 2013, called for the capping of China’s oil import dependency rate at 61% by 2015. But in 2013, China’s foreign oil dependency had already reached 59%. (IEA, 2014) Regarding China’s natural gas demand, the 12^th FYP called for gas to comprise 7.5% of China’s primary energy mix by 2015.

In addition, according to China’s Energy Policy 2012:

“The Chinese government has to maintain long-term, stable and sustainable use of energy resources. So, China's energy development must follow a path featuring high-tech content, low consumption of resources, less environmental pollution, satisfactory economic returns, as well as security.” (The Information Office of the State Council, 2012: 7)

China’s 13^th Five Year Plan

China’s National People’s Congress approved, on March 16^th, 2016 in Beijing, a new national development strategy for the next five years (2016 to 2020). The 13^th Five-Year Plan is considered to be strategically important: firstly, it is the first five-year plan under President Xi Jinping’s leadership, reflecting his development strategy and governance philosophy; secondly, it targets to build a “moderately prosperous society” by 2020.

“The energy targets in China’s 13^th Five Year Plan are ambitious, but also linked to domestic and foreign factors”

The 13^th Five-Year Plan contains a set of climate and energy related targets. Of the 33 major targets listed in the document, 16 of them concern the environment and resource use. The energy consumption cap was included in 13^th FYP for the first time, being set at 5 billion tons coal equivalent (or TCE) in 2020. Other climate and energy targets are:

• 15% reduction of energy intensity, compared with 2015 levels
• 18% reduction of carbon intensity, compared with 2015 levels
• 15% share of non-fossil energy in primary energy consumption.

(Seligsohn, 2016: 1).

Presently, China’s 13^th Five-Year Plan for Energy (Energy 13^th FYP) might be one of the most anticipated official documents in the world and white most of its targets will not be entirely “new”, the Chinese government is determined to reduce coal’s share in the country’s energy mix, to increase offshore oil and gas exploration, and to further develop its renewable energy sector, especially wind and solar power. (Ma, 2016).

Natural gas is seen as a pretty clean energy in China. Future natural gas demand, according to China National Petroleum Corporation (CNPC), will “grow by about 8 percent annually” and consumption will increase to “350 bcm/y and 550 bcm/y in 2020 and 2030 respectively, accounting for 10-12 percent of China's primary energy consumption.” (Shi andYang, 2015).

We can expect that China will increase offshore oil and gas exploration in the Bohai Sea, the East China Sea, and the northern part of the South China Sea, which was newly added to the plan. On the other hand, China will try to secure its imports and to integrate the Asian region, becoming an East-West energy hub. (Stegen, 2015).

Conclusion

China’s 13^th Five Year Plan will have a deep impact on economic growth and energy demand patterns. China’s economic growth is slowing, and the economy is now clearly shifting from an export oriented growth path to a more consumer-driven development model. (Meidan, 2016”: 16) 

The energy targets in China’s 13^th Five Year Plan are ambitious, but also linked to domestic and foreign factors. At national level, there are some problems regarding the industrial overcapacity or the closeness of the national oil companies (NOCs). Also, efforts will be needed to harmonize various policies, such as China’s 13^th Five-Year Plan for Energy with China’s “One Belt One Road” Initiative. But Beijing’s decisions about energy have profound global energy security implications, inclusively for oil market and other institutional arrangements of the world energy system.

At regional and international level, there still remain various challenges for China’s energy supply, in the Middle East, Africa and Southeast Asia. However, China seems determined to protect even more its energy interests in these regions. With the rapidly expanding investments of its national oil companies, long-term oil and liquefied natural gas (LNG) supply deals, and active energy and pipeline diplomacy, China will inevitably become a key player in virtually every major oil and gas exporting region of the world. (Herberg, 2010).

Irina Ionela Pop is a Junior fellow at the CGSRS | Centre for Geopolitics & Security in Realism Studies. He may be contacted at irina.ionela.pop@cgsrs.org.

Follow The CGSRS | Centre for Geopolitics & Security in Realism Studies on Facebook and Twitter (@CGSRS_UK)