Growing Chinese Energy Demand
October 19, 2007
Only a few years ago Chinese government leaders were optimistic that their country could quadruple its GDP between 2000 and 2020 while only doubling energy consumption. For any other developing country this would be considered an unrealistic goal, as energy consumption during development tends to grow as fast as or even faster than GDP. Yet, China had quadrupled GDP while only doubling energy use from 1980 through 2000, so government officials reasoned they could do it again.
However, China is already off track in meeting its 2000-2020 energy consumption goals, and the country is now at a point where it will be nearly impossible to prevent energy consumption from more than doubling. Energy use, instead of growing half as fast as GDP, has grown notably faster than GDP on average since 2000. Notwithstanding, China's government, as well as major energy statistics agencies including the International Energy Agency (IEA) and U.S. Department of Energy (DOE), have been so captivated by the original, optimistic story line that their forecasts have not caught up to the reality of what is happening in China.
In this report, the authors examine the period from 1980 through 2000 and explain why it was unusual for the Chinese energy industry. Then, they look at the changes in China since 2000, including in the critical electric power generating sector. Using a simple thought experiment, they illustrate that even with very conservative assumptions about Chinese GDP growth and income elasticity of electricity demand out to 2025, the country will experience much higher coal demand and emit much greater volumes of carbon emissions than forecast by IEA and DOE. This leads to some final thoughts on the implications of future Chinese energy demand on global energy markets.