1. THE WORLD BANK Coal and the Search for Energy Security: Challenges Facing China Junhui Wu Energy Sector Manager East Asia and Pacific Region

2. THE WORLD BANK Regional Context Fastest energy demand growth among all regions in the world Coal to account for nearly half of primary energy  environmental impacts Oil imports to rise  security concerns Gas low; renewables very low – aggressive promotion needed Power generation dominated by coal (~75%); oil (~10%); gas (~10%); rest renewables + nuclear

3. THE WORLD BANK Government’s goal is to quadruple real GDP from $1,081 billion in 2000 to $4,132 billion in 2020 (2000 dollars). China Context: What the projections say? Energy consumption in China expected to rise from 1,300 Mtce in 2000 to between 2,290 and 3,280 Mtce in 2020. China Primary Energy Forecasts 0 500 1,000 1,500 2,000 2,500 3,000 3,500 1980 19901992 19941996 1998 2000 2002 2004 2006 2008 20102012 2014 20162018 2020 Millions of Tons of Coal Equivalent ActualUS DOE High Growth US DOE Ref caseUS DOE Low Growth IEA 2002IEA 2004 DRC Bus As Usual (BAU)DRC Sustainability DRC Green Growth DRC BAU: In 2020, 2.5 times 2000 level IEA 2002: In 2020, 1.75 times 2000 level IEA 2004: In 2020, 2.43 times 2000 level

4. THE WORLD BANK This may only be the beginning Per capita energy consumption will still be low in 2020 – with plenty of room for growth

5. THE WORLD BANK Coal will dominate (>50% of primary energy till 2020). Coal consumption to increase from 1.3 billion tons in 2000 to between 2.1 and 2.9 billion tons in 2020. Oil will account for about 27% of total primary energy in 2020. Consumption increase from 4.6m barrels per day in 2000 to between 9 and 12.2m barrels per day in 2020. Other sources (nuclear, hydro, other renewables) will account for less than 5% of primary energy in 2020. Consensus: coal will remain dominant and oil imports will surge! Gas to expand to 7%-9% of primary energy by 2020 increasing from 26 bcm in 2000 to around 159 bcm in 2020.

6. THE WORLD BANK Energy Efficiency: Potential exist but more difficult to tap …further reductions in intensity will not be as easy to realize A More Energy-Efficient Growth Path for China? GDP/total energy use (PPP$/kg of oil eq) 2001 0 1 2 3 4 5 6 7 8 9 10 11 12 $-$5,000$10,000$15,000$20,000$25,000$30,000$35,000 GDP per capita (PPP$, 2001) Sources:The Economist World in Figures 2003, WDI 2003 Hong Kong China Thailand Japan South Korea

7. THE WORLD BANK Safeguarding the environment: Finding the common ground China’s focus is on local environmental damage:  acid rain as SO 2 emissions double and NOx emission triple between 2000 and 2020  impact on agriculture and food security  particulates  population health cost of exposure to particulates (for urban residents) expected to rise from $32 bn in 1995 to $98 bn in 2020 (WB: China 2020) International community’s focus is on global environment: China’s CO 2 emissions are expected to increase from 3.3 billion tons of carbon in 2000 to 5.7 billion tons in 2020 (IEA 2004).

8. THE WORLD BANK Gross Efficiency in Energy Production 198519901995 China USA India Japan Germany UK France China 1990200020022004 Installed Capacity in GW 138319357 441 of which Thermal 102238253 325 Gross Efficiency (gce/kWh) 392363357 352

9. THE WORLD BANK Decreasing efficiency in coal-fired generation ? Improvements in China’s gross efficiency in power generation is expected to halt or reverse due to rapid growth of smaller less efficient units

10. THE WORLD BANK  Pricing issue, lack of incentives  Emission standards: Less stringent to older power plants as well as new small plants (less than 100 MW)  Environment regulation enforcement issue  Planning issue during transition in sector restructuring  None availability of efficient clean coal technology and equipment domestically, especially for small and medium power plants  Acute power supply shortage (New capacity: rush for installation of small units to avoid approval process; Existing units, not practical for outages) Barriers to scale-up of deployment of clean coal technologies  New Park- leapfrogging to newest technologies and most stringent energy standards  Existing Park- intensify efficiency improvement  Technology transfer from international community and increased investment in China’s R&D. Recommendations:

11. THE WORLD BANK 1.Policy Dialogue and Technical Assistance 1.Assisted in developing long-term energy strategy – on-going study “China Energy 2020” 2.Contribution to formulation of 《 China Renewable Energy Law 》 3.Policy recommendations supporting the deployment of clean coal technologies 4.Assisted in setting up project processing criteria/procedures, with adequate focus on economic, social and environmental sustainability 5.Contribution to development of coal sector restructuring and development strategy – a study just started 2.Lending 1.Introduction of China’s first 300, 600 and 1000 MW coal fired units, greatly improved efficiency in generation 2.Diversified sources for generation: hydropower, gas, renewable energy 3.Energy Efficiency, building efficiency and heating 3. Carbon finance and GEF World Bank Involvement in the Energy Sector - Past and Future

12. THE WORLD BANK Thank you Junhui Wu Energy Sector Manager East Asia and Pacific Region Contact: jwu@worldbank.org