1. Fighting the Climate Change Challenges Facing China and WB Support Junhui Wu Sector Manager Energy and Mining Sector Unit East Asian and Pacific Region

2. Outlines 1. Energy Consumption and Projections 2. Challenges Facing China 3. China’s Response – 11th Five-year Plan 4. China’s Response – Medium & Long-term Energy Conservation Plan 5. China’s Response – Promotion of Renewable Energy 6. WB Contributions and Support

3. Energy Consumption and Projections EAP region/China in 2002 - 2010 Energy demand to grow the fastest among all regions in the world Coal to account for nearly half of primary energy  environmental impacts Oil imports to rise  security concerns Gas still low, renewables very low  aggressive promotion needed Power generation to remain dominated by coal (~75%), with oil (~10%), gas (~10%), and renewables + nuclear (~5%) Biomass to be significant China 2002 EAP 2010 (BAU) EAP 2002

4. Energy Consumption and Projections High fossil fuel consumption is leading to increased Greenhouse Gas emissions CO 2 emission from fossil fuel consumption (Billion tons)

5.  Coal will dominate (>50% of primary energy till 2020). Coal consumption will 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 will increase from 4.6 million barrels per day in 2000 to between 9 and 12.2 million barrels per day in 2020. Energy Consumption and Projections  Gas will increase from 26 bcm in 2000 to around 159 bcm in 2020, expanding to 7%-9% of primary energy.  Other sources (nuclear, hydro, other renewables) will account for less than 5% of primary energy in 2020. CHINA

6. Energy Consumption and Projections GoC’s long-term goal: to quadruple real GDP from $1,081 billion in 2000 to $4,132 billion in 2020 (2000$) - more pessimistic projections see the quadrupling in between 2024 and 2028. Energy consumption will rise from 1,300 Mtce in 2000 to between 2,290 and 3,280 Mtce in 2020 Per capita energy consumption will be low in 2020 – with plenty of room for growth

7. Energy Intensity China has made great progress in reducing waste, however, further reductions will not be easy to realize. Energy intensity of China’s industries is still high. Energy Consumption and Projections Energy intensity of China’s industries Gap between energy consumption/unit output in China and international best practice China: Energy intensity tons of oil equivalent /1,000 dollars of GDP (1995$)

8. Challenges Facing China 1. Long-term Energy Security Providing affordable and reliable energy supply 2. Local Environmental Impacts acid rains impact on agriculture and food security -SO 2 emissions will double and NO x emission will triple from 2000 to 2020 particulates impact on population health -cost of exposure to particulates for urban residents expected to rise from $32 billion in 1995 to $98 billion in 2020 (WB: China 2020) 3. Global Environment Impacts – Climate Change China’s CO 2 emissions are expected to increase from 3.3 billion tons in 2000 to 5.7 billion tons in 2020 (IEA 2004)

9. China’s Response – 11 th Five-year Plan One theme: establishing a harmonious, resource-saving and environmental-friendly society -through harmonization of economic development and social development; -through harmonization of economic development and efficient resources utilization & environment preservation. Two Targets: doubling the GDP (2000 – 2010) reducing energy consumption per unit GDP by 20% from 2005 to 2010 -through economic structure adjustment – less energy intensive development path; -through more efficient resource utilization.

10. For the energy industry specific, the 11 th Five-year Plan calls for Policy guidelines: give priority to energy efficiency Principle: diversify energy sources, with coal as the major source of supply Coal: -construct large-scale coalmines, upgrade small- and medium-scale ones -make use of coal-bed methane -encourage co-generation operation Petroleum and Gas: -strengthen exploitation of petroleum and natural gas -increase strategic oil reserve -develop gradually alternative forms of energy to petroleum Power: -install large-size, high-efficiency thermal generators -encourage hydropower development harmonized with better protection of natural and ecological environment -further develop nuclear power generation Renewable Energy: -accelerate research and scale up utilization of wind, solar, and biomass energy and other renewable energy Energy in Rural Development: to encourage use of methane gas and other clean energy in rural areas China’s Response – 11 th Five-year Plan

11. Objectives Achieving annual reduction of energy consumption per unit GDP by 2.2%. Measures: Enhancing Regulations: formulate and implement harmonized energy & environment policies -facilitate industrial structure adjustment -provide incentives to energy efficiency improvement -set up energy efficiency standards -control strictly addition of new stocks from energy efficiency perspective -reinforce regulation on energy efficiency in major sectors: key industries (power, petroleum, steel, coal …), transportation, building, household electric appliances, etc. -strengthen monitoring of energy efficiency Promoting market-based mechanism for energy efficiency improvement -accelerate development, demonstration and promotion of energy efficiency technologies and services -create enabling environment to facilitate financing investments in energy efficiency improvement Implementing major energy efficiency projects -explore energy efficiency potentials in existing stocks -apply new energy efficiency technologies/practices in new stocks Creating energy efficiency awareness and knowledge dissemination China’s Response – Medium & long-term energy Conservation Plan

12. Renewable Energy Objectives by 2020 announced by GoC at the International Conference on Sustainable Development of Renewable Energy, Beijing, 2005 -Wind power capacity: 30 GW -Solar PV capacity: 2 GW -Biomass generation capacity: 20 GW Renewable Energy Law has been made effective since January 2006 Implementing regulations -feed-in tariff – biomass -Market Mandatory Share (MMS) of renewable energy – in consideration China’s Response – Promotion of Renewable Energy

13. WB supports contributed to sustainability of energy development in China through lending and TA  Introduced advanced technologies - greatly improved efficiency in power generation  300, 600 and 1,000 MW thermal power units  300, 550 MW hydro units; 300 MW pumped storage units  Assisted in capacity building  Energy master planning, resource use planning  Social and environment impact assessment and management  project processing – selection and processing criteria, procedures and methodologies  Advanced project management concepts and practices  Supported energy sector reform and sustainable development  development strategies and planning  policy dialogues and sector regulation  Formulation of 《 China Renewable Energy Law 》 WB Contributions and Support - Past

14. WB Contributions and Support - Current Policy and Regulation China Energy 2020 (long-term planning) Implementation of Renewable Energy Law Municipal heat industry regulation and EE pre-invest Coal sector restructuring and development strategy China CDM strategy Coal-bed Methane Strategy DSM knowledge & policy Energy Efficiency Market-mechanism - ESCOs, intermediaries for financing Heat reform & Building EE (China Energy Conservation, Liaoning City Infrastructure) Thermal Power Efficiency AAA on Cleaner & more efficient coal-fired generation Challenges Energy Security Local Env Impacts Climate Change Renewable Energy CRESP – wind (200 MW), biomass (25 MW) & hydro rehab. Lending to new hydro (269 MW) CF to new hydro (130 MW) Clean Coal Technology Development - support/recomm. New park – leapfrogging to newest technologies & most stringent energy standard Existing park – intensify efficiency improvement TT & increased invest. in R&D Environment Set-up of SDF (TA, HFC-23) Conversion of coal-fired to gas boilers (Beijing Env. Project) Integrated forestry management (Guangxi) Waste mgmt. (Shandong, Shanghai, Tianjing) Coal-bed methane recovery (Jingcheng, Qingshui)