significantly improved technical sophistication
and energy use for living and production. However, a few factors, including inadequate market
competition and pricing mechanisms, an outdated
energy legislation system and inefficient regulation, have all restricted the growth of China’s
energy industry. It is imperative that the Chinese
economy shifts from being resource/energy/
pollution-intensive to a healthier, innovationdriven mode of growth, and that it moves away
from quantity and speed to quality.
Transformation of the energy system, as an
instrumental part of the energy revolution, means
pursuing goals in five different areas: energy
availability guarantees, environmental pollution
controls, economic restructuring, price shock
absorption, and energy security.
First, energy system transformation can lead
to improved energy availability. Energy underpins the development and security of a nation.
Given an energy portfolio that features an
abundance of coal and very little oil and gas, as
well as insufficient use of nuclear, wind and solar
power, a more streamlined energy system is vital
to increase the use of new energy and provide
long-term energy supply stability in China.
Second, energy system transformation alleviates environmental pressure on the energy
industry. With energy consumption increasing,
pollutant emissions from China’s energy sector
are becoming a critical challenge. Especially in
recent years, climate change and the environmental impact of the energy sector have drawn
much attention. In China, extreme weather, such
as acid rain and haze, has become a major threat
to people’s health. Energy system transformation
will, therefore, improve efficiency in the sector
and promote clean and green initiatives, which
will reduce the resource and environmental
pressure on the sector.
Third, energy system transformation facilitates economic restructuring. China’s extensive
economic growth over the past three decades has
resulted in a rigid energy consumption structure
as well as waste and the inefficient use of energy
sources. Given this context, energy transformation provides an effective path to optimise the
economy: the efficient use of energy sources will
promote economic restructuring and ensure sustained efficient operation of the economy.
Fourth, energy system transformation can
alleviate the impact of energy prices on businesses and people. An efficient energy pricing
system accurately reflects the supply-demand
relationship and guides sensible production and
consumption and promotes the efficient use of
resources. If it is to succeed, energy system
transformation must take into account resource
scarcity, affordability, social fairness and
sustainability.
Fifth, energy system transformation helps
improve energy security. Against the backdrop of
an increasingly complex global political and
economic landscape, energy security is essential
for the smooth operation of the Chinese economy, as well as for the sustained progress of
Chinese society. Using market mechanisms,
energy system transformation leverages pricing
to balance energy supply and demand, ultimately
contributing to national energy security.
4.2 Status Quo and Major Conflicts
in China’s Energy System
Since opening up, China has implemented a series of transformative initiatives in energy development and exploitation, market access, pricing,
investment and financing, international trade, and
administration. The time when only government
invested in the energy sector has gradually
changed. The old system of planning and
administration, where demand was dependent on
availability, has also changed, to cover supply
and demand as well. There has been solid progress in transforming the energy pricing mechanism, and an energy market has taken initial
shape. A few energy sectors are no longer under
central control, and the institutional climate for
energy development has improved, which plays
an instrumental role in guaranteeing supplydemand balance and driving social and economic development. Specifically, reforms like
price control removal, administration-enterprise
unbundling and empowering enterprises to
become market participants have revitalised the
Special Report 4: China’s Energy System Revolution
447
and energy use for living and production. However, a few factors, including inadequate market
competition and pricing mechanisms, an outdated
energy legislation system and inefficient regulation, have all restricted the growth of China’s
energy industry. It is imperative that the Chinese
economy shifts from being resource/energy/
pollution-intensive to a healthier, innovationdriven mode of growth, and that it moves away
from quantity and speed to quality.
Transformation of the energy system, as an
instrumental part of the energy revolution, means
pursuing goals in five different areas: energy
availability guarantees, environmental pollution
controls, economic restructuring, price shock
absorption, and energy security.
First, energy system transformation can lead
to improved energy availability. Energy underpins the development and security of a nation.
Given an energy portfolio that features an
abundance of coal and very little oil and gas, as
well as insufficient use of nuclear, wind and solar
power, a more streamlined energy system is vital
to increase the use of new energy and provide
long-term energy supply stability in China.
Second, energy system transformation alleviates environmental pressure on the energy
industry. With energy consumption increasing,
pollutant emissions from China’s energy sector
are becoming a critical challenge. Especially in
recent years, climate change and the environmental impact of the energy sector have drawn
much attention. In China, extreme weather, such
as acid rain and haze, has become a major threat
to people’s health. Energy system transformation
will, therefore, improve efficiency in the sector
and promote clean and green initiatives, which
will reduce the resource and environmental
pressure on the sector.
Third, energy system transformation facilitates economic restructuring. China’s extensive
economic growth over the past three decades has
resulted in a rigid energy consumption structure
as well as waste and the inefficient use of energy
sources. Given this context, energy transformation provides an effective path to optimise the
economy: the efficient use of energy sources will
promote economic restructuring and ensure sustained efficient operation of the economy.
Fourth, energy system transformation can
alleviate the impact of energy prices on businesses and people. An efficient energy pricing
system accurately reflects the supply-demand
relationship and guides sensible production and
consumption and promotes the efficient use of
resources. If it is to succeed, energy system
transformation must take into account resource
scarcity, affordability, social fairness and
sustainability.
Fifth, energy system transformation helps
improve energy security. Against the backdrop of
an increasingly complex global political and
economic landscape, energy security is essential
for the smooth operation of the Chinese economy, as well as for the sustained progress of
Chinese society. Using market mechanisms,
energy system transformation leverages pricing
to balance energy supply and demand, ultimately
contributing to national energy security.
4.2 Status Quo and Major Conflicts
in China’s Energy System
Since opening up, China has implemented a series of transformative initiatives in energy development and exploitation, market access, pricing,
investment and financing, international trade, and
administration. The time when only government
invested in the energy sector has gradually
changed. The old system of planning and
administration, where demand was dependent on
availability, has also changed, to cover supply
and demand as well. There has been solid progress in transforming the energy pricing mechanism, and an energy market has taken initial
shape. A few energy sectors are no longer under
central control, and the institutional climate for
energy development has improved, which plays
an instrumental role in guaranteeing supplydemand balance and driving social and economic development. Specifically, reforms like
price control removal, administration-enterprise
unbundling and empowering enterprises to
become market participants have revitalised the
Special Report 4: China’s Energy System Revolution
447