Energy in China: Understanding Past Trends and Future Directions

China's growing influence on world energy and global environmental issues make it an important country for study. The purpose of this paper is to identify and measure the relative importance of factors driving China's past energy trends and to explore the implications of factors that are likely to drive China's energy future. China's rank as the second largest consumer of energy and the largest producer and consumer of coal in the world has been the result of the government's past promotion of heavy industry and the country's abundance of coal resources. China's transition to a market economy — which has spurred large efficiency improvements and a shift away from heavy manufacturing sectors to service-oriented and consumer products sectors — has resulted in a dramatic fall in the country's energy intensity over time; however, rapid economic growth as a result of these reforms has led to higher energy use, swamping these energy efficiency gains. China's energy intensity is likely to continue to fall and a shift from coal to other fuels (e.g., oil) is expected with the continued growth of the consumer products, transportation, and service sectors. However, China will continue to be a dominant energy consumer with coal as its primary source. This has serious implications for a number of environmental issues, including climate change, which will require China's involvement to address.