Energy Subsidies in China

Common problems often require common solutions and the need for a dialogue. This is true in the case of China and India when it comes to tackling air pollution and switching to clean energy. Poor air quality has become a major political concern in both countries.

This report seeks to assess the cost to the Chinese government, in terms of subsidies, of operating and investing in coal-fired electricity generators, the predominant source of electricity in China.

Over the last 10 years, China has seen an unprecedented deployment of wind power, with capacity growing from 1.26 gigawatts (GW) in 2005 to 91.4 GW at the end of 2013. This report takes a closer look at the drivers behind the impressive wind power development in China in order to understand the complex connection between the policy goals, policy measures and development impact. In particular, it considers two related issues that have been encountered—curtailment of generation and delays in connection of projects—and how these are being addressed. The report aims to identify the lessons to be learned to inform future policy measures in China and elsewhere.

This report offers a summary of several countries’ experiences implementing energy policy shifts in an area of particular interest to China: the transition away from coal to cleaner fuels and a low-carbon economy. Using IISD’s “window of opportunity” framework, these case studies are analyzed in terms of the four critical elements of success: context, champions, concerns and complementary policies. In the second part of the briefing note, we apply the same framework to China’s own experiences in phasing out coal around Beijing. The briefing note aims to assist policy-makers, the expert community, media and all others interested in the lessons learned that countries can exchange and benefit from international experience, including within the G20 and UNFCCC processes.

China and India, the world’s most populous countries, also match each other on the scale and severity of urban air pollution.

In 2015 electricity demand rose by just 0.5 percent over 2014 levels, while coal consumption dropped by 5 percent. The slowdown in coal-use together with a continuing rise in generation from renewable sources plunged the domestic coal production industry into a crisis and led to a dramatic fall in coal imports.

This study examines the role that policy crediting might play in increasing the mitigation impact of energy pricing reform and carbon pricing policies (pricing reform).

20-21 April—Beijing—Coal remains central to the energy sector in China despite the impact on air pollution and greenhouse gas emissions. Recognizing the problems associated with coal use, China has embarked on a programme to gradually reduce the role of coal and develop cleaner forms of energy.  A key first step to breaking the hold of coal on the energy sector is to stop providing subsidies to the industry.