Energy and Resources in China’s 14th Five-Year Plan

A few weeks ago, Beijing hosted the quinquennial  ‘Two Sessions’ (两会), which lasted a total of ten days. During this political congress of two weeks, the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) meet to assess Chinese policies of the past years, and to determine the policies of the coming year. In addition, the next Five-year plan is ratified. There were a couple of high-priority themes that were discussed during this years’ Two Sessions, including digital currency and economic reform, but also energy and natural resources. These last two issues are particularly interesting to look at, especially in the context of the race against climate change, and increasingly intense competition over the planet’s natural resources.

China’s Energy Transition

The People’s Republic of China, with its 1.4 billion-strong population and one of the fastest growing economies over the course of the last two decades, has become both the largest producer and the largest consumer of energy on the planet. Simultaneously, as the Chinese economy kept growing, this created a situation known as the ‘China Paradox’, where China simultaneously is the world’s largest user of coal (it has had a higher coal consumption than the rest of the world combined since 2011), as well as the world’s largest investor in sustainable energy sources. With Chinese investments into renewable energy being equal to 23% of global renewable energy investment. In addition, the transition is significantly easier now than it was 10 years ago, as the price of producing one kwh of solar energy has dropped by 89%, and the price of wind energy has dropped by 70%, according to Our World in Data.

In the 14th Five-Year Plan, the Chinese government aims at continuing the transition by “cutting energy intensity by 13.5% and emissions intensity by 18% before 2025”. Energy intensity here means the amount of energy needed or CO2 emitted for one unit of GDP. In other words, in order to reach this goal, China will need to make sure that its GDP grows faster than their carbon emissions or energy consumption. Some have applauded China’s continued commitment to combat climate change, but others have argued that these stipulations are too vague to make any proper difference, according to DW.

China’s Resource Dependency

China’s drive for transitioning to more sustainable energy sources is not only due to environmental concerns, but also stems from a desire to make national energy production less dependent on imports from abroad. In 2019, China still relied on coal for 55,7% of their energy production, with 73% percent of that coal being imported from abroad. This ambition for self-reliance seems to be a recurring theme in the 14th Five Year Plan: China seeks to boost domestic consumption, in order to reduce China’s reliance on exports and foreign product demands. In addition, China wants to achieve “self-reliance in advanced technologies”, which it aims to achieve by boosting domestic production of semiconductors and computer chips.

China in the Arctic

Of course, the Five-Year Plan did not only contain plans for energy transition and moving away from fossil fuels. It also mentioned the expansion of the so-called Polar Silk Road. This (for now) is a hypothetical shipping route that China seeks to add to its already extensive Belt and Road Initiative. It is expected that this Northern Sea Route, due to climate change, will be completely ice-free in the summer months. Another reason China is interested in the North Pole is the great untapped potential of natural resources.

Chinese interest in the Artic region, however, is not new. Already in early 2018 did China brand itself as a ‘near-Artic Nation’, and the Chinese government expressed their plans of setting up a ‘Polar Silk Road’, integrating a northern shipping route into their Belt and Road Initiative. This is one aspect of China’s presence in the Artic. According to the Clingendael Institute, China is also eager to help develop the Russian Arctic, as it would benefit the Chinese economy by producing equipment, and by providing China better access to natural gas and oil from Russia.

The Artic is a region with enormous estimated quantities of natural resources, such as oil and gas. As climate change is slowly melting the ice sheets, more and more countries are eyeing these regions for potential economic development. Other countries, such as Sweden, have protested against extensive economic development of the Arctic, and instead wants to make preservation of the Arctic a priority.

The Future of Climate and Energy

Being a giant player on the world energy market, China’s actions will have a significant impact on the world energy market for the next decade. Especially in the combat against climate change, and the economic development of the Arctic Region, China is a country that we will keep a close eye on. As the world economy has yet to recover from the Covid-19 pandemic, it seems plausible that many countries will prioritise spending their budgets on economic recovery, rather than energy transition and sustainability. Whatever happens, we will keep you updated. See you next time!