CHINA: ENERGY AND CARBON EMISSIONS OUTLOOK TO 2020

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0005304576
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 25
• Document Creation Date: June 23, 2015
• Document Release Date: September 10, 2009
• Case Number: F-2008-01057
• Publication Date: June 1, 1999

Chin
APPROVED FOR
RELEASE^DATE:
04-Sep-2009 .
 Million tons carbon
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
China's Carbon Emissions%
The 1997 a'nd, 1999 SWdie s-
1998 2000 2005 2010 2015
Energy Outlook 1999
Source: The Energy Information Administration Annual
(Slower economic growth, declining
coal consumption, and more rapid
development of gas and nuclear power
result in a drop in carbon emissions
from 1997.)
2020
US Emissions
(EIA 1999)
China Emissions
(May 1997 Study)
China Emissions
(1999 Study)
 NeW, Carbon, Emis4ion 'Proje e- tion
Growth Rate, s-,Key F66tor
? A new CIA study of China's energy outlook projects that carbon emissions
output-a major cause of greenhouse gases-will reach 1,390 million tons per
year by 2020. This is far lower than projected US output levels of 1,975 million
tons in 2020 as estimated by the Energy Information Administration (EIA).
Previous studies by CIA, DOE, and others had projected Chinese carbon
emission levels would match US levels around 2015, but this may not
occur until 2035, according to the new CIA study.
? The lower carbon emission projection derives from the new study's lower
economic growth assumptions-average annual rate of 5.5 versus 7.0 percent
in the earlier study. Chinese emission levels could reach US levels in 2020, if
GDP growth averaged 7.5 percent annually.
- Lower emissions also result from treating coal as a residual fuel to meet
primary energy demand rather than using official targets, which appear
high given declining production and consumption in the past few years
(Appendix A).
 Carbon Emissions in 2020
Aggressive
Substitution
Under Three,. J-Developm- e nt -,C I 'a's e- o s-
Million tons carbon
Official Plans
Underachiever
1,150 1,200 1,250 1,300 1,350 1,400 1,450
eunfidentl9i
_6
100160PPT
 - Official Plans case assumes a moderate rate of alternative fuel
development-in line with midrange targets by Chinese officials.
China's development of alternative fuels does not substantially alter
emissions projections and will be costly. The study considered three
development cases for gas, nuclear, hydropower, and renewables-bracketing
China's official targets for those fuels.
- Underachiever case assumes a slow rate of alternative fuels
development-often the low end of official Chinese targets.
- Aggressive Substitution case assumes China has reached its highest
targeted levels for alternative fuel development.a
a Where target levels for fuels have not been announced, CIA has extrapolated development levels.
Alternative Fu-'1 D-qvelopm'e nt
Less lrnpbtant
-Gamm+aeemail
100160PPT 1
 Million tons carbon
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1998 2000 2005
Source: EIA Annual Energy Outlook 1999
Under ThreetDev~lopi~er~t cases
US Emissions
(EIA 1999)
China Emissions
(May 1997 Study)
Underachiever
Official Plans
Aggressive
Substitution
2010 2015 2020
Confidential
- 10016QPPT '~' ~
China's Emissions
1999 cases:
 Cumulative Energy Infrastructure
Costs,. 1999020
Under the Aggressive Substitution case, carbon emissions decline by
10 percent, or 135 million tons, but the associated costs-not including
indirect infrastructure-total $122 billion.
Underachiever Official Plans Aggressive
Substitution
Costs (Billion $)
Power plant costs
386
399
484
Partial natural gas
Infrastructure
17
23
56
Total infrastructure a
403
422
540
Emissions (Million tons carbon)
Carbon emissions 1,434 1,386 1,251
(See Appendix B for electric plant capital costs.)
a Note: "Total infrastructure" cost estimates above include only power plants, import
pipelines, and liquefied natural gas (LNG) plants, and exclude associated
infrastructure costs for domestic gas transmissions and distribution networks, other
industrial end users (for example, fertilizer and petrochemical plants), and oil and gas
exploration and development.
 Comparison atPrimar/ FueiMix
Official Plans
(2020) Nuclear 5
Coal 53
Source: Press
Coal 45
China's primary energy consumption for 1998 and 2020 is 18.8 and 37.7 million
barrels of oil equivalent per day, respectively.
Aggressive Substitution
Gas 10 (2020) Nuclear 5
10.
 Ch'ina"Reas-
Slower economic growth, reduced energy demand, and growing pollution
problems are on the minds of Chinese officials as they prepare the Tenth
Five-Year Plan (2001-05). Addressing acid rain and airborne ash particles will
take precedence over carbon emissions, but efforts to deal with acid rain also
may reduce emissions.
- Beijing is emphasizing greater energy efficiency in the industrial and
energy sectors through its restructuring of state-owned enterprises and
closure- of some of the more inefficient and polluting coal-fired plants.
- Embassy and press reports on leadership preferences and recent trends
in energy investment suggest the Chinese will seek to develop further
their hydropower, nuclear, and natural gas assets.
 Consumption Outlook
for fVatu~rat Gas, Coal- and 011
2000 2005
Natural Gas (Billion cubic meters per year)
Underachiever 25
Official Plans 25
Aggressive Substitution 25
Coal (Million tons per year)
Underachiever 1,360
Official Plans 1,360
Aggressive Substitution 1,360
O i I (Million barrels per day)
All Cases a
4.5
2010
2015
2020
40
65
85
110
40
120
160
200
60
115
170
235
1,500
1,670
1,910
2,220
1,500
1,560
1,770
2,010
1,460
1,520
1,550
1,680
5.4
6.4
7.5
8.7
a Appendix C-oil elasticity section.
Source: Press
Confidential
100164Prr ~_ . I
 Natural Gas: Grow. Ing,.But
. Limit ed,-.-Poteptial
Chinese officials have announced consumption targets as high as 200 billion
cubic meters (bcm) for 2020, nearly ten times China's 1998 production or
about one-third current US gas use.
- Even with substantial investment, CIA projects that
consumption in 2020 is unlikely to exceed 135 bcm.
e Gas use is constrained by the dearth of long-distance transit pipelines.
Proved reserves-CIA estimates about 1,000 bcm-are inadequate for
sustained production of much more than 40 bcm without large new
discoveries or substantial reserve growth.
- Recent exploration results have been modest to disappointing.
? Import pipeline and LNG projects are in their early stages. Financing and
project economics are problematic, and the petrochemical sector will remain
an important gas consumer.
Eorifiden in
13
 COW Consumption, Outlook
by-CasE, 19984020
Million tons of coal
2,500
2020
2,000
1,500
1,000
500
1998 2000
Source: Press
2005
2010
Con#ic{ewtial~
2015
Underachiever
Official Plans
Aggressive
Substitution
 oal
C -i's Chan' In, 9-Role
Jn, China'-'s'Primary., FO-61-M
? The study projects coal consumption-driven in part by power sector
demand-will be 1.7- 2.2 billion tons in 2020.
Coal output peaked in 1996 at 1.39 billion tons and has since declined
annually by about 100 million tons. Coal stocks remain high, forcing China to
close 25,000 unlicensed mines and make even greater output cuts this year of
250 million tons, an output target of less than 1.1 billion tons.
Beijing is likely to abandon the Ninth Five-Year Plan's official
production target of 1.5 billion tons for the year 2000, as slower
economic growth, high levels of coal stocks, service sector growth,
and greater reliance on alternative fuels depresses demand.
- If the slump in coal consumption continues for a few years, then our
projections for China's emissions in each case will be high.
Ce side" u
100160PPT ~'
 Inttalled Powe r Go- neration
Ca acitys-, 2.0-Q
700
600
500
400
300
200
100
0
2000 2005
aOne thousand megawatts or 109 watts.
b installed capacity targets under review.
c No estimate.
Source: Press
2010
Genfoaem;atr
2015
2020
State Power
Corporation b
?}
-100160PPT
 POW-ler Sector" -Demand.DrIVIna-
coal. Consumption Growth.
? The power sector consumed 35 percent of China's coal in 1998, but our study
projects that by 2020 this will rise to 45-51 percent as the demand for electric
power increases in the economy. Under the study's 5.5-percent average
annual growth rate, China's installed capacity will total 691 GW by 2020-an
average annual increase of 21 GW, with coal making up 6 to 12 GW.
State Power officials had planned to add an average of 25 GW annually
through 2015, but now say new capacity additions will slow for the next
three to five years (Appendix D).
China is experiencing surplus capacity from depressed demand for
electricity in many regions because of slower economic growth, state
enterprise reform, and the reduced demand from heavy industry. Over
the past decade, new power capacity additions averaged 15 GW annually.
 Hydropower' Capacity Outlook
by Case,- 1.998w&2020
250
200
150
100
50
1998 2000 2005 2010 2015 2020
Source: Press
Confidential
Underachiever
Official Plans
Aggressive
Substitution
 Hydropower Developmenh
~.ileely To FResnain Str~ng
? Beijing has 14 large dams under construction and plans to rapidly develop
hydropower by adding 5 GW annually to 2010. In 1998, China reached an
installed hydroelectric capacity of 60 GW, or 16 percent of its total 380 GW
hydropower resources.
- Most hydroelectric projects are in isolated rural areas and are
critical to rural development and electrification. The high domestic
content of hydropower projects also stimulates the economy and creates
jobs.
Our projection for hydropower development could be overstated-especially
under the Aggressive Substitution case-if China cannot obtain sufficient
financing or if extensive corruption is uncovered that leads to a reevaluation
of major projects.
- Three Gorges dam-China's largest at 18 GW-so far remains on
schedule to be completed in 2009, despite press reports of insufficient
funding, shoddy construction, and graft.
 er Studies. of China's
carbon Emma ions-
Million tons carbon
2,500
2,000
1,500
1,000
500
US Emissions
(EIA 1999)
IEA Projection
EIA Projection
CIA Projection
1-
1998 2000 2005 2010 2015 2020
Source: EIA Annual Energy Outlook 1999
Cen#idcntial
- 100160PPT ~' 'I
 ? A 1998 International Energy Agency (IEA) study is consistent with the 1999
CIA study's conclusion that China's carbon emissions could be lower than US
emissions in 2020.
- LEA's study used the same 5.5-percent average annual growth
rate for GDP but used higher energy demand elasticities and
assumed less natural gas development.
A 1999 study by Energy Information Administration (EIA) of the Department of
Energy projects China's emissions will slightly exceed US emission by 2020.
- The EIA study uses a higher level of emissions for their base year
and assumes a 6.5-percent average annual GDP growth rate.
 Million tons carbon
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1995
Appendix Ad factors Underlying,
Lower Carbon Ernisii~ns.in 215
2000
2005
con#idential
1997 level
2010
2015
Change In Model's
Coal Use
Greater Substitution
Change In GDP
Growth
1998. Drop in Coal
Consumption
1999 Emissions
Under Official
Plans Case
' j
,00,60PPr
 ? Slower GDP growth-an average annual rate of 5.5 percent versus
7 percent-accounted for just over 40 percent of the drop-in emissions.
? Making coal a residual fuel rather than using official targets accounted for a
third of the drop in emissions. Under the new study, coal consumption is
1.8 billion tons in 2015, down from 3.4 billion tons. Another 20 percent of the
decline in emissions is due to the drop in coal consumption in 1997 and 1998.
Greater development of alternative fuels accounted for only 7 percent of the
drop in carbon emissions. Under the new study by 2015 gas consumption in
primary energy increases to 160 bcm versus 44 bcm in the earlier study.
Alternative fuel use also increased in the power sector.
- Coal-fired capacity declines to 324 GW versus 570 GW, while
nuclear power capacity doubles to 30 GW, gas-fired plant capacity
increases by 50 percent to 24 GW and hydropower capacity increases by
25 to 150 GW.
e6nfidenfiao
Appendix Apf,1999 Official Plans
Versus i:997:$iudy. Assumptions
? 10016OPPT 'r`
 ,I-App endix Bq%k.Capital Cosft
fop Ele~tric Power Plants
Fuel
Coal
$
600/kW
Oil
$
525/kW
Natural gas
$
450/kW
Hydroelectric
$ 1,000/kW
Nuclear
$ 1,350/kW
Renewables
$ 1,000/kW
Note: Costs represent the lower end of a range and could understate
total capital costs.
Source: Press
Cost per Kilowatt Capacity
GenfidenUal
OO160PPT '~_;~
 Appendix 04.1-Mod I-Elasticitle
? China's historical income elasticity of primary energy demand-roughly
0.5-is markedly low when compared to other developing nations. The 1999
CIA study assumes that this elasticity will rise to 0.8 by 2020.
China's low elasticity implies either extreme energy efficiency or faulty
GDP statistics; elasticities for India, Taiwan, and the United States are
0.9, 0.9, and 0.7, respectively.
? Under the 1999 CIA study China's income elasticity of oil demand rises from
a 0.6 historical average to 0.7 in 2020. Even higher elasticities could
occur-India and Taiwan have elasticities of 1.0 and 0.9, respectively.
- If China's car ownership trend imitates South Korea's or Taiwan's, oil
consumption could increase by 4-6 million barrels per day adding
155-233 million tons more in carbon emissions by 2020.
? China's income elasticity of electricity demand averaged 0.8 through 1997,
which is low compared with other developing nations. Under the 1999 CIA
study, the elasticity increases to 1.2 by 2020, on par with India and Taiwan.
 Appendix Dpi 0InStalled Capacity
by Fuel Mix Uncler Thre-e Cases
2000 2010 2020
State Power's Targets
290
500
NEa
.Study's Projected Totals
266
431
691
Coal
Underachiever
173
252
417
Official Plans
172
249
393
Aggressive Substitution
173
231
292
Gas
Underachiever
1
14
36
Official Plans
1
16
45
Aggressive Substitution
1
16
50
Hydropower
Underachiever
70
125
175
Official Plans
70
125
175
Aggressive Substitution
70
150
300
Nuclear
Underachiever
2
19
40
Official Plans
2
19
50
Aggressive Substitution
2
20
60
Renewables
Underachiever
0.1
8
2
4
Official Plans
1.2
5
3.4
8.4
Aggressive Substitution
0.1
8
3.5
10
a No estimate.
Cen#ideatial~
--T I
- 100160PPT