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Opportunity to Leapfrog into Energy Transition: Is China on the Right Track?

In the early 21st century, China took the world by surprise when it sustained rapid, coal-intensive growth. This made them the major contributor to global coal use and greenhouse gas emission across the globe. The growing concern pertaining to environmental pollution has called for urgent eco-friendly and energy transition measures in China. As per the five-year plan passed by China in 2016, reform and transition are the main agenda on the cards for China.IR_Brochure

Evolution of China’s Energy Demand

Coal has long been the dominant source of energy consumed in China. In the early 2000s, China had contributed to half of the global coal consumption. However, the changeover to “green industrial policy” by the Chinese government has forced many companies to look at opportunities for energy transition to zero-emission renewable sources. This has eventually changed China’s energy supply mix dramatically, dropping the dependence on coal. Also with the help of the government’s promotional policies, companies who have focused on environment-friendly and energy-saving practices have attained rapid growth.

In China, electricity generation was one of the key factors accounting for emissions. But due to China’s eco-friendly paradigm shift in energy transition, measures have been taken to reduce the dependence on coal for generating electricity and substituting the same with renewable sources of energy. Also, the Chinese government had implemented measures to reduce carbon emission from vehicles by promoting the use of electric vehicles in the country. This was one of the major energy transition reforms adopted by the Chinese government to control the swelling pollution.

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Why is it Still a Long Road Ahead for China in Energy Transition?

Despite positive signs of progress in terms of eco-friendly measures, China still has a rocky road of challenges ahead of them before they attain complete energy transition.

Inability to Eliminate Coal

The decentralization of power to approve environmental impact assessments from national to provincial level, gave the power to local governments to invest in new thermal power plants. The local governments were urged to approve these projects in the belief that investments would boost the economy. As such, the dependence on coal has increased at a significantly low level.

Wind and Solar Curtailments

China has numerous limitations when it comes to electricity dispatching and absorption mechanism, which does not go hand in hand with the speedy development of renewable energy. The rapid growth of investments in new power plants along with the restrictions involved in the usage of wind and solar energy has aggravated this problem.

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Chinese Economy Focuses on Environment Sustainability – Here’s Why

The Chinese economy is one of the world’s largest and most powerful economy despite the recent economic meltdown. The robust and growing manufacturing sector coupled with supply chain repositioning has fueled the growth of the Chinese economy. Traditionally, China has always focused heavily on theAsk an analyst export of finished goods to accelerate growth. However, with the changing market scenario and competitive landscape, China’s leaders have started directing their efforts towards domestic consumption; thereby, moving from an export-driven economy to being more consumer-oriented. As a result, Chinese manufacturers must tweak their production systems, manufacturing process, and product features to meet the quality requirements and their citizen’s needs.

Chinese Economy Addresses Environmental Concerns

With a consumer oriented approach, China must develop frameworks that meet consumers’ demands and comply with the high safety and environment standards. The country is endowed with limited natural resources, making it difficult for the Chinese economy to move away from their current production processes that make use of highly polluting, locally available, and cost effective resources such as coal. But with the increase in the domestic pressure to devise environment-friendly processes that facilitate energy conservation, new challenges have cropped up for the chemical, manufacturing, and energy industries in the Chinese economy. The state authorities and decision makers must keep the following in mind – ensure effective capital deployment and leverage green technology – to reduce carbon footprints.

Developing A Sustainable Economy

As the Chinese economy inches towards sustainability, the policy makers must address key issues such as opting for operational processes that fulfill their long-term objectives, enable supply chain optimization, support product innovation, and drive organizational efficiency. The Chinese economy is plagued with overcapacity in terms of structure and production, which can be solved by permitting M&A activities to optimize resources and facilitate asset scalability. The Chinese policy makers are constantly striving to strike a balance against the dynamic market forces to ensure effective implementation of new structural policies. In order to build an environment-friendly and sustainable economy, China’s leaders and policy makers must understand that the transformation process is not a one-time thing; rather, it is a continuous and cumulative process.

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