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An open and diversified strategy should be worked out to deal with the country's serious energy challenges.

To meet the needs of China's rapid economic growth, energy consumption has skyrocketed.

In 2003 the nation's total output of primary energy reached 1.6 billion tons of standard coal - an increase of 49.53 percent over 2000. Among the total output, coal yielded 1.66 billion tons, a 67.03 percent growth over 2000. Meanwhile, import of petroleum witnessed an upsurge of 97 million tons, or 39.35 percent more than in 2000. About one third of the country's petroleum need is dependent on import.

Demand for electricity has also increased sharply. In 2003, China used 1,891 billion kilowatt-hours of electricity, an increase of 40.38 percent over 2002.

High consumption of energy supported the country's economic development, but the flip side of the phenomenal economic growth is a serious energy crunch.

Excessive dependence on fossil fuels poses a threat to the sustainable supply of energy resources.

Statistics indicate China's per capita exploitable reserve is much lower than the world average. For example, in 2000, the country's exploitable reserve of petroleum per capita was 2.6 tons, natural gas 1,074 cubic meters and coal 90 tons. Those figures accounted for only 11.1 percent, 4.3 percent and 55.4 percent of the world average respectively.

On the other hand, China's further economic development demands almost non-stop consumption of energy. Although the utilization ratio of energy could be raised for a large scale, it is a long and tough road to tap potential sources.

China's dependence on energy for social and economic development is heavier than that of developed countries. In 2001, Chinese end users of energy spent 1.25 trillion yuan (US$151 billion) on energy consumption, accounting for 13 percent of the country's GDP, compared to 7 percent in the United States. And China's utilization ratio is lower than the global advanced level.

Energy shortage and environmental pollution have put obstacles in the way of building a well-off society. For example, release of carbon dioxide has grown from 394 million tons in 1998 to 832 million tons in 2001. Serious pollution has put a high price tag on economic and social development and threatened citizens' health.

Energy safety, especially petroleum safety, has become a hot issue and attracted more and more attention. Since China became a net importer of petroleum in 1993, import of petroleum has rocketed from 7.6 percent in 1995 to 31 percent in 2000. It is expected that by 2020 the consumption of petroleum will reach 450 million tons - about 60 percent of which will be imported.

How to make full use of markets and resources at home and abroad, how to set up emergency counter measures, how to participate in the international co-operation of petroleum use, and how to sharpen the competitive edge of China's petroleum enterprises have all become urgent questions.

The ultimate goal of the country's energy strategy is to replace fossil fuels with recycled energy. To reach that goal, a harmonious development between society and economy must be pursued. The market should play a more important role in allocating energy resources than the government, and full use should be made of foreign resources.

A strategy has been worked out which sets energy saving as the priority, makes the energy structure diversified, builds a friendly environment and lets the market play a role.

It is estimated that if proper and effective measures are taken, by 2020 the country's total consumption of energy could be trimmed by 15-27 percent, which means 1.04 billion tons of standard coal, worth 932 billion yuan (US$112 billion).

Whether or not economic growth can continue with relatively low input of energy depends on how well potential reserves and energy conservation are managed. Meanwhile, energy savings are also important to safeguard the environment.

By 2020 the industrial sector will reduce its consumption of primary energy to 56-58 percent, while the transportation and construction sectors will increase their demands to 16-17 percent and 25-26 percent respectively. These major sectors should all be required to make efforts to save energy.

For a long time, China's energy consumption has focused on coal. Optimizing the structure of energy consumption is important to diminish the total demands of energy. For example, as coal use decreases by 1 percentage point, the total demand for energy might be reduced by 20 million tons of coal.

In this way, the country has made a decision to gradually shrink coal consumption, speed up the exploitation of natural gas, make full use of domestic and imported petroleum, and actively develop hydropower, nuclear power and recycled resources. It is expected to construct a diversified and optimized structure in 20 years.

The environment has a close relationship with energy strategy and the techniques of energy supply. China's environment has been seriously polluted, and the poor utilization of energy has been a main cause of that problem. In the future, China should adjust its energy strategy to ease the pressure of environmental protection.

China's reform in energy lags behind the progress of its economic reform.

A unified energy management department, which could co-ordinate the development of different energy sectors and work out a comprehensive strategy of energy, needs to be established.

The government should shift its function to safeguarding the country's energy safety and protecting the public interests and environment.

And the pricing mechanism for energy resources should be reformed and decided by the market.

(China Daily April 23, 2004)