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The Chinese “realpolitik” on energy

Posté par admin le October 26, 2012 à 14:34 Dans Agenda,Industry,Markets,Ressources | No Comments

Although China claimed in its twelfth five-year plan that it intended to cut the share of fossil fuels in its energy mix by 15% by 2020, it remains the second largest oil consumer and is still responsible for the largest portion of greenhouse gas emissions worldwide. Apart from various transition energy projects in renewables, China also made ​​significant investments in traditional sources, leading a pragmatic strategy.

Hydrocarbons attract Chinese foreign direct investments (FDI)

According to International Energy Agency forecasts, the oil market is facing deep changes, especially because of fast increasing demand in countries outside the OECD, such as China, the second largest trading power worldwide. Energy consumption there has been skyrocketing and despite the government’s willingness to promote energy efficiency, it diversifies and ensures the long-term security of its fossil-fuel supplies.

Recent Chinese FDIs provide good evidence for this. In the past, China used to invest mainly in South Asia, but the recent acquisition of the Canadian company Nexen by the China National Offshore Oil Corporation (CNOOC) is an example of the internationalization and diversification of Beijing’s supplies. This 15.1 billion-dollar-deal is the largest Chinese foreign investment ever. It marks a turn in Chinese energy policy, but above all it confirms the Middle Kingdom’s pragmatic energy strategy, which combines a focus on the long-term security of its traditional supplies and the development of renewable energy sources.

Besides, this sum is of minor importance compared, for example, with infrastructure investments. In early September, nearly 123 billion euros were spent on 55 large-scale projects.

Rebalancing the energy mix

Given the narrowness of the market for natural resources, China carries on the diversification of its supplies through ambitious purchases, beyond the mere “pipeline diplomacy” aiming at ensuring the long-term security of supplies through bilateral agreements. This strategy can be understood in the light of the Chinese energy mix, which relies heavily on coal (70%, i.e. more than the US, the EU and Japan combined in absolute terms). As for oil, it only accounts for 20% of the total (Figures from IFRI French Institute of International Relations). Investments in the oil sector therefore prove compatible with a stated desire to promote energy efficiency, given that the combustion of oil emits less CO2 than that of coal.

This traditional approach to energy policy, however, does not mean that China is stepping back from its commitment to sustainable development. According to a recent study conducted by an Australian company, Climate Bridge, Chinese rulers are truly starting to incorporate the fight against climate change as one of their goals: “Cutting greenhouse gas emissions in China is crucial to prevent worldwide climate change and the implementation of ambitious policies by Chinese authorities is very encouraging in this respect” (Alex Wyatt, CEO at Climate Bridge).

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