IEEJ：September 2021©IEEJ 2021
Special Bulletin
A Japanese Perspective on the International Energy Landscape (549)

September 10, 2021

China’s Growing Presence in the World in a Journey Toward Decarbonization
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanAs Japan, the United States, European countries, China and other major countries enhancecarbon neutrality initiatives, energy transition towards global decarbonization is accelerating.
Through the energy transition, the world will reform the current energy supply and demand systemthat structurally depends heavily on fossil fuels. The difficult challenge would trigger structuralenergy supply and demand changes in the world and each country and subsequent changes in thepower balance for energy geopolitics and in major players’ presence in international energy markets.
China is the world’s largest energy consumer and CO2 emitter. While depending on coalfor nearly 60% of its primary energy supply, China plans to substantially transform its energy supply
and demand towards reaching carbon neutrality in 2060. According to an outlook released by ananalytical team including Tsinghua University, China plans to keep greenhouse gas emissions at thecurrent levels until 2030 before reducing them rapidly. Energy scenarios for carbon neutrality in theworld commonly envisage attaining a zero-emission power generation sector while enhancing
energy savings and promoting electrification, introducing hydrogen and other innovativetechnologies to the maximum extent and using forest sinks, DACCS (direct air carbon capture andstorage) and other negative emission technologies to offset residual CO2 emissions. The Chinese
scenario, though similar to the others, features an electrification rate of more than 70% for 2050, farhigher than in other scenarios, indicating that realization of a zero-emission power generation sector
depending heavily on renewable energy and the promotion of electrification are the key to reachingcarbon neutrality in China.
Given China’s position as the world’s largest energy market and CO2 emitter, how China
would innovate or restructure its energy market is attracting global attention. Whether and how
Chinese initiatives would be successful or not has thus become a matter of global interest, indicating
China’s great presence in the world towards decarbonization. Separately from the abovementionedpoint, there are key points demonstrating China’s growing presence in or influence on the world
where decarbonization initiatives are promoted. We cannot ignore these key points.
First, China’s presence in international energy markets has increased as a consumer andimporter of fossil fuels. At a time when decarbonization initiatives are about to be enhanced, thisindicates that China’s presence is already great and will become even greater. China, which
recovered from the impact of COVID-19 ahead of other countries, has robustly increased demandfor oil, gas, liquefied natural gas and coal. Its import expansion has driven global demand expansion
in markets for these fossil fuels. Typically, China has substantially expanded its LNG imports. It is
expected to replace Japan as the world’s largest LNG importer in 2021. LNG market stakeholders
have no choice but to closely watch the Chinese trend. If China’s GHG emissions are kept almost
unchanged until 2030 in line with the Chinese scenario, its fossil fuel demand would remain firm,with its natural gas and LNG demand growth sustained. If other major countries hold down their oil,gas and coal demand to reduce GHG emissions in line with their policy targets, China’s presence in1

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oil, gas and coal markets would increase even further. In this sense, China’s presence in andinfluence on the Middle East, Russia and other major resource exporters will increase further.
Second, major countries in the world give priority to the dramatic expansion of non-fossil
energy consumption including renewable energy, indicating that China as a major renewable energy
consumer will increase its presence in the non-fossil energy field. China has become one of thelargest manufacturers of solar photovoltaics and wind power generation equipment. It has also
captured more than 70% of the global solar PV panel market. As renewable energy is planned to playa central role in China’s decarbonization, its domestic renewable energy market is expected toexpand substantially. In line with the expansion, China may increase production capacity forrenewable energy equipment and infrastructure and enhance its international competitiveness. As aresult, China’s renewable energy industry may enhance its international expansion to increase its
international presence as renewables globally spread. As a matter of course, there are some problems
that must be watched in this respect. For instance, international sanctions on China over a humanrights issue in the Xinjiang Uyghur autonomous region, known as one of leading producers of silicon
for solar PV panels, have become one of the background factors for silicon and solar PV panel prices
to rise rapidly. Generally, however, the global spread of renewable energy will lead to China’sgrowing presence as a major renewable energy consumer. In regard to nuclear energy as anothernon-fossil energy source as well, China’s presence is increasing dramatically. It is expected toreplace the United States as the world’s largest nuclear power generator by continuing to expand its
domestic nuclear power generation. At the same time, China is proactively promoting its expansion
into the international nuclear power plant market along with Russia. It may thus increase its
international presence regarding nuclear and renewable energy as non-fossil energy is promoted
amid global decarbonization.
Third, China’s presence is also great in regard to key minerals such as lithium, cobalt andrare earths that play key roles in promoting electrification and renewable energy diffusion, which
will hold the key to decarbonization. China now accounts for 40% of the processing of these key
minerals. The International Energy Agency forecasts that demand for these key minerals would
increase six-fold from the current level by 2040, indicating the growing importance of China that has
proactively expanded investment in domestic and international supply chains for these minerals,
covering from upstream development to processing. As the world promotes electrification andrenewable energy, the strategic importance of these key minerals will increase, leading to the greater
presence of China securing their supply.
Fourth, there is a viewpoint regarding China’s influence on the potential intensification ofnorth-south confrontation over climate change. Developing and emerging market economies haveclaimed that advanced economies have taken advantage of massive fossil fuel consumption toachieve economic development since the industrial revolution and are responsible for climate change.
The bottom-up approach in which voluntary national GHG emission reduction targets wereaccumulated to achieve the Paris Agreement was devised to avoid the north-south confrontation andsecure international cooperation in climate change countermeasures. However, the strong pressure
from US and Europe for developing and emerging market economies to achieve carbon neutrality as
early as possible may become a source of the intensification of north-south confrontation, withrekindling south-side argument that advanced economies held responsible for climate change. China,
which has offered a 2060 carbon neutrality target, could understand the stance of developing andemerging market economies and make arguments representing the south side, increasing its presence
in international climate negotiations.
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As the world goes in the direction of decarbonization, China is thus expected to increase
its international presence in various areas. Naturally, China may strategically exploit its growing
presence for international politics and geopolitics. This is the reality. As the U.S.-China
confrontation escalates, the United States indicates that it would enhance alliances and strategiccooperation with other major countries to compete with China. However, the current strong U.S.
climate change policy, including diplomatic pressure, could lead China to increase its influence on
and presence in the world as noted above, contradicting the China strategy as top U.S. foreign policy
priority. The United States may need to review its climate change policy from the viewpoint of its
comprehensive foreign policy strategy.

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