World Energy Outlook 2007

growth (Table 9.1). It is possible that China will manage to sustain its current
high growth rate pattern for a longer period than we assume in this scenario.
The implications for energy and the environment of faster economic growth
are analysed in a High Growth Scenario (see Chapter 12).
Table 9.1: Key Assumptions for China’s Energy Projections
in the Reference Scenario
1990 2005 2015 2030
Services share of GDP (%) 31 40 43 47
Population (millions) 1 141 1 311 1 387 1 457
Urbanisation (%) 26 40 49 60
Sources: IEA Secretariat; UNPD (2006).
Energy prices in China are assumed to move in line with international prices (see
Introduction). China’s ongoing market reforms, which are making domestic
energy prices more sensitive to international price movements, are assumed to
persist. Subsidies to energy were reduced significantly in 2006 and 2007, but
underpricing remains (see Chapter 8). We assume that the Chinese government
will gradually phase out all energy subsidies over the projection period.
The pace of technological innovation and deployment affects the cost of
supplying energy and the efficiency of its use. In general, it is assumed that the
end-use technologies available in China become steadily more energy-efficient.
However, the pace of change varies for each fuel and each sector depending on
the potential for efficiency improvements and the state of technology
development and commercialisation. The rate at which technologies are
actually taken up by end-users also varies, mainly as a function of how quickly
the current and future stock of energy-using capital equipment is retired and
replaced. How efficiency improvements are expected to reduce energy intensity
– the amount of energy used per unit of output – in power generation, industry
and transport is summarised in Table 9.2.
In addition to being a large and growing domestic economy, China is also an
export-oriented economy, with very high ratios of trade and investment to
GDP. It is also an economy which is undergoing rapid transformation, as
market reforms are introduced, a new middle class emerges and consumption
patterns change. Projecting trends in energy demand, therefore, involves an
analysis of the changing structure of the economy, as well as traditional
modelling of domestic consumer demand for goods, services and mobility. 2
9
2. For this WEO we have greatly expanded the modelling framework for China and increased the
degree of sectoral, technological and regional disaggregation.
Chapter 9 - Reference Scenario Demand Projections 285