World Energy Outlook 2007

uncertainty stems from how policies prepared by central government are to be
translated into firm action at the local government level. An obvious example
is the central government’s long-standing intention to reform pricing and
introduce taxes on sales of fuel to final consumers. What form this reform will
take, the level of taxation and the responsibilities for applying the tax and
collecting the revenues are still under discussion.
In the Alternative Policy Scenario, we assume the government at all levels takes
stronger action to ensure that policies and measures are implemented fully, are
enforced effectively and are supplemented by new measures where necessary.
For example, it is assumed that structural change within the economy is more
vigorous than in the Reference Scenario and that switching to natural gas is
actively promoted. Detailed assumptions for each policy are described below in
the sections on each sector. 2
The results of the Alternative Policy Scenario demonstrate that China can move
onto a more sustainable economic and environmental path through stricter
enforcement of existing policies and the introduction of new policies already
under discussion. In net terms, this result comes at a negative financial cost –
i.e. net benefit – to energy consumers and to China as a country – even before
the energy-security and environmental implications are taken into account.
Key Results
Energy Demand
In the Alternative Policy Scenario, the stricter enforcement of existing policies
and the implementation of new policies to promote energy diversification and
savings significantly curb the growth in energy demand. Primary demand in
2030 is reduced by about 15%, relative to the Reference Scenario (Table 11.1).
This saving is comparable to Africa’s entire energy consumption in 2005. The
average rate of growth of China’s demand is reduced to 2.5% per year, against
3.2% in the Reference Scenario. Demand nonetheless increases by around
90% between 2005 and 2030.
Most of the energy savings in the Alternative Policy Scenario in the short term
come from stricter implementation of the central government’s policy of
closing small and inefficient industrial facilities and power plants and their
replacement by plants using modern technologies. In the longer term,
structural economic change increasingly drives the faster improvement in
energy intensity, alongside more widespread use of efficient energy production
11
2. The Alternative Policy Scenario also takes into account new policies and measures in all other
regions. These policies are assumed not to affect international oil and gas prices, but do lead to lower
international coal prices than in the Reference Scenario, with consequences for China’s coal and
electricity prices and demand. See the Introduction for more details about the methodology and
global assumptions underlying the Alternative Policy Scenario.
Chapter 11 - Alternative Policy Scenario Projections 363