1986 making components for refrigerators and only produced its first car in 1998. Within a decade it was one of the top domestic Chinese manufacturers. In 2010 Geely purchased Volvo from cash-strapped Ford, giving it an instant global sales and dealer network. It is not clear whether that means Geelys will eventually go into American and European showrooms. But by producing Volvos in China, Geely would have a potentially upmarket brand with which to challenge BMW and Mercedes at home.
The rapid expansion in China’s auto industry is adding many jobs and stimulating domestic consumption—two steps that China’s trading partners have, for years, been calling for. At the same time, this is causing worry among China’s leadership about adding to future oil imports as well as about the quality of life. China’s major cities are already clogged with traffic for which they were not built, and the delays and congestion—and growing pollution—embody the costs of such success. Some predict that if Beijing continues to add cars at its current rate of 2,000 vehicles a day, average speeds in the city could drop to nine miles an hour.9
THE PRICE OF SUCCESS
The abstract GDP and energy consumption numbers tell an extraordinary story. Never has the world seen so many people moving so quickly out of poverty into a world of economic growth and expanding opportunities. The scourges of hunger and malnourishment are receding rapidly. But there is an environmental price. Water is a great problem, both because of potential shortages and because of pollution from untreated waste. But it is the air that carries the burden of the rapidly growing energy consumption. Individual Chinese feel the pollution in their lungs and in their health.
CHINA’S RISE: GDP AND TOTAL ENERGY DEMAND
Source: IHS CERA, IHS Global Insight, International Energy Agency, China National Bureau of Statistics
The major source of air pollution is coal, whether burned in individual homes for cooking and heating or used to generate electricity or burned in factories. Electricity demand is growing at about 10 percent. The rapidly growing automobile fleet is adding to the pollution in major cities. Regulations are seeking to push new cars to European levels of pollution control, but with mixed results.
Meanwhile, in recent years China has become less energy efficient, reversing a long trend. Between 1980 and 2000, China’s economy quadrupled, and its energy use only doubled. Such a record in energy efficiency was a considerable achievement. With the new century, however, the relationship suddenly reversed. Energy consumption started growing much more rapidly than the economy. From 2001 onward, a huge wave of investment stimulated enormous expansion in industry, particularly heavy industry. Many of the factories—old and new—were quite inefficient in how they used energy. As China became the workshop of the world, its energy-intensive heavy industries were operating at double-time supplying the world’s market. China, for instance, became the largest producer of steel—almost half of the world’s entire output—and the biggest exporter of steel in the world. Thus it would be correct, at least in part, to say that as Chinese production has supplanted energy-intensive output in the United States and Europe, some share of energy consumption that used to take place in the United States and Europe has in effect migrated to China. Or to put it more sharply, the United States and Europe have outsourced part of their energy consumption to China. As a result of the rapid rise in energy use, Beijing has put conservation—energy efficiency—at the very top of its priorities.10
As in other countries, climate change and emissions are becoming an increasingly important factor in reshaping China’s energy policies. But climate change is also a mechanism to tackle other more immediate and, from the Chinese point of view, much more urgent problems—environmental degradation, rising energy demand, and energy security. To reduce carbon is also to reduce air pollution and contain energy use, and thus modulate imports of energy.
POWER SURGE
In the second decade of the twenty-first century, one of China’s great challenges is to ensure that it has the electricity its rapidly growing economy needs and at the same time protect the economy against the environmental consequences of fast economic growth. For a number of years, China was adding on an annual basis the equivalent of the entire installed capacity of a France or a Britain. This averaged out to another new, full-sized coal-fired plant going into service every week or two. The tempo has slowed down somewhat, but enormous capacity is still being added on an annual basis.
It is hard to comprehend the