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Congressional Research Service, "China and the United States—A Comparison of Green Energy Programs and Policies," June 14, 2010

This CRS article was written by Richard J. Campbell, a specialist in energy policy.
June 14, 2010

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China is the world’s most populous country with over 1.3 billion people. It has experienced tremendous economic growth over the last three decades with an annual average increase in gross domestic product of 9.8% during that period. This has led to an increasing demand for energy, spurring China to add an average of 53 gigawatts (GW) of electric capacity each year over the last ten years to its power generation capabilities.

China essentially functions as a “command and control” economy. The national government owns or controls many of the country’s industries and enterprises, and sets goals for economic development in the periodic Five Year Plans. China’s industries and enterprises are expected to comply with the goals set in the national government’s economic plan. China has set ambitious targets for developing its non-hydropower renewable energy resources with a major push of laws, policies, and incentives in the last few years. The wind power sector is illustrative of China’s accomplishments, as installed wind power capacity has gone from 0.567 GW in 2003 to 12.2 GW in 2008. Plans already exist to grow China’s wind power capacity to 100 GW by 2020. A similar goal exists for the solar photovoltaic power sector which China intends to increase generating capacity from 0.14 GW as of 2009 to over 1.8 GW by 2020. China recognizes that given the growing demand for energy at home, developing its domestic renewable energy industry and building manufacturing capacity can lead to advantages in future export markets.

However, energy efficiency and conservation are officially China’s top energy priority. These are considered the “low-hanging fruit” in the quest to reduce energy use and cut demand. Energy conservation investment projects have priority over energy development projects under the Energy Conservation Law of 1997, with government-financed projects being selected on “technological, economic and environmental comparisons and validations of the projects.”

The key piece of legislation in recent years for advancing renewable electricity in China is the Renewable Energy Law of 2005. The law was designed to “promote the development and utilization of renewable energy, improve the energy structure, diversify energy supplies, safeguard energy security, protect the environment, and realize the sustainable development of the economy and society.” Renewable energy is subsidized by a fee charged to all electricity users in China of about 0.029 cents per kilowatt-hour (kwh). The fee was originally based on the incremental difference between coal and renewable energy (estimated in China at $0.044 to $0.059 per kwh), and goes to the companies which operate the electricity grid and must buy renewable power from project developers.

In contrast, the United States has largely a market-driven economy. Some argue that the United States does not have a comprehensive national policy in place for promotion of renewable energy technologies, with some observers saying that the higher costs of renewable electricity are not conducive to market adoption. However, the reasons for increasing the use of renewable energy are diverse, and include energy security, energy independence, cleaner air, and more recently anthropogenic climate change, sustainability concepts, and economic development. Such goals could reasonably be said to apply both to the United States and China. Pending legislation in the 111th Congress contains provisions which could serve to increase power generation from renewable energy by establishing market drivers (such as a national renewable electricity standard) which could catalyze U.S. renewable electricity development.

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