Energy Trends

Energy is an important influencing area because the cost of gasoline and the availability and cost of alternatives affect both the number of miles and the types of vehicles people drive. This section includes background on oil price and oil consumption, the possibility of legislation or regulations to address climate change that would discourage use of certain types of transportation, and the adoption of two types of alternative vehicles: EVs and E-2Ws (both electric bicycles and scooters).

Oil Price and Consumption

The price of oil is determined on the world market.10 Although oil prices can be measured in various ways, we used the price of one barrel of Brent crude oil, which is a major benchmark price on the world market. Oil prices were fairly steady in the 1990s, generally fluctuating between USD 20 and USD 35 per barrel, but climbed steeply in the 2000s. By 2012, after a sharp dip caused by the 2008 recession, oil prices had risen to USD 104 per barrel (World Bank, 2013).

Oil consumption has been rising rapidly in China during the past two decades, nearly tripling since 1995. In Chinese statistics, oil is typically measured in standard coal equivalent, which we converted to tons of crude oil.11 In 1995, China consumed 163 million metric tons of crude oil, which rose to 647 million tons in 2011 (National Bureau of Statistics of China, 2012, Table 7-2). This is the equivalent of roughly 13 million barrels per day, using a conversion factor of 7.32 barrels per ton.12 (Statistics were not consistently available for years before 1995.)

As consumption has risen, so has the percentage of oil that is imported. In 1995, China imported about 21 percent of its crude oil. By 2011, more than half of its oil was imported—56 percent. This amounted to 362 million metric tons per year, or about 7.3 million barrels per day (National Bureau of Statistics of China, 2012, undated).13

Introduction of Effective Greenhouse-Gas Emission-Reduction Systems

The Chinese government has taken several actions in recent years to reduce greenhouse-gas (GHG) emissions and accelerate the transition to a low-carbon economy. In 2011, the State Council issued a work plan for GHG emission control (Central People's Government of the People's Republic of China, 2012a). The work plan, which is essentially a national guidance document, targets a 17-percent reduction of carbon dioxide emissions per unit of GDP by 2015 from the 2010 level and calls for comprehensive use of various control measures, including establishing a GHG emission accounting system, opening carbon emission-trading markets, and promoting extensive international cooperation (Central People's Government of the People's Republic of China, 2012a). Since the work plan was issued, progress has been made in three areas:

• First, the National Development and Reform Commission (NDRC) issued GHG emission accounting methods and reporting guidelines focusing on an initial group of ten industries (NDRC, 2013). The goal is to establish a national, local, and corporate accounting and reporting system, as well as to lay the groundwork for carbon emission-trading markets.

• Second, in 2011, the NDRC (2011) approved several pilot markets, five of which launched in 2013. In the five months after the Shenzhen market opened in 2013, the total trading volume exceeded 130,000 tons, and the price stabilized at around CNY 80 per ton (USD 31.21) (Southern Daily, 2013). The pilot markets determined their own total carbon dioxide emission targets for the 2013-2015 period, based on the emission-reduction requirements and local economic development (NDRC, 2011; Beijing Municipal Commission of Development and Reform, 2013).

• Third, a carbon tax has been proposed but not yet adopted. Because of concerns that a carbon tax might push commodity prices even higher, a relatively high inflation rate has been considered one of the biggest constraints to introducing a carbon tax. However, in 2010, the NDRC and Ministry of Finance issued a report on the Chinese carbon-tax system framework design, which proposed collecting a carbon tax beginning in 2012. One of the report's authors noted that not only would introducing a carbon tax not cause inflation; in contrast, it might produce a decline in the overall price of commodities (Daily Economic News, 2010). A Ministry of Finance official suggested in a 2013 interview that the carbon tax would focus mainly on coal, crude oil, and natural gas; that it would be introduced during 2016-2017 (China Carbon Emission Trade, 2013); and that the initial tax rate would be set to CNY 10 (USD 1.61) per ton of carbon dioxide and then gradually increased over time (Liu, 2013).

Adoption of Alternatively Fueled Vehicles

China has adopted aggressive targets for producing electric and hybrid vehicles, but it seems unlikely that they will be met on schedule. The 12th five-year plan calls for ownership of 5 million battery EVs (BEVs) and plug-in hybrid EVs (PHEVs) by 2020. However, in the third quarter of 2009, only 970 BEVs and PHEVs were registered nationwide,14 which amounts to less than 0.02 percent of newly registered vehicles during this period (Krieger et al., 2012). Reporting suggests that the pace has not increased significantly since then. Automobile manufacturers produced 6,000 BEVs and PHEVs in 2011 and 12,500 in 2012 (China Automotive Technology and Research Center, Nissan [China] Investment Company, and Dongfeng Automobile Company, 2013). From 2011 to the first half of 2013, 24,000 new-energy vehicles (NEVs, which are defined as BEVs, PHEVs, and fuel-cell cars) were sold (Wang Tingting, 2013).

Purchase prices for such vehicles remain high even with subsidies. The central government provides CNY 60,000 (about USD 9,900) and CNY 50,000 (USD 8,260) subsidies for BEVs and PHEVs. Some local governments also provide subsidies (International Energy Agency, 2012). However, even with subsidies, the cost of EVs can still be more than double the cost of a comparable gasoline vehicle. For example, the price of a BYD E6 (a Chinese EV larger than a sedan but smaller than a sport-utility vehicle) is about CNY 230,000 (USD 37,140) after the maximum CNY 120,000 (USD 19,380) subsidy, while the price of the comparable conventional BYD F6 is just CNY 90,000 (USD 14,850) (Krieger et al., 2012).

The installation of charging infrastructure has also been slow. Although the Ministry of Science and Technology proposed constructing more than 400,000 charging piles by 2015,15 the State Grid and the Southern Power Grid constructed only 16,000 total charging piles in 2011 (Krieger et al., 2012).

E-2W production has grown very rapidly in the past 15 years, from basically none in 1998 to almost 30 million in 2012 (Cherry, 2013). As of 2012, China had about 150 million E-2Ws in use (Sen, 2012). Another source notes that "[o]ne in five Chinese bicycles has a battery, and that ratio is likely to be higher in urban areas" (Grabar, 2013).

The E-2W category includes two broad types of vehicles: battery-powered bicycles (also called e-bikes) and electric "scooters" (also called e-scooters). E-bikes utilize both human power from pedaling and a small electric motor, while e-scooters operate entirely on electricity and tend to be larger. However, there is no hard and fast distinction between the two types of vehicles. The underlying technology is similar, and the design of the vehicles spans a continuum, making it difficult to categorize them definitively. E-bikes are less common than e-scooters; according to one survey, in 2010, only 16 percent of E-2Ws in the market were e-bikes; 26 percent were e-scooters; and 58 percent were "something in between" (Ruan et al., 2012).

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