Chinese Energy Strategy and Policy: Fiscal Implications for the Ministry of Finance

This paper examines issues in meeting China's rapidly rising demand for energy. The authors argue that, for the Chinese Government, the basic premise of China’s energy strategy is sustainability: energy supplies should be secure, clean, cheap and, as far as possible, renewable. In turn, a sustainable energy strategy will require securing petroleum supplies, promoting clean coal technology, supplying rural energy needs, promoting energy-efficiency through appropriate prices and taxes, and developing a medium-term plan for energy supply that emphasizes conservation, environmental protection and security. Given China's technological capacities, resource endowments, and fiscal strength, the authors argue that clean coal, rural energy supply, oil substitutes, and renewable energy sources should be priorities for fiscal expenditure. New levies and taxes on energy use may also be desirable.