OREANDA-NEWS. September 12, 2012. From July 2012 onward, mounting news releases and data on China's energy-economy presents a picture of energy transition, happening in the real world, here and now. Some of the changes are predictable - but others are not.

We get the impression that China's energy-economy is moving towards a "clean energy" future, but this has now moved into faster than planned acceleration, generating highly complex outlooks for oil and oil price forecasting, in a global energy scene that is also changing fast.

In August, the State Council announced that China may spend as much as 2.37 trillion yuan (about US\\$ 373 billion) on projects for conserving energy and reducing emissions in the less-than-four year period to December 2015. This comes on top of previous energy economy and green energy plans and programs set for the 2005-2015 period. The cumulative impact is therefore higher than this already-large new program might itself alone imply.

One predictable result on Asian stock markets was a surge in share values of cleantech, green energy and environmental protection companies. The more complex follow-on for share values in this equities grouping, outside Asia, also testifies to the multiple pathways that China's changing energy future will take, on a global level.

DECLINING ENERGY INTENSITY

One clear target in the new plan announced is that by 2015, China will reduce the amount of energy it uses to produce every unit of gross domestic product by 16% compared with 2010 energy intensity levels. This would theoretically generate annual energy savings of about 670 million tons coal equivalent energy (based on 8000 kWh thermal energy per standard ton of coal). This however also implies continued high levels of economic output, and growth of output in China's manufacturing and heavy industries, which is a long way from certain. If the economy moves faster to higher value added activities and output, China's energy intensity reduction from the new plan may surpass 16% by 2015.

China is raising energy efficiency and improve environmental conditions through several policy levers especially including a now-rapid reduction in the growth of output by energy-intensive heavier industries, and the increasingly probable decline of total output from heavier industries by about 2015. In the three decades of expansion through 1982-2012 China's economy has grown more than 90-fold, featuring the heavy industries and lower value added manufacturing.

China's government has previously announced energy-focus State plans and projects where cutting the amount of carbon it emits per unit of economic output by up to 45%, by 2020, from 2005 levels were the high-ground targets, enabling us to scenarize a reduction in total energy demand growth for the world's second biggest economy that can have far reaching global impacts. For oil and coal this is especially significant due to China being the world's undisputed No 1 coal consumer, and until 2010 having the fastest growing rate of oil import demand within the G20 countries. Through 1999-2009, China's rate of oil consumption growth averaged about 9.4% per year, but even by 2009 the annual rate had fallen to nearly one-half the 10-year average rate.

ENIVRONMENT - AND ECONOMY

The new energy saving and green energy promoting plan and programs of China address several issues, including attempts to bolster China from the effects of a global economic slowdown. They also respond to public outrage over a surge in urban pollution leading to several municipalities, including Beijing, introducing car ownership growth limits for new urban development set on fixed limits for the maximum number of cars per unit area. For non-thermal and electric cars, these new limits will not apply, in an incentivizing process similar to but stronger than reduced taxes and charges for urban electric car ownership in many western cities.

The real and basic problem, over and above and separate from the now controversial real degree of linkage between CO2 emissions and global warming, if there really is global warming, is "everyday pollution" especially in urban areas. Also important, economists including those at the International Monetary Fund have recommended spending on environmental protection as a way to support growth as the European debt crisis, and the USA's slow economic growth saps overseas demand for China's exports.

The role of environmental spending to bolster the domestic economy and generate a new type of sustainable economic activity is recognized. This adds another strand to the development of cleantech, green energy and environmental protection, where China's global role is now preponderant. To be sure China's Asian rivals India, Japan and South Korea are pursuing a similar track, for similar reasons including their intention to cut oil import demand growth where it is still growing, and increase its rate of annual reduction, where it is already falling.

The environmental protection industry is now one of the few areas where good growth potentials in China, and other countries are attractive to governments seeking to bolster investment and spending, to prevent or trim the downturn in economic activity. Market analyst reasoning is that share values in the sector will do well in an emerging scenario where most "classic industries" are slowing down.

The role of global economic trends, cutting overseas demand for industrial exports, and already-operating but perhaps surprisingly successful national action for reducing energy intensity is especially shown by China's electricity demand trends. Surprise data announced by the China Electricity Council in July showed that power demand in the 12 months July 2011-July 2012 had "flat lined", that is showed zero growth.

Industrial electricity consumption is a classic "proxy" for industrial output, making many foreign observers think that two trends are now operating. Firstly, China is moving away from heavier-type industrial and manufacturing activity at a fast pace; secondly the State's ability to create a mechanism to control total energy consumption has advanced faster than even its architects hoped: Liu Tienan, vice chairman of the National Development and Reform Commission has written that this is the final goal of his Commission (writing in the Qiushi Magazine, in July 2012).

At the same time, staying with electricity, China's push to develop renewable energy resulted in clean energy generation rising by 31% to 106.8 billion kWh in July from a year earlier, according to the State Electricity Regulatory Commission. Here agai however, the pace of change may produce surprising results. This massive annual growth may in fact be a "high-water mark", due to many factors, including the industrial slowdown and shift away from energy-intensive industry, in China. As in Germany, the second-biggest country in the race to develop clean energy, worldwide, energy-economic bottlenecks and pinch points are making for slower growth rates of clean energy output, which are intensified by an economic context where demand growth for electricity, and other energy, may fall to very low levels near zero growth, for some while ahead.

The challenging context for corporate planners and strategists and government deciders may result in shorter-term contraction of energy company investment plans and programmes, in a new and uncertain, complex global framework. At this time, one of the few fundamentals supporting high oil prices is slow output growth, or declining oil output by a large range of companies, from the "historic oil majors" to the NOCs of several countries. China's rapidly changing energy scene underlines the rate of change and the high-ground potential of decline in total energy demand without a corresponding and similar decline in economic output. Other environment-related sectors, especially food and food processing, will also be among the likely winners, due to system-wide analysis of all energy and resource inputs highlighting where total energy demand, and total environment impacts are presently highest.