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Wednesday, April 6, 2011

China and the United States—A Comparison of Green Energy Programs and Policies

Richard J. Campbell
Specialist in Energy Policy

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 has set ambitious targets for developing its 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, and China surpassed the United States in 2010 with over 41 gw of installed wind power capacity. Notably, however, approximately one-third of that capacity is not yet connected to the power grid. 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. A hold on large and medium-scale hydropower project development has been lifted, with a virtual doubling of hydropower capacity planned. Most recently, China pledged ahead of the Copenhagen talks in 2009 that 15% of total energy consumption will come from non-fossil fuel sources by the year 2020. The 12
th Five Year Plan will encompass 2011 to 2015, and will further formalize the link to green energy with specific deployment goals and investment. China recognizes that developing its domestic renewable energy industry and building its manufacturing capacity will help it meet energy demands at home and win advantages in future export markets.

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, and was originally based on the incremental cost difference between coal and renewable energy power generation.

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.” China is the world’s largest market for new construction, and new building standards have been in development since 2005 with national energy design criteria for residential buildings. In the power generation sector, many smaller, less efficient coal-fired power plants have been closed.

In contrast to China, 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, for both countries, 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. Creating new, higher quality jobs could reasonably be said to be primary drivers of policy goals in both the United States and China.

Date of Report: March 30, 2011
Number of Pages: 29
Order Number: R41748
Price: $29.95

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