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The Arctic for China's Green Energy Transition

By | Article
November 16, 2023
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A geothermal power plant in a mountainous landscape

The Yangbajain geothermal power station, located in Tibet Autonomous Region, China. Photo: Fanghong

The Arctic Institute China Series 2023

In response to Chinese President Xi Jinping’s call for an ‘Energy Revolution’ at a Chinese Communist Party (CCP) Central Financial and Economic Affairs Leadership Group meeting in 2014,1) the Chinese Government issued Energy Production and Consumption Revolution Strategy (2016-2030),2) which aims to promote strategic nation-wide energy transition to a green low-carbon energy system. More recently, at the 76th United Nations General Assembly in September 2021, President Xi further announced two ambitious carbon goals that China “aims to have carbon dioxide (CO2) emissions peak before 2030 and achieve carbon neutrality before 2060”.3) These goals have since been incorporated into China’s national economic and social development strategy. For example, the transition to a clean energy system and the pursuit of low-carbon development are recurring themes in China’s 14th Five-Year Plan (2021-2025) and the Vision 2035.4) Despite that, achieving these goals presents a significant challenge to China, the world’s second-largest economy and the largest energy consumer, with a heavy reliance on fossil fuels, especially coal. Therefore, a rapid and comprehensive green energy transition is needed in China to fulfill these ambitious climate goals. Meanwhile, the Arctic, an “emerging energy province”,5) has attracted increasing global attention due to its vast energy potential, particularly in oil and gas, with China showing considerable interest.

Various studies have pinpointed the strategic value of Arctic oil and gas for China. These energy reserves can enhance China’s energy security by increasing and diversifying its energy supply, particularly in the context of rapidly growing domestic energy demand and its heavy reliance on energy imports.6) While acknowledging the strategic value of Arctic energy resources for China’s energy supply, this article argues that they also have a role in China’s energy transition. Specifically, this study examines Arctic liquified natural gas (LNG), wind energy, and geothermal energy in China’s green transition. This study reveals different dynamics that each of these three energy sources plays within China’s green transition. Chinese mainstream discourse has greatly valued importing LNG from the Arctic to promote a domestic green transition, given its cleaner properties compared to coal and oil. The role of Arctic wind and geothermal energy development technology and experience is also recognized in China but less prominently featured in mainstream discussions. Furthermore, this study highlights that the tendency to overemphasize the role of Arctic LNG in energy transition may create a misleading perceptionof green progress. Such a tendency may unintentionally slow down the development of renewable energy, derived from natural sources that are continuously and naturally replenished.7) Unlike LNG, these renewable energies form the genuine foundation for a green energy transition.

Does Arctic LNG help China’s green energy transition?

LNG is natural gas converted to a liquid state (around -162 °C) with certain impurities, such as CO2 and dust, removed. The volume of LNG is about 600 times smaller than natural gas at standard atmospheric pressure, which greatly facilitates gas transportation without relying on pipelines and improves the gas storage capacity.8) More importantly, compared to other fossil fuels, LNG stands out for its reduced climatic impact due to its noteworthy carbon emission reduction:9) its use emits around 40 percent less CO2 than coal and 30 percent less than oil (specific figures vary among sources).10) In this regard, LNG has been long perceived as the cleanest fossil fuel,11) or even “clean” and “green” energy,12) and a reliable back-up for renewable energy,13) or more bluntly, “a perfect transition fuel” to clean energy production and “the fuel for change”,14) particularly in industries.

China has heavily invested in major Arctic LNG projects in the Russian Arctic, such as Yamal LNG and Arctic LNG 2, both of which are operated by Novatek, a publicly-traded Russian energy company on paper. China owns substantial stakes in these two projects. With China National Petroleum Corporation (CNPC) and the Silk Road Fund, Chinese shares account for around 30 percent of Yamal LNG. This represents the first mega overseas energy project since the launch of the Belt and Road Initiative (BRI) by the Chinese Government in 2013.15) It has also been hailed as the “corner stone” and “flagship project” of Sino-Russian cooperation by the leaders of Russia and China.16) Similarly, with CNPC and China National Offshore Oil Corporation (CNOOC), China secured a 20 percent share of Arctic LNG 2. Besides being a key shareholder, China is also a crucial buyer in Russian Arctic LNG projects. For example, CNPC holds a 20-year contract with Novatek to purchase 3 million tons of LNG annually, nearly 20 percent of the total production capacity of the first three factory lines of Yamal LNG.17) Yamal LNG was launched in late 2017, and China received the first shipment via the Northern Sea Route in 2018.18) Meanwhile, Arctic LNG 2 is still under construction, with the opening of the first production line originally scheduled in December 2023. Although NOVATEK has projected their confidence in completing the production lines on schedule,19) the original timeline has been complicated by Western sanctions against Russia following its invasion of Ukraine. For instance, these sanctions led to the withdrawal of key Western engineering companies, such as France’s Technip and Italy’s Saipem, from the project. Regardless of the future of Arctic LNG 2, Chinese energy companies already signed purchase agreements with Novatek for around 40 percent of the estimated LNG production.20)

Besides guaranteeing domestic energy supply and energy security, China’s enthusiasm for Arctic LNG projects is also guided by another crucial rationale: Arctic LNG resources can facilitate China’s energy transition and help China achieve its ambitious carbon goals. The significance of Arctic LNG for China’s green energy transition has been frequently highlighted by China’s state-run and top media channels, such as Xinhua News Agency, China Central Television, People’s Daily, Guangming Daily, and Chinese state-owned major energy enterprises, such as CNPC, the largest Chinese shareholder in the above-mentioned LNG projects and the largest Chinese oil and gas producer and supplier. For example, before the first production of Yamal LNG, the project had already been lauded in news reports by People’s Daily for its significance in advancing China’s energy transition, with LNG being described as clean energy fuel.21) Since the first shipment to China, the role of Yamal LNG in facilitating China’s energy transition has been reiterated by various state-run influential mass media.22) In a similar vein, the Chairman of CNPC, Wang Yilin, highlighted the great potential of Yamal LNG in China’s ongoing energy transition during his on-site visit to the Yamal Peninsula in July 2017.23) A public statement by CNPC further pointed out that Yamal LNG and Arctic LNG 2 are joint pillars of China’s Polar Silk Road, whose production can “further enrich the sources of China’s clean energy supply and accelerate the adjustment of China’s energy structure”.24)

Despite occasional concerns in China about the genuine purity of LNG,25) the prevailing discourse within the country suggests Arctic LNG could play a vital role in China’s green transition. However, it is important to recognize that LNG still has an environmental footprint.26) As highlighted by the United Nations Environment Program (UNEP), LNG is not “as climate-friendly as once thought”,27) mostly due to its substantial methane emissions during the upstream and regasification stages.28) Despite the far shorter atmospheric lifespan of its emissions (fading away in a decade on average while CO2 can last for centuries), methane is the second most important greenhouse gas (GHG) contributor to climate change29) and has about 80 times more warming power than CO2 over the short term.30) Furthermore, the development of Arctic LNG projects carries additional climate risks, given that the upstream stage occurs in the environmentally vulnerable Arctic. When Arctic LNG tankers arrive in China, the transported LNG must be converted back to its gaseous state through the regasification process, a stage in which both direct and indirect methane emissions may occur. This situation may pose a challenge to China’s broader efforts to reduce GHG emissions in the near term and adds a complex layer of the country’s climate change mitigation and green energy transition strategy, particularly given the methane’s significant short-term warming effect.

Overall, since natural gas is a cleaner alternative compared to ‘dirtier’ fossil fuels such as coal, Arctic LNG may have a role to play in China’s green transition. However, it is essential to recognize the inherent fossil fuel nature of LNG, along with the significant methane emissions. Therefore, it is important not to overemphasise the Arctic LNG’s role in China’s green transition in influential domestic discourses. Exaggerating its role may lead to misperception and hinder the fundamental efforts to achieve China’s ambitious climate goals, particularly given the considerable methane leaks during regasification in China and methane’s potent heat-trapping power in the near term. Additionally, China’s strong interest in Arctic LNG may not benefit its image as a responsible Arctic stakeholder when taking the substantial methane emissions during extracting and processing LNG in the environmentally sensitive Arctic into account. In short, stakeholders in China’s green transition would be wise to approach Arctic LNG with caution as a potential transition fuel, prioritising sustainable and renewable energy sources in China’s energy mix, rather than over-emphasizing the role of Arctic LNG.

What about Arctic renewables?

China’s first-ever Arctic Policy in 2018 alluded to the “abundance of geothermal, wind, and other clean energy resources” in the Arctic and highlighted that China “will work with the Arctic States to strengthen clean energy cooperation, increase exchanges in respect of technology, personnel and experience in this field, explore the supply of clean energy and energy substitution, and pursue low-carbon development”.31) While it remains unknown exactly what “other clean energy resources” include and whether LNG is a part of them, China appears to be interested in Arctic geothermal and wind energy for international cooperation in clean energy. Different from that LNG being shipped from the Arctic to China, cooperation on geothermal power and wind power is mostly about technology, personnel and experience exchange, as indicated in China’s Arctic Policy.

Wind power technology from the European Arctic States

Denmark, one of the Arctic states, pioneered wind energy and remains a world leader in the industry. Back in 2005, the Danish Government and the Chinese National Development and Reform Commission (NDRC) launched the Wind Energy Development (WED) Program to help China improve its wind power technology development in general and help Chinese local authorities tailor wind energy development plans.32) Since then, Denmark has played a key role in assisting China with its rapid wind power development. One example is that the Danish Energy Technology Development and Demonstration Programme (EUDP) and the Chinese Ministry of Science and Technology (MoST) started a new cooperation project in 2014, particularly focusing on “determining how Chinese wind turbines situated in mountainous regions can best be exploited”.33) Wind power cooperation between China and the Arctic states is not limited to Sino-Danish cooperation. The Nordic region has rich wind resources due to its geographical location. The Nordic countries have generally developed advanced wind power technology to cost-effectively generate, store, and distribute wind energy. China has been cooperating with these European Arctic states on wind energy development to varying degrees. For instance, China and Norway have been cooperating on offshore wind energy since 2010,34) with Norway holding advanced offshore wind energy technology and expertise. A Memorandum of Understanding (MoU) on Sino-Norwegian cooperation in the wind power sector signed between Innovation Norway and the Chinese Wind Energy Association in 2019 further promoted bilateral cooperation in the wind energy industry, particularly in the offshore wind energy sector, according to Knut R. Sørlie, the then Commercial Counsellor at Royal Norwegian Embassy in Beijing and the Head of Innovation Norway in China.35)

China experienced a tremendous development in wind energy over the past decade, exemplified by its emergence as the world’s largest manufacturing base for wind power equipment and a four-fold increase in installed wind power capacity from 2012 and 2022.36) Wind power accounted for more than 6 percent of China’s total electricity consumption in 2020, and this figureincreased to approximately 8 percent in 2021, with these percentages calculated by the author based on the data from the Chinese National Energy Agency (NEA). It is difficult, if not impossible, to assess the exact impact of cooperation with the pioneering Nordic wind power industry on China’s rapid and promising wind power development. Nevertheless, the European Arctic countries’ technological know-how and expertise have undeniably been instrumental in advancing the Chinese wind energy industry, and the sector’s rapid and steady growth could contribute to China’s progress towards its green goals.37)

Geothermal energy technology from Iceland

Iceland is the world leader in green transition and the utilisation of geothermal energy. According to the Icelandic Government’s Energy Policy to the year 2050 published in 2020,38) geothermal and hydropower had accounted for 100 percent of the nation’s energy supply of electricity and heating. Besides its original use in bathing and washing, geothermal energy has been predominantly used for space heating and electricity generation in Iceland.39) The export of Icelandic know-how and success in utilizing geothermal energy to China began in the 1980s. Sino-Icelandic cooperation in geothermal energy utilization has deepened since Arctic Green Energy Corporation in Iceland and China Petroleum & Chemical Corporation’s Star Petroleum (Sinopec Star)40) co-funded Sinopec Green Energy Geothermal Development Corporation in 2006.41) This joint venture company became “the world’s largest geothermal district heating company with 160 heat centrals across 20 cities/counties in China”42) in ten years and has been set as one of the first “Geothermal Utilization Demonstration Units” by the Ministry of Natural Resources and the NEA in China.43) Moreover, the Ministry of Science and Technology of China and the Ministry of Education, Science and Culture of Iceland signed an Memorandum of Understanding (MoU) on establishing a Sino-Icelandic Geothermal Research and Development (R&D) Center in 2015, and this R&D Center was successfully set up one year later.44) Building on this collaboration, the two countries signed another MoU in 2018 to establish a geothermal working group, providing “new platforms for bilateral cooperation”.45)

China is home to abundant geothermal resources, accounting for 7.9 percent of the world’s total resources, with the majority located in the populated and economically prosperous eastern region with the highest energy demand within the country.46) Chinese geothermal energy reserves are primarily mid- to low-temperature, making them more suitable for space heating in winter, a role traditionally filled by coal. However, this does not imply that mid-/low-temperature geothermal energy cannot be harnessed for electricity generation. China also possesses high-temperature geothermal resources that are more suitable for electricity generation, mainly distributed in Tibet, Yunnan and Sichuan.47) Moreover, the Chinese Government clearly recognizes the important role of geothermal energy in achieving green energy transition. Promoting the development and utilization of geothermal energy has been one key goal in China’s 13th and 14th Five-Year Plans for Renewable Energy Development. Specifically, the latest 14th Five-Year Plan for Renewable Energy Development (2021-2025) encouraged the local authorities to actively promote large-scale geothermal energy development, including comprehensively developing geothermal energy for district heating and gradually promoting the development of geothermal power generation.48) According to the Sinopec Green Energy Geothermal Development Corporation, their efforts in geothermal energy have replaced 5.92 million tons of coal, thereby reducing CO2 emissions by 11.25 million tons.49) Nevertheless, despite China’s significant reserves of geothermal energy and considerable progress in this sector, technological challenges have hindered the larger-scale and higher-quality development and utilization of these resources.50) To address the challenges, the well-established Sino-Icelandic cooperation on geothermal energy is playing and will continue to play a key role through the joint venture geothermal energy company, the R&D center, the dedicated geothermal working group, and potentially additional cooperation mechanisms in the future.

Conclusion

In conclusion, China recognizes the value of the advanced technology from the Arctic in development and utilization of wind energy and geothermal energy, thereby facilitating its national green transition. Besides the two examples analyzed in this article, China also values the Arctic cutting-edge technological development in renewable energy in general, as demonstrated by initiatives like the China-Finland Energy Cooperation Demonstration Project launched in Guangzhou in 2022 that concerns several clean energy sectors to expedite China’s green transition.51) However, it is worth noting that Arctic renewable energy receives far less media attention in China than Arctic LNG. Influential Chinese state-run mass media and the gas industry tend to overemphasize the role of importing Arctic LNG to promote domestic green transition.This focus may intentionally or unintentionally overlook the substantial methane leak associated with extracting, processing, and re-gasifying and the potent warming effects of methane in the near term. Such a tendency may create a misleading perceptionof green progress, slowing down the development of renewable energy sources, eventually hindering the realization of China’s ambitious climate goals.

Yue Wang is a Doctoral Researcher in International Relations at Tampere University (Finland) and a Visiting Researcher at the Arctic Centre, University of Lapland (Finland). This work was primarily supported by a Fudan-European Centre for China Studies (FECCS) Small Grant, awarded by the Department of Culture Studies and Oriental Languages (IKOS) at the University of Oslo, with the project period spanning from January 2023 to January 2024. Additionally, this work benefited from a mobility grant from Tampere University’s Climate Neutral Energy Systems and Society (CNESS) research platform that facilitated a research stay in Iceland in October 2022.

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