China’s new energy ministry demonstrates the country’s continued commitment to environmental protection and renewable energy.
Recent comments from senior communist party leaders indicate that the Chinese government intends to establish a new Ministry of Energy to streamline and consolidate authority for energy-related issues. The responsibility for these issues is currently dispersed among a variety of other ministries. The new ministry will be responsible for managing sectors including electric power generation, oil and natural gas in a bid to improve the workings of government and policymaking in relation to energy. However, the full extent of the new ministry’s authority remains unclear, including whether it will have oversight of China’s state-owned oil companies.
The new ministry will replace the National Energy Administration (NEA). The NEA is the current energy regulator, established a decade ago under the auspices of the National Development and Reform Commission (NDRC) — a management agency with broad administrative and planning control over the Chinese economy. In addition to expanding NEA’s existing authority over energy issues, the creation of the new ministry elevates China’s energy regulator to equal status with NDRC and the other ministries, reporting directly to the State Council. This is significant as it represents structural reform reflecting the promotion of environmental protection to officially-endorsed ideology as part of “Xi Jinping Thought.”
The news reflects both China’s emphasis on developing renewable energy, as well as the continued importance of fossil fuels to the Chinese economy. China is the world’s biggest purchaser of oil and imports are expected to grow in the coming years. At the same time, China has become the world leader in renewable energy by a wide margin, accounting for one quarter of global renewable energy capacity. According to an Institute for Energy Economics and Financial Analysis report, China invested over US$44 billion in renewable energy projects in 2017.
Latham will continue to monitor and report on the new ministry’s next steps.
This post was prepared with the assistance of Olivia Featherstone in the London office of Latham & Watkins.