China's Energy Conundrum: Clean Ambitions, Fossil Fuel Realities
China's clean energy sector is booming, but the country's energy landscape remains deeply intertwined with coal, oil, and gas. Over the past decade, China has witnessed an extraordinary growth in renewable energy and clean technologies, outpacing the overall economy. In 2025, China's clean energy investments reached a staggering 7.2 trillion yuan ($1 trillion), accounting for over 11% of its GDP and growing three times faster than the broader economy. Solar, batteries, and electric vehicles have been the primary drivers of this growth, contributing over 90% of the country's investment rise.
But here's the catch: despite China's impressive clean energy surge, fossil fuels still dominate its energy mix. Coal, in particular, remains the bedrock of China's energy sector, supplying over 50% of electricity generation and 60-70% of total primary energy consumption. With an annual coal consumption of over 4 billion tons, China accounts for more than half of the world's coal use. In 2023, China's coal imports reached a record high of 474 million tons, solidifying its position as the world's largest coal consumer and importer.
And the country's reliance on coal isn't slowing down. In 2024, China embarked on a construction spree of new coal-fired power plants, with 94.5 GW of new capacity initiated and 3.3 GW of previously suspended projects resumed. This heavy coal dependence has led to significant air pollution and carbon emissions, despite President Xi Jinping's promises to curb coal expansion.
Oil is another critical component of China's energy equation. Consuming around 16.3-16.4 million barrels per day, China is the world's second-largest oil consumer. In 2024, the country imported approximately 11.1 million b/d of crude oil, accounting for about 74% of its consumption. Russia, Saudi Arabia, and Iraq are China's primary crude suppliers, with Russian imports exceeding 2 million bpd, or roughly 20% of China's total imports. Interestingly, China receives around 900,000 bpd of Russian oil via pipeline, with the rest arriving by sea, sometimes using a "shadow fleet" to circumvent Western sanctions.
China is also rapidly expanding its domestic oil production, with output reaching 4.3 million b/d in 2025, up from 3.8 million b/d in 2020. This push is part of a broader strategy outlined in the 2019-2025 "Seven-Year Action Plan" to increase domestic production, especially from offshore and unconventional reserves. However, the high costs of extraction from mature fields mean domestic output cannot meet demand, necessitating substantial imports.
Natural gas, meanwhile, serves as a vital bridge fuel in China's energy transition. As the world's third-largest natural gas consumer, China is increasing its gas usage across industrial, residential, and power generation sectors. Natural gas is seen as a key player in reducing coal reliance, improving air quality, and balancing renewable energy sources. China's natural gas consumption reached ~428 billion cubic meters in 2024, up from 330 bcm in 2020. The country relies on a mix of domestic production and imports, with the industrial and city-gas sector driving demand. China's LNG imports are expected to rebound in the current year, with projections of a 10% increase to nearly 76 million metric tons after a decline in 2025 due to high domestic production and lower demand. China imports LNG primarily from Australia, Qatar, and Russia, and also receives substantial gas via pipelines from Russia and Turkmenistan.
China's dominance in the global clean energy sector is not solely due to its massive investments and technological advancements. It also stems from its near-monopolistic control over the rare earth elements (REEs) supply chain. China controls approximately 60-70% of REEs mining and over 90% of processing and refining. REEs like neodymium and dysprosium are vital for high-strength permanent magnets in electric motors, enhancing power density and efficiency. These magnets are used in wind turbines to improve performance, especially in offshore direct-drive turbines without gearboxes. REEs such as yttrium, lanthanum, and cerium are also used in specialized solar components, even though they are not directly part of PV modules.
So, while China's clean energy ambitions are commendable, the country's energy reality is still deeply rooted in fossil fuels. This raises questions about the sustainability of China's energy transition and the potential environmental consequences of its continued reliance on coal, oil, and gas. How can China balance its clean energy goals with its fossil fuel dependencies? Is it possible to achieve carbon neutrality while maintaining such a heavy reliance on coal? These are questions that demand attention and discussion as China continues to shape the global energy landscape.
