New+energy+industries+to+fuel+China's+green+growth+-+Christy+Ng

**Source:** http://news.xinhuanet.com/english2010/china/2011-04/09/c_13821061_3.htm **Editor: An (** BEIJING XINHUA) **Date:** 2011-04-09 21:03:20

__Brief Explanation:__  This article talks about China overtaking American as the world's largest energy consumer in 2010. As China's demand for energy increases rapidly,it decides to generate renewable energy using wind, solar, nuclear etc., to meet its energy demands. In its 12th 5-years plan, China is planning to invest 5 trillion yuan on new energy power by 2020 to achieve a lower carbon dioxide emission per unit of GDP.

The world oil supply is limited and yet human's demand for energy has increased rapidly (almost infinite). As China has a huge population, it becomes the world's largest energy consumer. Due to the determinant of number of consumers, the global price of fuels had been increasing over time. (Shown in Graph 1) Also, as fuel is an inelastic product, the increase in price will not result in a significant change in the quantity demanded. An inelastic product does not obey the law of demand (when the price of a produce increases, the quantity demanded will decreases).Therefore, the Chinese government understands that "traditional enery sources will run out sooner or later" and decides to enlarge the green energy industry by investing money, thereby increasing the supply of natural energy as a solution to the problem. As shown in graph 2, when the supply of energy increases (energy produced by natural resources), the price of energy will decreases back to the prove of equilibrium (P1), while the Quantity supplied increased from Q1 to Q3. The solution therefore increase the quantity supplied of energy and at the same time lower energy prices for the people.

__Vocabulary:__  **Development:** A process to improve the lives of people in a country (Qualitative) **Economic growth:** An increase in an economy's real level of output over time (Quantitive)  **Emission:** Production of carbon and other greenhouse gases that will pollute the atmosphere and enhance global climate change  **Consumer:** A person or organization that uses a commodity or service **Quantity demanded:** The quantity of a good or service that consumers are willing and able to purchase at a give price in a give time period. **Quantity Supplied:** The quantity of a good or service that producers are willing and able to produces at a give price in a give time period. **Determinants of Demand:** They are the non-price factors that determine demand for a product and lead to an actual shift of the demand curve to either the right or the left. Example includes income, substitute, taste, complement, etc. <span style="font-family: Arial,Helvetica,sans-serif;">**Determinants of Supply**: They are the non-price factors that determine supply for a product. Examples includes Costs of production, technology, number of producers, substitute producer goods and government action. <span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; line-height: 19px;"> **GDP:** Gross Domestic Product- The total value of all final goods and services produced in an economy in a year <span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; line-height: 19px;">**Investment:** The act of investing and commitment of money to a certain industry with an expectation of profit. <span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; line-height: 19px;">Elasticity: A measure of how much the quantity demanded of a product changes when there is a change in the price of the product. <span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; line-height: 19px;">**Short Run**: That period of time in which at least one factor of production is fixed. All production takes place in the short run <span style="font-family: Arial,Helvetica,sans-serif;">**Long Run:** That period of time in which all factors of production are variable, but the state of technology is fixed. All planning takes place in the long run.

__Graph:__ Graph 1: <span style="color: #000000; font-family: Arial,Helvetica,sans-serif; font-size: 13px; line-height: 19px;">Due to the determinant of number of consumers, the demand of fuels had been increasing over time. As you can see, as the population increases, the demand of fuels increases, therefore shifting the demand curve from D to D2. As a result, the both the price and quantity are increased.

Graph 2: <span style="font-family: Arial,Helvetica,sans-serif;">Firstly, due to the determinant of number of consumers, the demand of energy is increased. As the demand of energy increased (D to D2), the price is also increased from P1 to P2. So, when the supply of energy increases (energy produced by natural resources) from S to S2, the price of energy will decreases back to the prove of equilibrium (P1), while the Quantity supplied increased from Q1 to Q3. China's solution to the short of energy problem therefore increase the quantity supplied of energy and at the same time lower energy prices for the people.

Graph 3: The article states that " China added 90GW of additional hydropower, 25GW of wind power and 2GW of nuclear power during the period from 2005 to 2008." This process can be showed by graph 3. For example, at first, China is only producing with one wind power. To increase the amount of energy output,China has to increases the amount of plants in the planning of long run. (SRAC 1, SRAC 2, etc) Once an additional wind power is added, it is back to short run again. Meanwhile, "according to a report by the Economic Information Daily, China aims to install 290GW of new energy power by 2020, with a planned investment of 5 trillion yuan." Again, this means China is adding another SRAC (short run average cost) curve as an additional power plant is added. With all the SRAC curves, these result in the LRAC (as shown on graph). The article also states that "I n the long run, the sector has huge potential to spur growth and create jobs."

__Evaluation:__ I agree with the China's solution to the energy shortage problem. This is because the price of fuel energy is high now and many people might not be able to afford it. As shown in graph 2, when China build more natural energy plants, the supply of energy will increase, and as a result decreases the price back to equilibrium. Therefore, China's investment of new energy plants will allow people to benefit as most will be able to afford it. On the other hand, using natural resources to generate electricity decrease the carbon emission and therefore helps slow down global climate change. This is also beneficial to all people. As China has aimed for a "17 percent reduction in carbon dioxide emissions per unit of GDP over the 5 years", there will not only be economic growth but also development. Last, as the article states that in the long run, the sector will spur growth and create jobs for the people, again there will be less jobless people and therefore improving the lives in China. In conclusion, I think China's solution to the problem might cost a huge amount of money but it will bring a lot of benefits to the country. Therefore, this solution is efficient and useable.