Brief Analysis on China’s Energy Law

On November 8, 2024, the Standing Committee of 14th National People’s Congress enacted the Energy Law of the People’s Republic of China at its 12th session. This marks the promulgation of China’s first overarching national statute governing the energy sector, which will take effect on January 1, 2025. The Energy Law serves as a high-level legislative framework, addressing core issues and laying the groundwork for future regulatory developments in the energy industry in China.¹

The legislative path of the Energy Law dates back to 1979. ² In 2007, the Office of the National Energy Leading Group released the first draft of the Energy Law for public consultation. Following this, the legislative process was temporarily suspended until 2015. In 2020, the National Energy Administration (NEA) issued the draft Energy Law to solicit public comments (for further details, please click here to read our Brief Analysis of the Energy Law (Draft for Comments)). After extensive deliberations and three rounds of review, the final version of the Energy Law was ultimately adopted by the Standing Committee of the National People’s Congress in 2024.

The Energy Law is structured into nine charters, covering General Provisions, Energy Planning, Energy Development and Utilization, Energy Market System, Energy Reserves and Emergency Measures, Energy Science and Technology Innovation, Supervision and Administration, Legal Liability, and Supplemental Provisions.

With respect to its scope of application, Article 2 of the Energy Law provides a clear definition of “energy,” which is described as “various resources from which useful energy can be derived directly or through processing or conversion, including coal, oil, natural gas, nuclear energy, hydro energy, wind energy, solar energy, biomass energy, geothermal energy, ocean energy, and electric power, heating power, and hydrogen energy, among others” This definition explicitly encompasses fossil energy, non-fossil energy (including renewable energy and nuclear energy) and hydrogen energy. 

In this article, we have made introductory remarks concerning the key provisions and highlights of the Energy Law, with a particular focus on the sections concerning energy development and utilization, given the constraints of this brief.

I. Purpose and Objective

Article 1 of the Energy Law articulates its purpose as follows: “advancing the high-quality development of energy, safeguarding national energy security, promoting green and low-carbon transformation and sustainable development of economy and society, advancing carbon dioxide peaking and carbon neutrality in a proactive and steady manner, and adapting to the needs of building a modern socialist country in all respects.” The emphasis on green & low-carbon transformation, sustainable development, and peak carbon dioxide emissions & carbon neutrality demonstrates the fundamental orientation of China’s energy policy as reflected in this comprehensive statute. 

Upon reviewing the full text of the Energy Law, we understand that its purpose and objective focuses on the following key aspects:

1. “Safeguarding Energy Security”

The Energy Law establishes a robust framework to ensure national energy security through the following mechanisms:

First, the law aims to “improve the energy reservation system and the energy emergency mechanism,” implementing a model that “government reserves shall be combined with enterprise reserves, and physical reserves shall be coordinated with production capacity reserves and mineral deposits reserves” (Chapter I (General Provisions), Article 7; Chapter V);

Second, it mandates the “develop and improve energy planning” on both a comprehensive and sector-specific basis, extending across national, regional, provincial, autonomous regions, and municipalities directly under the Central Government (Chapter II);

Third, it calls for “develop and improve energy development and utilization policies in a classified manner” (Chapter I (General Provisions), Article 5; Chapter III), with tailored policies designed for different types of energy resources (see subsequent analysis for details);

Fourth, “enterprises that undertake the supply of energy such as electric power, fuel gas, and heating power” are required to guarantee that energy users within their service areas “obtain safe, sustainable, and reliable energy supply services” (Article 36);

Fifth, the law reinforces the development and protection of energy infrastructure. The people’s governments of provinces, autonomous regions, and municipalities directly under the Central Government shall “according to the energy planning, reserve land and sea for the construction of energy infrastructure and include it in the territorial spatial planning.” Furthermore, enterprises operating energy transmission pipeline network facilities shall “guarantee the operation security of energy transmission pipeline network systems” (Article 37).

Notably, Article 79 explicitly provides that organizations and individuals outside the territory of the People’s Republic of China that conduct any acts compromising the national energy security of the People’s Republic of China shall be held legally liable in accordance with the law.

2. “High-Quality Development of Energy” 

The concept of “high-quality development of energy” as envisioned by the Energy Law aims to achieve efficient energy utilization, environmental protection, and sustainable economic and social development, while ensuring national energy security. ³ To realize this objective, the Energy Law provides a comprehensive framework in Chapter I (General Provisions) and subsequent chapters, addressing the following key aspects: “strengthening energy conservation management”, “promoting the development and utilization of energy”, “establishing a robust energy market system”, “enhancing the energy standard system”, “encouraging scientific and technological innovation in energy”, and “advancing international energy cooperation”.

In particular, Article 5 underscores a strategic shift from the “dual control of energy consumption” to the “dual control of carbon emissions.” The provision notes that “the state shall establish a new mechanism for the comprehensive transformation from the dual control of the total amount and intensity of energy consumption to the dual control of the total amount and intensity of carbon emissions, and accelerate the construction of the institutional system on the dual control of the total amount and intensity of carbon emissions”. This provision elevates the “dual control of carbon emissions” proposed in the Opinions on Promoting the Gradual Transition from Dual Control of Energy Consumption to Dual Control of Carbon Emissions (《关于推动能耗双控逐步转向碳排放双控的意见》in Chinese) issued by the Central Comprehensively Deepening Reforms Commission in July 2023, from policy document to national statute.

Furthermore, Chapter V (Energy Market System) of the Energy Law emphasizes the development of an energy market. Specifically, Article 41 provides that “the state shall promote the independent operation of natural monopoly links and the market-oriented reforms in competitive links in the energy field”, Article 42 stipulates that “promote in a coordinated manner the building of unified national trading markets for coal, electricity, oil, natural gas and other energy, promote the establishment of market trading institutions or trading platforms featuring complete functions and well-regulated business operations, expand the scope of trading methods and trading products in accordance with the law, and improve trading mechanisms and trading rules”; and Article 45 advocates for the establishment of “an energy price formation mechanism that is commensurate with the socialist market economic system and is mainly determined by factors such as status of energy resources, product and service costs, market supply and demand, and sustainable development status”.

3. “Green and Low-Carbon Transformation and Sustainable Development”

This objective aligns closely with the goal of “high-quality development of energy.” The Energy Law prioritizes the aim of “peak carbon dioxide emissions and carbon neutrality”, establishing a comprehensive framework for achieving a green and low-carbon transformation which includes, among others, “advance the safe, reliable and orderly replacement of fossil energy with non-fossil energy” (Article 22), “improve the guarantee mechanism for the consumption and absorption of electricity generated from renewable energy sources” (Article 23), “make terminal energy consumption cleaner, more low-carbon, more efficient and more intelligent” “establish a green energy consumption promotion mechanism through the implementation of the renewable energy green electricity certificate and other systems”, “Public institutions shall give priority to the purchase and use of renewable energy and other clean and low-carbon energy and energy-saving products and services” (Article 34), and energy users shall rationalize their energy consumption (Article 35).

II. Development and Utilization of Non-Fossil Energy

As discussed above, to achieve the objective of green and low-carbon transformation and sustainable development, the Energy Law establishes a framework for energy substitution, prioritizing the replacement of fossil energy sources with non-fossil alternatives.

Under the Energy Law, non-fossil energy sources include renewable energy and nuclear energy. Renewable energy is defined as “energy that can be sustainably replenished and renewed through natural processes during a relatively short period of time, including hydro energy, wind energy, solar energy, biomass energy, geothermal energy, and ocean energy, among others” (Article 75). 

The Energy Law places emphasis on “classification” in the formation and refinement of energy development and utilization policies. It advocates for the “priority utilization” of renewable energy, establishing a system that encourages the substitution of non-fossil energy sources for fossil fuels. Specifically, it mandates “support the priority development and utilization of renewable energy, advance the safe, reliable and orderly replacement of fossil energy with non-fossil energy, and increase the proportion of non-fossil energy consumption” (Article 22).

The competent department of energy under the State Council is tasked with setting medium- and long-term targets for the development and utilization of non-fossil energy sources. These targets will be monitored annually and made publicly available (Article 22).

With regard to the consumption of renewable energy, the Energy Law requires the national energy authorities to establish a minimum target for the proportion of renewable energy in overall energy consumption. It also strengthens the improvement of the guarantee mechanism for the consumption and absorption of electricity generated from renewable energy sources. “Electricity supply enterprises, electricity sales enterprises, relevant electricity users, and enterprises using self-supply power plants for power supply, among others, shall assume the responsibility for consuming and absorbing electricity generated from renewable energy sources in accordance with relevant provisions issued by the state” (Article 23).

The Energy Law provides detailed provisions for the development and utilization of various specific non-fossil energy sources as follows:

• Wind energy and solar energy: The law emphasizes “promotion of the development and utilization”, “adhere to both centralized and distributed development, accelerate the construction of wind power and photovoltaic power generation bases, support the nearby development and utilization of distributed wind power and photovoltaic power generation, develop offshore wind power in a rational and orderly manner, and vigorously develop solar thermal power generation” (Article 25);

• Biomass energy: The law encourages “the rational development and utilization of biomass energy”, adapting to local conditions (Article 26);

• Hydropower: “The state shall properly balance hydropower development and ecological conservation, and strictly control the development and construction of small hydropower stations” (Article 24);

• Nuclear power: “The state shall develop nuclear power in a proactive, safe and orderly manner” (Article 27), and the law mandates that the State shall “enhance the administration and supervision of the planning, site selection, design, construction and operation of nuclear power plants and other links according to their functions” (Article 27).

III. Development and Utilization of Fossil Energy

While prioritizing the safe and orderly substitution of non-fossil energy for fossil energy, the Energy Law also acknowledges the fundamental role of fossil energy in ensuring energy supply and national energy security. Accordingly, the law promotes development in a reasonable manner and using fossil energy in a clean and efficient way (Article 22). The specific provisions are outlined as follows: 

• Coal: “The state shall optimize the layout and industrial structure of coal development, encourage the development of circular economy in coal mining areas, optimize the coal consumption structure, promote the clean and efficient utilization of coal, and maximize the basic guarantee and system regulation roles of coal in the energy supply system” (Article 28);

• Petroleum and natural gas: The state shall “strengthen the exploration and development of oil and natural gas resources, and enhance the capacity for securing the domestic supply of oil and natural gas”. “Equal importance shall be given to onshore and offshore development of oil and natural gas, and the large-scale development of unconventional oil and gas resources such as tight oil and gas, shale oil, shale gas, and coalbed methane shall be encouraged.” “The state shall support the rational development and utilization of new types of fuels and industrial raw materials that can replace oil and natural gas” (Article 29);

• Coal-fired power: “The state shall promote the clean and efficient development of electricity from coal-fired power plants, make reasonable layout for the construction of coal-fired power plants according to the need for stable operation of the power system and power supply guarantee, and improve the capacity for regulation of coal-fired power generation” (Article 30).

IV. Development and Utilization of Other Energy Resources

In alignment with the overarching goals and objectives outlined in Section 1 of this article, the Energy Law sets forth key provisions to support the development and utilization of other energy resources:

• Power system: The Energy Law mandates “the state shall accelerate the construction of a new type of power system, strengthen the coordinated construction of power sources and power grids, promote the intelligent transformation of power grid infrastructure and the construction of smart microgrids, and improve the power grid’s capacity to accept, allocate, and regulate renewable energy” (Article 31);

• Energy storage: “The state shall make reasonable layout for and develop and construct in a proactive and orderly manner pumped storage power stations, promote the high-quality development of new types of energy storage” (Article 32);

• Hydrogen energy: “The state shall promote the development and utilization of hydrogen energy in a proactive and orderly manner to promote the high-quality development of the hydrogen energy industry” (Article 33);

• Energy services: “The state shall encourage the development of distributed energy and the comprehensive energy services of complementary development and joint supply of mixed energy, vigorously promote market-oriented energy conservation services such as contract energy management” (Article 34);

• Green certificates: “The state shall establish a green energy consumption promotion mechanism through the implementation of the renewable energy green electricity certificate and other systems” (Article 34);

• Enterprises involved in the supply of electricity, gas, thermal and other energy: These enterprises are required to “ensure that energy users within their business areas obtain safe, sustainable, and reliable energy supply services; and shall neither refuse nor interrupt the provision of energy supply services without statutory or agreed reasons nor increase prices, illegally charge fees, reduce the quantity of supply, or restrict the quantity of purchase without approval.” Additionally, enterprises shall “publicize service specifications, charging standards, and channels for filing complaints, among others, and provide public inquiry services for energy users” (Article 36);

• Enterprises operating energy transmission pipeline network facilities: “Enterprises operating energy transmission pipeline networks shall improve fair access and use mechanisms, disclose to the public the information on energy transmission pipeline network facility access, transmission capacity and operation conditions as required, and open and provide energy transmission services to eligible enterprises and other business entities in a fair and non-discriminatory manner” (Article 43).

V. Supervision Administration & Legal Liability

Chapter VII of the Energy Law sets forth comprehensive provisions regarding the supervisory and inspection duties of the competent energy authorities and related measures (including entering energy enterprises, dispatching institutions, energy market trading institutions, energy users, and other entities to conduct on-site inspections, interviewing relevant personnel, and reviewing and photocopying the documents, materials and electronic data, etc.). The inspected entities and their relevant personnel shall support this supervision, and may not refuse or obstruct. (Article 64). Furthermore, the law stipulates that the energy department of the State Council shall, in conjunction with relevant departments of the State Council, strengthen the construction of the credit system for the energy industry, and establish the credit record system in accordance with relevant provisions issued by the state (Article 66).

Chapter VIII of the Energy Law stipulates the legal consequences for violations of its provisions, as follows:

• Officials of energy authorities or other related agencies: Any person who abuses his or her power, neglects his or her duties, practices favoritism or makes falsification for personal gains in violation of the Energy Law, shall be subject to disciplinary actions in accordance with the law;

• Enterprises involved in the supply of electricity, gas, thermal and other energy: An enterprise that violates its statutory obligations to ensure energy supply may be ordered to rectify the breach and may face administrative penalties. Relevant supervising officials and directly liable persons may also be subject to disciplinary actions. More specifically, if an enterprise fails to publicize service specifications, charging standards, or channels for filing complaints, among others, or fails to provide public inquiry services for the energy user, it may be ordered to rectify the non-compliance, or receive a warning or a notice of criticism. Should the enterprise refuse to comply, it may be fined between RMB 100,000 and RMB 200,000.

• Enterprises operating energy transmission pipeline network facilities: An enterprise that fails to open and provide energy transmission services to eligible enterprises or other business entities in a fair and non-discriminatory manner may be ordered to take corrective action, or receive a warning or notice of criticism. In cases of non-compliance, it shall be fined not more than twice the amount of the economic losses of the relevant business entity. Additionally, in severe violations, relevant supervising officials and directly liable persons may face disciplinary actions.

  Failure to disclose to the public the information on energy transmission pipeline network facility access and transmission capacity and operation status as required  may result in an order for taking corrective action, a warning or a notice of criticism. Continued non-compliance may lead to fines ranging from RMB 100,000 to RMB 200,000.

• Energy enterprises: An enterprise that does not provide relevant data on prices and costs, as required may be ordered to rectify the breach, receive a warning or notice of criticism, and face fines of between RMB 100,000 and RMB 200,000 for continued non-compliance.

Moreover, the Energy Law stipulates penalty provisions on energy enterprises, energy users, and other relevant entities or individuals who fail to fulfill their obligations of energy emergency supply (Article 73).

VI. Outlook

The enactment of the Energy Law not only consolidates and codifies existing regulations and practices within the energy sector but also introduces new objectives and requirements. It is anticipated that relevant national authorities will issue supplementary policies and implementation guidelines in the near future to provide specific interpretations of the law. Such measures will be essential to address potential inconsistencies between the new Energy Law and existing sector-specific statutes, regulations, and administrative rules, as well as to give detailed guidance on the Energy Law’s new requirements on higher-level law. We will keep a close eye on the developments and post updates when they occur.

1. Dai Xiaohe, “China passes the Energy law, to take effect on January 1, 2025” (in Chinese:《新华社权威快报丨我国有了能源法！2025年1月1日起施行》), Xinhuanet (http://www.xinhuanet.com/politics/20241108/df93f27e4a6742dd868bc241bb82184c/c.html), November 8, 2024

2. Pan Qiuxing and Jiang Li, “Energy Law and Electricity Law (revision) Listed in the Legislation Plan, What Legal Clout Will be Given to the Energy Reform?” (in Chinese:《能源法、电力法（修改）列入立法规划，会如何总结能源改革？》), Southern Energy Watch (南方能源观察), September 15, 2018.

3. Wang Xuemian, “Three Issues Addressed by the Energy Law” (in Chinese:《<能源法>解决的三个问题》), at the WeChat public account “电联新媒” (https://mp.weixin.qq.com/s/FXCfcHgOORjar6FN4WX30w), November 9, 2024.