The economic activities of production and consumption require the use of energy, and the
use of energy affects the environment in the forms of water pollution, air pollution and
emission of CO2 that causes global warming. Furthermore the use of energy from
exhaustible resources can create energy shortage in the future. The solutions to the
problems of energy and environmental degradation include (1) reducing the use of energy
in production and consumption, (2) increasing the use of energy-saving and
environmentally friendly methods in production and consumption and (3) promoting
technological innovations that will reduce the use of energy per unit of output (reduce
energy intensity or increase energy efficiency) or reduce pollution per unit of output to
achieve (1) and (2) in the future. To achieve (1) and (2) given the state of technology we
can regulate the use of energy by law or by economic incentives to limit the emission of
pollutants.
The last is an example in solving the problem of “externalities” in economics - the
undesirable external effects of production or consumption, the cost of which is not born
by the producer or consumer responsible. An economic solution to the problem of
externalizes is to charge the cost to the producer or consumer who is responsible.
In section 2, we describe the energy-environment problems during China’s recent
economic development. In section 3, we discuss the laws, government agencies
established and the policies introduced by the Chinese government to protect the
environment and reduce energy consumption. Section 4 deals with difficulties in
implementing China’s environmental policies. Section 5 discusses three most important
issues related to the attempts to solve the energy-environment problem. Section 6
concludes.