The head of the International Energy Agency called on China to more quickly reduce subsidies on gasoline, diesel and electricity.
In an interview Wednesday with The Wall Street Journal, Nobuo Tanaka, executive director of the industrialized world's energy watchdog, said prices in China should reflect the fact that the age of cheap energy is over, a reality underlined by the Japanese nuclear crisis.
He said it is obvious that the nuclear industry's expected expansion will be curtailed in the wake of Japan's disaster in Fukushima prefecture, though he thinks the energy source will remain important. However, it carries lessons for the energy industry, he said.
"In the short term it is very difficult to predict the oil price or the energy price, but we know in the longer term the cheap-energy age is over," he said.
Mr. Tanaka said that while China has moved closer to market pricing of energy, including more frequent increases in retail gasoline prices, it continues to send "the wrong signal to the consumer" about energy costs.
He said the IEA "strongly recommends to this government phasing out fossil fuel subsidies."
The official is in Shanghai as part of the city's major auto show and will take part in a seminar on electric cars later in the week.
He said China could become the world leader in developing new energy sources but said Beijing will need to "vigorously" stick to its plans for the sector and "provide incentives to foreign companies to invest here."
Mr. Tanaka said individual governments have the right to reconsider how nuclear energy fits into their energy profiles, but he said nuclear remains a rare source of large-scale clean energy. "We think nuclear is a very good baseline resource," he said.
He said the IEA is in the process of reassessing the nuclear industry's likely role in global energy output, and it is too early to calculate how much of a hit the industry has taken in the wake of Japan's post-earthquake disaster at the Fukushima plant. "We know this has a significant impact for deploying nuclear reactors as well as the need for early retirement for old reactors," Mr. Tanaka said. "We know our optimistic scenario is no longer possible, but how much we still don't know the answer."
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