This paper analyzes the inter-relationship of energy development and environmental constraints in China, It examines the effects of economic development, investment, energy trade and environmental Limitations in shaping energy development, It highlights the tensions between institutions involved in energy development, energy conservation and environmental protection, and concludes that total fuel mix in China will be diversified in the future, The share of coal in primary energy production and consumption will increase in the short time span till 2020, and diminish gradually thereafter, being largely replaced by gas, nuclear and renewables, China will become a big oil importer, due to increase in demand and resource limitations, Meanwhile, coal export will increase in the long run, SO2 and CO2 emissions will become potentially larger in the future, because of the speed of economic growth and lack of effective control measures. Institutional bottlenecks, and political preference to solving local environmental problems, will affect actions to eliminate global environmental risks, There exist huge investment potentials for energy development from both international and domestic private investment funds, Energy efficiency will continue to improve, associated with gradual decline of non-commercial energy use and increasing share of commercial energy in final consumption. Energy conservation holds the key for sustainable energy development, which should be promoted at the national and local levels with demand management as a focus in policy implementation.