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Transforming China into a low-carbon economy

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Vehicles drive past a pedestrian bridge in the haze of Beijing, China, 5 November, 2016. (Photo: Reuters/Jason Lee).

In Brief

For the sake of national and international interests, China can no longer continue along its conventional path of encouraging economic growth at the expense of the environment.


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Chinese leaders have for some years been aware of the environmental challenges the country faces. In November 2012 at the 18th National Congress of the Central Committee of the Communist Party of China, China adopted a general policy of establishing an ‘ecological civilisation’. This places ecological goals at the same level of priority as existing policies on economic, political, cultural and social development.

One key issue now becomes how China will deal with the impacts of climate change. This presents a tremendous climate policy dilemma, not only for China but also for the world given the scale of China’s emissions and dynamic economy. This is true even in the context of the current slowdown of the Chinese economy, as the incremental additions of its level of growth are still significant at the global level.

China started to introduce strict climate change policy just before the Copenhagen summit in 2009, pledging to cut its carbon intensity by 40–45 per cent relative to 2005 levels by 2020. Then prime minister Wen Jiabao made it clear that China’s pledges were ‘unconditional and they are not dependent on the reduction targets of other nations’.

Then, the 12th five-year plan (FYP) for 2011–15 adopted a carbon intensity target as a domestic commitment. Under the target, energy intensity was to be cut by 16 per cent nationwide and carbon intensity by 17 per cent relative to 2010 levels.

While such unilateral commitments point to China’s determination to further decouple its energy use and carbon dioxide emissions from economic growth, it still raises the issue of whether the pledge was truly ambitious or just ‘business as usual’.

But the evidence suggests that China plans to continue to strengthen and to extend its commitments. For instance, under the joint China–United States climate statement announced by Chinese President Xi Jinping and US President Barack Obama in November 2014, China committed to cap its carbon emissions by about 2030. And, in March 2016, the National People’s Congress approved the aim to cut energy intensity by 15 per cent and carbon intensity by 18 per cent relative to 2015 levels by 2020 as part of the 13th FYP.

Industry accounts for about 70 per cent of China’s total energy consumption. To achieve China’s 2010 goal of reducing energy intensity by 20 per cent, the government has put much effort into changing the pattern of industrial growth. China established the Top 1000 Enterprises Energy Conservation Action Program in April 2006, involving 1008 enterprises in nine key industrial subsectors. According to China’s National Development and Reform Commission (NDRC), the program reached its reduction goals two years ahead of schedule.

In December 2011, the NDRC and 11 other central government organisations expanded on the Top 1000 program by introducing the 10,000 Enterprises Energy Conservation Low Carbon Action Program. This involves 16,078 enterprises, including industrial and transportation operations. In 2013 the program had already achieved total energy savings equivalent to 69 per cent of the total energy-saving goal of the 12th FYP.

With cities being responsible for more than 60 per cent of total energy consumption,  China has also started experimenting with low-carbon provinces and cities. A NDRC evaluation revealed that ten pilot provinces cut their carbon intensity by 21.5 per cent in 2014 compared to their 2010 level, a rate much higher than the national average of 15.8 per cent. 23 provinces and cities — including Beijing Guangzhou and Zhengjiang — have also formulated the Alliance of Peaking Pioneer Cities, committing to peaking emissions ten years earlier than the national goal.

The NDRC has also established a series of incentives to shut small, inefficient power plants. By the end of 2010, the total capacity of decommissioned smaller and older units had increased to more than the entire power capacity of the United Kingdom.

Proof of the Chinese government’s commitment to climate mitigation is also evidenced by restrictions on all new coal generation facilities. In March 2016, the National Energy Administration ordered 13 provincial governments to stop issuing approvals for such plants until the end of 2017. It also directed 15 provinces to cease the construction process for new coal-fired power plants that had already been approved.

And, after years of simply taking advantage of overseas orders to drive down the cost of manufacturing solar panels, a solar power market has also been created, with the establishment of solar power feed-in tariffs in July 2011.

China is not only setting ambitious renewable energy goals, but is also making dramatic efforts to meet these goals. In terms of committing finance, as far back as 2009 China’s renewable energy investments of US$39.1 billion exceeded the United States’ US$22.5 billion — knocking it from the top spot for the first time in five years. China’s investments as a share of GDP are more striking again. In 2010, renewable energy investments reached 0.55 per cent of GDP, meaning that China’s relative domestic investment was more than double that of the United States, at 0.23 per cent.

The future of China’s climate change mitigation commitment also looks promising, with China already announcing that it will launch a national emissions trading scheme (ETS) by 2017. But the planned ETS does present a number of challenges, including how to create reliable allowances that are comparable across sectors and regions. National ETS legislation also needs to be established to provide uniform guidelines for operating the ETS and penalties for noncompliance.

In March 2014, Chinese Premier Li Keqiang stated that the country would ‘declare war against pollution as we declared war against poverty’. If China’s internationally recognised accomplishments in reducing poverty can be considered any kind of predictor, there is some credibility to prospects of winning the fight against pollution.

ZhongXiang Zhang is Distinguished Professor in the College of Management and Economics at Tianjin University.

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