A Lean, Green China is Possible

The effects of the rapid growth of the world’s second largest economy are visible everywhere. China’s pollution is raising environmental and health concerns, and steeply rising oil imports raise questions around energy security. Chinese leaders are deeply aware of the challenges and they have placed ecological goals at the same level of priority as economic, political, cultural and social policies.

The effects of the rapid growth of the world’s second largest economy are visible everywhere. China’s pollution is raising environmental and health concerns, and steeply rising oil imports raise questions around energy security. Chinese leaders are deeply aware of the challenges and they have placed ecological goals at the same level of priority as economic, political, cultural and social policies.

Burning coal contributes to the overwhelming majority of national sulphur dioxide, nitrogen oxide and carbon emissions in China. Coal dominates the electricity sector, and it has accounted for over two-thirds of China’s primary energy consumption for several decades. Current installed capacity of coal-fired power plants is more than that of the United States, Britain and India combined.

This has given rise to unprecedented environmental pollution and health risks across the country. Given China’s coal-dominated energy mix, cutting carbon intensity to meet 2020 climate commitments means cutting energy intensity. However, proposals to cap total national energy consumption have been slow to get off the ground. While the growth in coal production appears to be slowing, the key challenge for China is to let coal consumption peak in 2016–20 to allow carbon emissions to peak in 2025–30.

Industry accounts for about 70 percent of China’s total primary energy consumption. The Chinese government has made huge efforts to change the current energy-inefficient and environmentally unfriendly pattern of industrial growth. However, the country needs to enhance industrial policies to encourage technical progress, strengthen pollution control and promote industrial upgrading and energy conservation.

China could cap its absolute greenhouse gas emissions by around 2030. Given China’s relatively low stage of development and its coal-fuelled economy, its carbon emissions are projected to grow beyond 2030, despite energy saving policies. Even if it maintains its Copenhagen pledge, achieving a carbon intensity reduction rate of approximately 3 percent annually from 2016 to 2050, its carbon emissions would not peak until 2040. With extra effort, and given previous grace periods on international treaties, 2030 is a reasonable goal. Any longer would be unreasonable for a country of China’s immense size.

Peak-carbon in 2030 means that China would need to bring its current target forward at least a decade. While this commitment is ambitious, it would not be enough to avoid a global surface temperature rise of two degrees by the end of 2100. This would require a peak in 2020–25. China’s emissions must decrease very quickly for the target to be achieved. Therefore, even if China were to peak in 2030, the necessary emissions reductions afterward are unlikely to be achieved.

Capping China’s carbon emissions around 2030 would cost 0.02 percent and 0.06 percent of China’s GDP in 2020 and 2030, respectively, without considering other benefits of carbon abatement. It could be achievable. China began to experiment with low-carbon city development in 2010. All the pilot provinces and cities set carbon emissions peaks in 2030 or earlier. More experimentation is planned. The practice and ambition of the pilot regions sets a good example for abating emissions and it could allow China to peak earlier.

The level at which China’s emissions will peak remains unknown. Estimates of China’s peak emissions differ significantly across studies, but are unlikely to be lower than 10 gigatonnes in 2030.

China has implemented a variety of programs and initiatives to reduce carbon emissions, including mandatory closures of small, inefficient power plants. Supportive economic policies are also being implemented to encourage technical progress and strengthen pollution control. These initiatives will need to be strengthened and expanded.

Renewable energy is another long-term solution and has been identified as one of seven strategic emerging industries. China has targeted alternative energy sources to meet 15 and 20 percent of its energy requirements by 2020 and 2030, respectively.

However, China needs to complement administrative measures with market-based approaches. Administrative measures can be effective but are not efficient. Harnessing market forces to reduce energy consumption and cut carbon will be crucial to success.

Getting energy prices right is the first step in sending clear signals to both producers and consumers. China has moved away from centrally planned pricing towards a more market-oriented pricing mechanism, though the pace and scale differs across energy types.

China ran pilot carbon trading schemes during 2013–15. The pilots cover both electricity generated within the region and imported from outside. Pilot regions were given leeway in how to design the schemes, including which industries would be affected, how much they would cut, who would be allocated permits and where the energy would be sourced. Hence, effects varied significantly across regions. However, they have been generally successful, giving China impetus to introduce a national carbon market. Until a fully-fledged national ETS is established, China’s regional schemes will be expanded and continue to function in parallel.

China’s green push is not completely new. Former leaders Hu Jintao and Wen Jiabao recognised the seriousness of environmental degradation in China and insisted that encouraging economic growth at the expense of the environment had to end. However, there is now an imperative to push efforts further to meet global goals. This is in China’s interest not only to sustain its economic growth but also to ensure its standing in the world. If Xi Jinping and Li Keqiang can make China ‘green’, history will indeed record their contribution as equal to that of Mao Zedong and Deng Xiaoping.

How China can go green without it being a struggle is republished with permission from East Asia Forum