Download Carbon Intensity: China`s Card for Climate Politics

Carbon Intensity:
China’s Card for Climate Politics
CHEN Gang*
At the 2009 Copenhagen Climate Summit, China declared a targeted 40-45%
cut in carbon intensity, the amount of carbon dioxide emitted per dollar of
GDP, by 2020. China’s diplomatic tactic is to use voluntary carbon-intensitybased targets to replace mandatory and quantified emissions cuts and ease
international pressure. Climate change is an image issue as well as a good
opportunity for China to address the country’s serious energy shortage problem
caused by growing demand, inefficient use and limited energy reserves.
TO IMPROVE ITS image in global climate politics before the Copenhagen Climate
Summit, China for the first time declared that it was targeting a hefty 40-45% cut in
carbon intensity, the amount of carbon dioxide emitted per dollar of GDP, by 2020.
Accounting for 40% of global greenhouse-gas emissions, China and the United States
are the two most important nations under scrutiny in the international climate politics.
China and America, dubbed the G-2 after the financial crisis, have been at odds for
years over the climate issue, using the other’s inaction as an excuse for not capping its
* CHEN Gang is Research Fellow at the East Asian Institute, National University of Singapore.
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own domestic emissions. The two giants’ acceptance of aggressive targets will be vital
for a new legally binding climate treaty that is to take effect after 2012. Meanwhile, the
two powers also increasingly have closer cooperation in this area. To alleviate international
pressure before the Copenhagen conference, the two governments agreed on a broader
plan for the future development of clean energy during President Obama’s first state
visit to China in November 2009, with green issues high on the agenda.
Neither has made binding pledges up to now. With no commitment to a hard cap on
emissions, Chinese President Hu Jintao for the first time told world leaders that China
will combat climate change in the next decade by further cutting carbon intensity, the
amount of carbon dioxide emitted per dollar of gross domestic product (GDP), by a
“notable margin” by 2020. Hu also said China would increase the share of non-fossil
fuels in energy consumption to around
15% by 2020, and increase forest carbon
sink and forest coverage by 40 million
... energy scarcity could hectares and forest stock volume by 1.3
become a real bottleneck for billion cubic metres by 2020 from the
2005 levels.
China’s sustainable
China, the world’s largest carbon
is playing astute politics when
development due to its emitter,
facing increasing international pressure
increasing dependency upon before the Copenhagen climate
conference. China has long been fending
imported oil and lower-than- off an international accord that could force
average per-capita energy it to cut emissions and scale back its
economy; however, it also understands
resources. that as a rising power with growing global
influences and responsibilities, its
international image is at stake if no significant commitment is made. China’s diplomatic
tactic is clear and shrewd: utilise voluntary carbon-intensity-based targets to replace
mandatory and quantified emissions cuts and ease international pressure. As a result,
such a target is inherently indexed to the economic growth of a country and meeting this
target does not directly require a decrease in economic production. The main limitation
of an intensity-based target is that, although it can lower an emission growth trajectory
below the projected business-as-usual level, it is unlikely to result in an absolute decrease
in emissions.
President Hu’s new carbon-intensity pledge is closely related to China’s long-term
ambition of reducing its energy intensity, improving energy efficiency and restructuring
its industry. Energy intensity, referring to energy consumption per unit of GDP, is positively
correlated to the variation of carbon intensity. Changes in energy intensity can arise
from technological changes as well as through structural changes in the economy, e.g.,
a move from heavy industry to a service economy. China has set an aggressive goal of
cutting its energy intensity by 20% in its 11th Five-year Plan period (2006-2010). It
seemed to be a mission impossible in the first two years, when it only managed to cut
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energy consumption per unit GDP by 1.23% in 2006 and 3.27% in 2007. Year 2008
witnessed a big step forward when the energy intensity indicator dropped 4.59% thanks
to both the government’s green efforts and global financial crisis that slowed down the
economy.
China Using Green Measures to Solve Energy Resource
Depletion
Climate change is not only an image issue for China, but also a good opportunity to
address the country’s serious energy shortage problem caused by growing demand,
inefficient use and limited energy reserves. The relationship between economic growth
and energy utilisation matters greatly from not only an emissions perspective, but also
an energy security perspective as well. As the world’s second largest energy consumer,
China is rich in coal, lacking in oil and natural gas. Despite rocketing energy demand
during its industrialisation and urbanisation process, China is still able to supply over
90% of its energy needs.
In the long run, however, energy scarcity could become a real bottleneck for China’s
sustainable development due to its increasing dependency upon imported oil and lowerthan-average per-capita energy resources. About half of China’s oil consumption is
imported, and it has become a net coal and natural gas importer. The World Energy
Outlook 2007 in its Reference Scenario expected China to overtake the United States
to become the world’s largest energy consumer soon after 2010. China’s primary energy
demand is projected to more than double from 1,742 Mtoe in 2005 to 3,819 Mtoe in
2030 – an average annual growth rate of 3.2%.
China’s energy mix has a structural problem: about 70% of the country’s primary
energy consumption comes from coal, which is inherently more polluting and more
carbon-intensive than oil and gas. China is by far the biggest contributor to incremental
emissions, surpassing the United States as the world’s biggest carbon polluter in 2007.
China understands that energy efficiency and conservation has to play a central role in
curbing soaring demand for fossil fuels and cutting carbon emissions. China’s performance
in the field of energy efficiency was satisfactory between 1980 and 2000 when its GDP
quadrupled and energy consumption only doubled, a 50% drop in energy and emissions
intensity.
Since China’s accession to the World Trade Organization (WTO) at the end of
2001, however, total energy consumption together with carbon emissions and other
major pollutants started to grow very rapidly, and energy intensity rebounded. After
2003, China’s energy shortage became more and more serious especially in the affluent
coastal regions that were poor in fossil fuel resources. China’s parliament, the National
People’s Congress, passed the Renewable Energy Law in 2005, and amended the
Law on Conserving Energy in 2007 to make the law stricter. China has planned to
increase the proportion of renewable energy in the primary energy consumption from
seven percent in 2005 to 15% in 2020, substituting fossil energy by 400 million tons of
coal equivalent and cutting carbon dioxide discharge by one billion tons and sulphur
dioxide discharge by more than seven million tons.
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Renewable sources still account for only a very small portion of domestic power
supply, mainly because of the high generation costs. The cost of electricity generated
from solar power, for example, is some 3 yuan (40 U.S. cents) per kilowatt-hour,
while that from a typical coal-fired power plant is only around 0.22 yuan (2.8 U.S.
cents) per KWh. From September 2007, China’s State Electricity Regulatory
Commission (SERC) has required all power grid companies in China to preferentially
purchase the maximum amount of “green” electricity generated from renewable sources
such as hydropower, wind power, biomass, solar power, tidal power and geothermal
energy.
The government itself has been giving large amount of subsidies for cost sharing.
China distributed two billion yuan ($293 million) in subsidies for power generated by
renewable energy sources in the second half of 2008, according to the SERC. China’s
central government has subsidised purchases of cleanenergy vehicles for public fleets in 13 cities to help the
automobile industry develop green technology since
Despite aggressive the beginning of 2009. The scheme promotes the use
measures to address of electric, hybrid and fuel-cell vehicles by public
transport operators, taxi firms and postal and sanitary
climate change, the services in cities such as Beijing and Shanghai. Subsidies
be based on the gap in prices between more
government’s will
energy-efficient vehicles and those with traditional
“growth first” engines, and local governments were asked to allocate
money to build and maintain facilities for the green
strategy remains vehicles.
With strong support from the government, major
unchanged ...
state-owned auto makers announced ambitious plans
to enhance research and development in clean-energy
vehicles. SAIC Motor Corp, China’s biggest auto maker, said it would set up a venture
with two billion yuan ($293 million) investment to develop hybrid and electric vehicles.
The government’s decisive actions to support and subsidise clean-energy industry have
received remarkable paybacks. China is now the world’s largest solar-panel producer,
and fourth largest producer of wind power (Table 1). By 2020 wind power will likely
surpass nuclear power as China’s third-largest source of electricity, after thermal and
hydropower. China plans to get 20% of its electricity from renewable sources by 2020,
with some 100 gigawatts of wind capacity and 1.8 gigawatts of solar.
“Growth First” Strategy Unchanged
Despite aggressive measures to address climate change, the government’s “growth
first” strategy remains unchanged, and it is unlikely that China will accept any legallybinding emission caps at the Copenhagen conference that may slow down the economy.
“Climate change is an environment issue, but also, and more importantly, a development
issue,” President Hu said at the UN climate summit in September 2009. China took
part in the UN-track climate negotiations from its preliminary stages, viewing climate
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TABLE 1
MAJOR WIND POWER PRODUCERS (2008)
Country
Capacity (in MW)
In World’s Total (%)
USA
25,170
20.8
Germany
Spain
23,903
16,754
19.8
13.9
China
India
12,210
9,645
10.1
8
Source: Global Wind Energy Council
change as a controversial issue that involved North-South equity problems. Historically,
China believed that developed countries should take responsibility for environmental
protection and give developing countries the opportunity to advance as much as the
developed countries.
As the world’s largest developing country and a permanent member on the UN
Security Council, China has been playing a leading role among developing countries in
steering international climate change negotiations, uniting with other developing countries
to form the “bloc of G-77 (the Group of 77 developing countries) plus China.” The
principle of “common but differentiated responsibilities,” advocated by China, India
and other developing countries, was followed by the legally binding Kyoto Protocol,
which took effect in 2005 and argued for the Clean Development Mechanism (CDM)
to encourage developed countries to provide financial and technical assistance to
developing countries.
According to the Kyoto Protocol, 38 industrialised countries were required to reduce
their carbon emissions by an average of 5.2% below 1990 levels by 2012. Conversely,
China and other developing countries had no concrete abatement commitments. They
only needed to establish national emissions inventories, report on national programmes
and promote cooperation, sustainable development and information exchange. The
Kyoto Protocol, the first international treaty to set detailed obligations for industrialised
nations to reduce their carbon emissions, is actually yielding huge benefit for China
instead of imposing afflictive restraint upon its economy. The CDM-based carbon trading
system in the Kyoto Protocol allows industrialised nations such as Japan and UK to
invest in overseas green projects in developing countries like China and then buy the
certified emission reductions (CERs) to offset their obligations.
China, the largest developing country with the world’s largest greenhouse gas
emissions, enjoys the highest CDM project potential because its marginal cost for
emission reduction is relatively low compared to many other developing countries.
According to figures from the United Nations, some 59% of the total CERs produced
from all CDM projects in the world annually are from China, which means that more
than half of the revenue from such carbon trade between developing and industrialised
nations goes to China.
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China’s “growth first” stance is closely related to its special inter-agency mechanism
on climate change, in which the National Development and Reform Commission (NDRC)
plays a dominant role with the Ministry of Environmental Protection and China
Meteorological Administration (CMA) playing minor roles. In 1998, China established
the National Coordination Committee on Climate Change, an inter-agency organisation
that now includes representatives from the NDRC, Foreign Ministry, Ministry of Science
and Technology, CMA, State Environmental Protection Administration (SEPA) and
other 10 ministerial-level departments. With NDRC Director Ma Kai appointed
Chairman of the National Coordination Committee on Climate Change, the NDRC
takes charge of all routine affairs in the Committee and obviously has the overpowering
role in the decision-making process.
Compared with the SEPA and CMA that are potentially sympathetic to a more proactive approach to emission abatement, the NDRC leans towards rapid economic
growth as well as material benefits including fund and technology transfers. The heavyweighted role of the Foreign Ministry and Ministry of Science and Technology enhances
NDRC’s advantageous position in the climate change decision-making process. The
Foreign Ministry puts an emphasis on the preservation of national sovereignty, meaning
that developing countries have the need and the right to develop, while the Ministry of
Science and Technology focuses on foreign technological aid.
China’s Quandary and Future Stances
The Chinese government fully understands that both the world and China are facing
potentially devastating consequences from climate change, and its international image
will be tarnished if domestic emissions continue to grow fast. Yet it also knows that
accepting legally binding emission caps may not only hamper economic growth, but
also jeopardise the lucrative business of carbon trade. In China’s first “National Climate
Change Programme” released in 2007, the government admitted that climate change
will lead to prolonged droughts and a decline in agricultural output, while the acceleration
of glacier melting on the northwestern Qinghai-Tibet plateau will reduce water supply
to the Yangtze and Yellow Rivers. Furthermore, China’s rising sea level triggered by
global warming is higher than the global average and threatens China’s coastal cities,
the nation’s economic powerhouse.
The gloomy climate prospect has made the public doubt the country’s industrial
strategy that puts priority on the heavy and chemical sectors. China is now the world’s
largest producer of steel, coal and cement and a leading producer of automobiles. In
2008, China surpassed the United States as the second largest auto-producing nation
and in one or two years the country is poised to displace Japan in the top seeded
position.
The Chinese government has now come to realise that if the worsening environmental
problem is not addressed, the consequences may be so disastrous that it will erase the
benefits derived from the economic boom. Yet Chinese experts also argue that if China
accepts emission quotas just like those imposed upon industrialised nations in the Kyoto
Protocol, it will pay much more than what it has gained currently from CDM projects
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so as to buy emission permits from other countries at a higher carbon price in the postKyoto period. The alternative carbon tax, if adopted in the next protocol, is expected
to cost Chinese industry billions of dollars or more if China’s economy and emissions
continue to grow at the current rates. From China’s perspective, an international effort
against climate change is a two-edged sword, which can transfer fund and technology
to China and at the same time put shackles upon the giant if disadvantageous pacts are
reached from future negotiations.
In future talks, it is very unlikely that China will yield to international pressure and
accept mandatory emission cutting targets, but it will continue to use voluntary carbonintensity targets to substitute cap-and-tax obligations
and participate more frequently in other bilateral and
multilateral diplomatic activities on climate change
In future talks, it is
besides UN-track climate talks to enhance its
international image and alleviate external pressures.
very unlikely that
China is likely to choose enhancing strategic solidarity
with third world countries than deviating from the bloc
China will yield to
and acting alone. In fact, China’s alliance with the Ginternational pressure
77 has not waned, and its willingness to step out of
the pact has declined even further for fear of being
and accept mandatory
singled out for its increasing economic growth and
emission cutting
energy use. China’s desire to stay within the bloc,
however, is facing more challenges when some
targets ...
members are starting to diverge somewhat from their
stances, while others are complaining about the
imbalanced distribution of CDM profits among developing countries. Some Latin
American countries led by Brazil and Argentina have showed eagerness to accept similar
quantitative emission obligations as western countries, while China and India fear legally
binding goals will hamper their burgeoning industrialisation process.
As the UN-track climate regime is featured with quantifiable emission cutting targets,
China is planning to join more regional mechanisms on climate change that emphasize
non-compulsory energy-efficiency programmes. Publicly, China still insists that global
climate talks should be conducted in the framework of the United Nations, but in practice,
China has become more active than before in joining all kinds of bilateral and multilateral
cooperation mechanism against climate change outside the UN-track. In recent years,
many multilateral organisations including APEC (Asia-Pacific Economic Cooperation),
ASEAN (Association of Southeast Asian Nations) Plus Three (China, Republic of
Korea and Japan), G-8/G-20 have started to build up special mechanisms on climate
change, and China has proved to be an active participant or dialogist in forums,
conferences and cooperation programmes held by these mechanisms. In the bilateral
context, China pays more attention to cooperative programmes on clean energy and
emission reduction with industrialised nations especially the United States. Climate change
issue has become an indispensable content in China’s recent bilateral talks with many
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