Download Analysis on the Status and Developing Trend of Low-carbon

EASTERN ACADEMIC FORUM
Analysis on the Status and Developing Trend of Low-carbon
Economy in Our Country
LI Fan
Survey & Planning Institute of State Forestry Administration, P.R.China, 100714
Abstract: With the change of global climate and energy consumption increasingly becoming the focus
of the world, the concept with the theme of low-carbon economy is widely recognized and
recommended. Low-carbon economy has five core elements, namely low-carbon technologies,
low-carbon energy, low-carbon industries, low-carbon cities and low-carbon management. As the
different forms of carbon trading at the same time, the trend of the enlarging scale of low-carbon
economy economic globalization has become the mainstream.
Keywords: Low-carbon economy, Concept and characteristics, Developing trend, Analysis
1 Introduction
With the change of global climate and energy consumption increasingly becoming the focus of the
world, the concept with the theme of low-carbon economy is widely recognized and recommended,
especially since the " inputting 1% of the global annual GDP to avoid the loss of 5% ~ 10% of the GDP
per year in the future " proposed by Nicholas • Stern , the former World Bank chief economist, in "Stern
Report " in 2006, many countries have started the exploring on the development strategies of
low-carbon economic and related fields. Low-carbon economy has set off a storm of reform in energy
utilization, economic development model or even the concept of people's lives and other aspects,
"low-carbon technologies", "low-carbon life ", "carbon tax ", "carbon trading" and other concepts and
policies have gradually penetrated into the economic and social life in various fields.
2 The Concept and Characteristics of Low-carbon Economy
In our view, low-carbon economy is a developing model characterized by low power consumption, low
pollution and low emissions, and new rules to regulate the pattern of world development for the purpose
of coping with the change of climate, ensuring the security of energy and promoting the sustainable
development of economy and society. The essence is to improve efficiency of energy utilization and
create a clean energy structure, developing low-carbon technologies, products and services to ensure
stable economic growth while reducing the emission of greenhouse gas. The key is technological
innovation and system innovation. Low-carbon economy has three major characteristics namely
economic, technical and targeted. The first is economic: it contains two meanings, the one is the
development of low-carbon economy should be in accordance with the principles and mechanisms of
market economy, the other one is the development of low-carbon economy should not lead to significant
decrease of people's living conditions and welfare levels. That is to say, we should fight against the
luxury or wasteful consumption of energy, but also improve people's living standards. Followed by
technical: that is to improve energy efficiency while also reduce CO2 and other greenhouse gas
emissions intensity through technological progress. The former requires that people do not enjoy the
decreasing energy services under the conditions of the same energy consumption; the latter requires that
people do not enjoy the decreasing living conditions and welfare in the case of the same emissions of
greenhouse gases, the two do not reduce the need be realized through the development and
industrialization of energy efficiency and greenhouse gas emission reduction technology. Finally is
targeted: the goal to develop low-carbon economy is maintaining the concentration of greenhouse gases
in the atmosphere at a relatively stable level, and not to bring global warming affecting the survival and
development of human, in order to achieve harmonious development between human and nature.
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3 The Status and Problems of Low-carbon Economy
In 2003, the British government published White Paper on Energy - "Our energy future: creating a low
carbon economy", the first time clearly proposing the development of "low-carbon economy", that is, a
new model of economic development with low emissions, low energy consumption, low pollution, and
the integrating of economic, social and ecological benefits. As early as September 8, 2007, Chinese
President Hu Jintao with the attitude of highly responsible for humans and the future had solemnly made
four recommendations on the matter the welfare of the people of China, the people of Asia and the
Pacific and the people of the world in the 15th APEC (APEC) leaders meeting, clearly stands for "low
carbon economy", surprising the world. He said a total of 4 back to the "carbon" in this important speech:
"the development of low-carbon economy", the research and promotion of "low-carbon energy
technologies," "increasing carbon sinks", "the promotion of carbon sequestration technology" .He also
pointed out: "Developing National climate change publicity and education to raise public awareness of
energy conservation, so that every citizen consciously make efforts for the mitigation and adaptation of
climate change." It is also issued a call for people across the country, put forward new requirements and
expectations. However, there are still some problems in China's low-carbon economy.
First of all, there are many small- and medium-sized enterprises in China, and heavily concentrated in
manufacturing, these small- and medium-sized enterprises have the task of involved in reduction, but the
will of reduction is not high.
Secondly, it is different from other commodity markets in the mechanism of operation that the
government played an important role in the carbon trading market.
Finally, the standard-setting requires the State not only to confirm the general goal, but also to approve
relevant technologies, authorizing the system of third-party certification and establishing the trading
systems and punishment mechanisms.
The major factors affecting the Process of low-carbon life and low-carbon economy are as follows.
3.1 The obstacle of thought and recognition
The concept of low-carbon life is rather weak low-carbon, the idea of low-carbon life has not been
established, and it is a lengthy period to take the action of low-carbon life. According to the "2009-2012
China Environmental Protection Industry Investment Analysis and Forecast Report" published by CI
Consulting , China has made saving energy, developing clean energy, renewable energy and new energy
as a basic national policy in energy, issued a series of policies and measures. However, as governments
at all levels don’t place enough emphasis on it, coupled with the pursuit of the local effects and
short-term economic benefits partially in enterprises, they ignore the negative impact on the
environment from life.
3.2 The obstacle of system and policy
China's social system is seriously lagging behind in the development of economic, institutional, the
implementation efforts and the effect of government at all levels are relatively low. China is still in the
high-speed period of development, there are large amount of unreasonable and unqualified economic
enterprises everywhere, two thirds of the companies will likely be forced to close if operated in
accordance with the national standard strictly, and China's economy will plummet.
3.3 The obstacle of infrastructure
The infrastructure of the fledgling low-carbon economy has not changed greatly, and it is not enough
compared to the requirements of the low-carbon economy needed proposed by us. The gap will be even
greater compared to the developed countries. This is a direct impact on the process of China's
low-carbon economy to a great extent.
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3.4 The obstacle of technology
The management and technical means of the operating system of the low carbon are still quite backward.
The development of advanced low-carbon technology is still quite backward, the standards of
technology, equipment and Information between different low-carbon enterprises are not unified, and
the non-standard is rather common. Personnel barriers can be attributed to technical obstacles.
4 The Analysis on the Developing Trend of Low-carbon Economy
The "Kyoto Protocol" entered into force in 2005 provides the emission reduction targets of developed
countries in the accessory of "the United Nations Framework Convention on Climate Change"
(UNFCCC), that in the 2008-2012 period, the developed countries cut 5.2% of their greenhouse gas
emissions from 1990 levels. Among them, 8% of reduction in the EU, 7% of reduction in the U.S.
6% of reduction in the Japan. To ensure the realization of the global emission reduction targets, the
"Kyoto Protocol" established three flexible mechanisms for emission reduction, namely emissions
trading mechanism (ET), clean development mechanism (CDM) and joint implementation mechanism
(JI). Developed countries can obtain emission credits outside the country through these three
mechanisms, to ease the pressure on domestic emission reductions and achieve emission reduction
targets at lower cost. The developing countries can also obtain the technology and funds of emission
reductions through project cooperation to promote sustainable economic development. In the framework
of the Kyoto Protocol, greenhouse gas emissions rights become a commodity, creating a global
greenhouse gas emissions rights trading, referred to as carbon trading in short.
Currently, there are two main forms of global carbon trade, the one is transactions based on quota,
namely the transactions of emission quota coming from the distribution or sale of relevant institutions in
the "cap-and-trade" system. There are the three separate systems in market: The EU emissions trading
system (EUETS), Australia, New South Wales (NSW) and the Chicago Climate Exchange (CCX), all
carried out in developed countries. The other one is transactions based on project, namely trading the
project confirmed to reduce greenhouse gas emissions. The market includes the clean development
mechanism and joint implementation mechanism, the former used in the trade between developed and
developing countries, while the latter used in the trade between developed countries and economic
transition countries. As a developing country, China can only participate in the development of CDM
project, and sell CERs resulting from the project to the government or institutions in developed
countries with emission reduction requirements.
4.1 The scale of the global carbon market transactions in rapid expansion, the EU emissions
trading system is dominated
According to World Bank statistics, the average annual growth in global carbon trading is 126.6%
between 2005 and 2008, Although the trade volume of primary market based on the level of the CDM
project decreased as the global financial crisis in 2008, secondary market remains active; transactions
based on quota still maintain a rapid growing momentum, the annual trading volume reached 126.35
billion U.S. dollars, increased 100.5% compared to 63.01 billion U.S. dollars in 2007,over 10 times the
transactions volume in 2005. From the perspective of global carbon transactions, it also showed a rapid
growing momentum, an average annual growth of 59.5% between 2005 and 2008. The global carbon
trading volume reached 4.81 billion tons of carbon dioxide equivalent in 2008,a growth rate of 61.4%
compared with29.8 tons of carbon dioxide equivalent in 2007, 3 times the annual volume in 2005.
According to the forecast of The World Bank, the global carbon trading amount will reach 1,500 billion
U.S. dollars by 2012, likely becoming the world's largest market over the oil market.
In the global carbon trading, the EU emissions trading system is the dominant. In 2008, the EU
emissions trading system trading amounted to 91.91 billion U.S. dollars, trading volume was 3.09
billion tons of carbon dioxide equivalent, respectively increase by 87.3% and 50.1% compared with
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2007, accounting for the proportion of the world were respective 72.7% and 64.2%. Clean development
mechanism after the EU emissions trading system, its turnover and trading volume respectively
accounted for 26% and 30.3%of the world. View from the size of the market, there is a significant gap
between the Clean Development Mechanism and the EU emissions trading system, but the growth rate
of the clean development mechanism can’t be discounted, in 2008, the turnover and trading volume of
Clean Development Mechanism respectively increase by 154.5% and 84.5% compared with 2007, far
exceeding the average level the EU emissions trading system and the global carbon trading.
To cope with the global climate change in the principle of common but differentiated responsibilities,
clean development mechanism is a more effective and successful methods at the present. As a huge
difference in emission reduction costs, developed countries are willing to transfer technology and funds
to developing countries. While developed countries transfer low-carbon technology to developing
countries, they also promote their own technology innovation and export, so it is a win-win mechanism.
China is the main supply-side in projects trading under the CDM currently, accounting for 84% share of
the world In 2008, India and Brazil ranked second and third, respectively accounting for 4% and 3% of
the global proportion.
4.2 The regional carbon trading market is booming, the global unified market and the rules are to
be formed and developed
EU emissions trading system is the world's biggest greenhouse gas emissions trading rights trading
market, covering 27 EU member states, nearly 12,000 industrial greenhouse gas emissions entities, Paris
Bluenext carbon market, the Netherlands Climex Exchange, the Austrian Energy Exchange (EXAA), the
European Climate Exchange (ECX), the European Energy Exchange (EEX), the Italian power exchange
(IPEX), the London Energy Brokers Association (LEBA) and the Nordic Power Exchange these eight
trading centers such becoming the major driving force of the global greenhouse gas emissions trading.
According to the arrangement of the second stage (2008-2012) and the third stage (2013-2020) of the
EU emissions trading system, the EU will continue to increase the emission reduction efforts gradually
and extend emission limitation to more sectors (such as aviation industry). In addition, the EU also plans
to introduce auction mechanism in the quota allocation in the third stage to improve the efficiency of
carbon trading.
The United States has not yet established a unified national carbon trading system, there are the Chicago
Climate Exchange, 10 states in the eastern and the Mid-Atlantic region greenhouse gas emissions
reduction initiatives and the California global warming initiatives and other regional carbon market,
where carrying out the quota trading and the voluntary emission reduction project transactions. The
Chicago Climate Exchange established in 2000 has been launched the U.S. carbon trading futures
products after 2012, and has begun trading. the "American Clean Energy Act" adopted in the June of
2009 provides for implementation of greenhouse gas emissions trading scheme, the government sets
carbon emissions caps for power plants and factories .85% of the quota is allocated by the Government
free of charge, the remaining 15% of the amount should be purchased by the company. As long as
emissions are below the cap, the limitation can be resold in order to encourage companies to reduce
carbon emissions. National carbon trading market is expected to form based on the Act.
Australian New South Wales greenhouse gas emissions trading system launched in January 2003, it
provides emissions share for the electricity retailers and the state department, the extra emissions should
be compensated through the purchase of certified emission reductions in the carbon market. Australia
joined the "Kyoto Protocol" in 2007, in order to achieve greenhouse gas emission reduction targets, the
Australian government has made the plan of emission reduction measures and the establishment of the
Australian national system of carbon trading, tentatively introduced in 2011.
The starting of carbon trading is late in Asia. Singapore Trade Exchange was established in early July
2008, planning to launch trading of CERs. Hong Kong Exchange has begun to develop
emissions-related products and prepare for the floor trade of greenhouse gas emissions rights. Japanese
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Ministry of Environment has said that Japan is developing the cap controlling and quota trading similar
to the EU emissions trading system, but the launch time is still to be determined.
With the policy of low-carbon economy becoming mature and perfect gradually, the countries and
regions have developed their own regional carbon trading market in the world. The European Union
proposed the establishment of a unified global carbon trading market in January 2009, as a part of the
solutions to deal with the global climate change. It is obviously that the European Union wants to lead
the development of international rules in the future. Although the EU has pledged to expand its
emissions trading system, absorbing other developed countries to join, it still takes some time to form a
unified global carbon trading market.
5 Rectification Measures
For the current situation, we must develop low-carbon economy both in the economic base and
superstructure, the major measures are as follows.
5.1 Government leading and market permitting entering
We should vigorously promote low-carbon economy, and as a base to upgrade the industrial structure.
The leadership of the government is the most basic premise, which includes the development of
long-term strategy, Introducing policies to encourage technological innovation, energy saving and
emission reduction, utilization of renewable energy and tax breaks, subsidies, government procurement,
green credits and other measures, to lead and further boost the development of low-carbon economy to
achieve a reasonable industrial structure upgrading. The government should take the initiative to
develop energy-saving environmental protection industry development strategy and systematic industrial
development planning, and guide and support promising industries for technical reserves and
technological innovation. We should establish industrial alliances and strive to foster a large number of
enterprises in the relevant market at home and abroad to participate in international competition.
Currently, the energy conservation in our country is still largely dominated by the central government
and mainly through administrative means, the enterprises lack the internal motivation and external
pressure to increase investment, they need to recognize the direction and catch up consciously. To
establish long-term mechanism, make full use of the potential of the market mechanism, set out the
withdrawing period for the backward industries and products. To establish the industry accessing permit
system to improve the market access threshold, promoting a high starting point of business investment.
Assuring the healthy development of energy-saving and environmental protection industry and
enhancing the overall competitiveness of the industry. This allows the companies to feel the pressure
and the driving force from the government which accelerating the upgrading and transformation of
industrial structure.
5.2 Reasonable taxation and carbon trading schemes
China is currently facing a severe emissions reduction situation. We should learn the experience of
emissions trading from the developed countries as soon as possible, and construct carbon trading market
conformed to the situation in China, to timely promote the formation and effective operation of carbon
emissions trading system. On the one hand , establishing emissions trading scheme is helpful to the
overall controlling of greenhouse gases, on the other hand ,it contribute to the innovation and promotion
of new technology enterprises in and accelerate the enterprises transforming into economic developing
mode of low-carbon energy with energy-saving and environmental protection.
5.3 Independent research and fostering innovation
We should strengthen the research and development ability in various industries, forming a large number
of core technologies with independent intellectual property rights. Cultivating all kinds of innovative
talents for the need of our country through universities and companies, and establishing a reasonable
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incentive mechanism for innovative talents, we should be able to cultivate, utilize and retain the talent.
The government should guide and foster innovative enterprises, which develop new low carbon
technologies and products and increase the added value of its products and consume less energy.
Cultivating creative and low-carbon talent and enterprise can optimize the industrial structure through
independent research.
5.4 Promoting the utilization and development renewable energy
Positive developing wind energy, hydropower, solar power, tidal energy, bio-energy and other renewable
energy sources, it influences the environment lightly to develop and use these energy sources,
discharging less greenhouse gas emissions and meeting the requirements of the development of
low-carbon economy. We should also focus on the development of new energy vehicle technologies,
shortening the distance with advanced countries in vehicles industry and reducing carbon emissions in
the field of transport through the development of new energy vehicles. Renewable energy industry is a
sector of the low-carbon economy also a booming industry. It will contribute to the upgrading and
transformation of relevant industries in our country to develop renewable energy sources.
5.5 Rational management, improving energy efficiency and developing national low carbon
awareness
We can improve the utilization efficiency of energy and resource to reduce the wastage of energy and
resource through the rational management. At the same time, we should vigorously develop the
universal consciousness of energy-saving and low carbon life and pay attention to energy conservation
and reducing the pollution and carbon emissions in every aspect of life, forming a good social
atmosphere and living habits.
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