GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 7growth and improve living standards. Environmentalprotection has become an increasingly salient social issuein the past few years, but the public’s attention has mostlyfocused on those issues which directly affect economicproductivity and living conditions. The issue of carbonemissions has not yet hit the radar of the average citizen,and thus little public pressure has been put on the governmentto reduce emissions. On the other hand, providingenough energy to sustain China’s energy and manufacturingintensive economy is both a social and political priority.Indeed, meeting energy demand is the single most importantobjective of China’s green development. In nextsection, we will show how Chinese government plans tomeet the challenge of satisfying China’ growing energydemand, and the opportunities and challenges for globalclimate change with China’s green development plan.3. Overview of China’s energy policies:opportunities and challengesIt is our view that the key objective in the government’sgreen development plan is to enhance China’s energy securityby moderating the growth of energy demand andat the same time increasing energy supply. Compared toa business-as-usual scenario, China’s carbon emissionswill grow at a slower rate as a result of these initiatives.Yet these initiatives alone are highly unlikely to lead to areduction in China’s total carbon emissions or even a fulldecoupling of emissions from growth in the next two decades.5The findings presented in this section suggest that:• Energy efficiency programs will lower the energy intensityof GDP, but are not likely to reduce China’s totalenergy demand or total carbon emissions.• The government’s economic restructuring efforts mayeventually bear fruit, but are not likely to reduce energydemand or carbon emissions in the near term.• China’s burgeoning green industries will influence globalenergy markets through learning and scale effects,even though they will have little impact on China’s primaryenergy mix.• China’s new and improved electricity transmission anddistribution system will not only integrate new renewablesources into the state grid, but also incorporatenew coal developments and other fossil fuel sources;thus, its effect on emissions is likely mixed.• Electricity pricing reforms are required to rationalizeenergy usage, but such reforms have stalled due to thegovernment’s concern over inflation and social unrest.We now turn to examine in greater detail each of thesefive aspects of China’s current energy policy frameworkto explain how we arrived at the above conclusions. Toreiterate, these five initiatives are energy efficiency, economicrestructuring, expansion of renewables, electricitytransmission, and electricity pricing reform.3.1 Improving energy efficiencyThe Chinese economy is very energy-intensive. In 2006,per unit of GDP, China consumed 48% more energythan the US and nearly twice as much compared to Japanor France (EIA 2008). The high energy intensity ofthe Chinese GDP is the result of a combination of factors,including but not limited to: inefficient technology,a manufacturing-driven export-led economy, and pricecontrols that distort energy usage by industrial and residentialconsumers.From the late 1970s to the late 1990s, China actuallyhad a rather strong track record of reducing the energyintensity of its economic growth. But after China’s accessionto the World Trade Organization, manufactured exportsbegan to soar, as did the energy intensity per unit ofGDP. In order to curb this unwelcome trend, the Chinesegovernment in 2004 began to adopt a number of policiesto promote energy efficiency. Those policy measures includedfiscal incentives such as tax breaks for purchasingenergy conserving equipment, stricter standards for newbuildings and appliance, mandated closures of inefficientcoal-fired power plants and manufacturing plants, andinformation-driven programs like appliance labeling andmedia advertising (Zhou, Levine and Price 2010). Despitethe blip in the early 2000s, the Chinese governmenthas been remarkably successful with its energy efficiencyprograms.The government has been particularly aggressive inclosing small and inefficient power plants and producersof energy-intensive products. In 2007, the NDRClaunched a “build big, close small” campaign to consolidatethe number of coal-fired power plants. The followingtypes of generators had to be shut down: those under50,000kWh, those under 100,000kWh and in operationfor more than 20 years, and those that do not satisfy existingenvironmental or efficiency standards. Between2006 and 2010, China closed down 72.1GW of smallcoal-fired generators (Wen 2011). Many inefficient producersof coal, steel, concrete and coke were also closeddown. This type of industrial upgrading has, and willcontinue to, improve energy efficiency in China.Perhaps more importantly, the central governmenthas signaled that it will begin to evaluate the performanceof local officials based on their ability to meet notonly economic growth targets, but also national energyintensity reduction targets. The 12th FYG states that thecentral government will strengthen evaluation of energyconservation goals and improve the reward and punishmentsystem to ensure that local governments have theproper incentives to carry out energy efficiency policies(NDRC 2011, chapter 22 section 1).From 2006 to 2010, the implementation of energyefficiency policies has helped China to reduce energyintensity by 19.1% from 2005 levels. This achievementwas a little shy of the stated target of 20%, but nonethelesssignificant. However, there were severe unintended consequencesof energy efficiency programs, particularly atthe local level. Some local officials, struggling to meet theenergy intensity reduction targets, scheduled brownouts5 According to the latest forecastsby the China Energy Group atLawrence Berkeley National Laboratory,China's emissions arelikely to peak between 2030 and2035. However, this result is basedon the crucial assumption thatChina's average GDP growth ratebetween 2010 and 2020 will be7.7%, considerably lower than theprevious 10 years and in line withChina's stated target, and even slowergrowth rates of 5.9% between2020 and 2030 and 3.4% between2030 and 2050 (Zhou et al. 2011,3). This again demonstrates thatcompatibility between emissionsreduction and economic growthnot only requires aggressive policies,but also a much slowergrowth rate than what China isaccustomed to.78