GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 7which caused temporary shutdown of factories, schools,and hospitals. When the lights were turned off, manufacturersfired up diesel generators to compensate for the lossof electricity from the grid. Such actions had the perverseeffect of driving up diesel prices and ultimately food prices(Xinhua 2010), not to mention promoting an uncontrolledsource of energy and emissions in the form of off-grid dieselgeneration. The use of ad hoc measures – brownouts,shutdowns, off-grid generation, etc. – suggests that Chinawas pushing close to its practical limit of energy intensityreduction under the current policy framework.Though the central government gave no specific reasonfor lowering the energy intensity reduction target inthe 12th FYG to 16% from the 20% target in the 11thFYG, it likely did so to limit these types of unintendedconsequences at the local level. A lower target will hopefullypreclude local officials and manufacturers fromtaking drastic and disruptive measures to reduce energyconsumption. And given China’s proven track record onenergy efficiency, a 16% reduction in energy intensityappears achievable under the current policy framework.3.2 Restructuring the economyOne of the goals of economic restructuring is to decreasethe relative importance of the industrial sector in theeconomy while increasing the share of the service sector,and thereby slow the growth of energy demand. TheChinese government has often discussed the need foreconomic restructuring in order to achieve a more balancedand sustainable economic development and mitigatethe depletion of China’s limited natural resources.Nonetheless, at present, the Chinese economy is stillheavily reliant on manufacturing and energy intensiveindustries.The 12th FYG lays out various policies to promote lessenergy-intensive industries. The document states thatthe government should severely control the export ofenergy-intensive, pollution-intensive goods and naturalresources and promote the export of services and service-relatedproducts such as cultural products, Chinesemedicine, software, and information technology (NDRC2011, Chapter 51 Section 1). The 12th FYG also callsfor a 4% increase in the share of services in the economy(NDRC 2011, chapter 3), which was about 43.6% in2010 (Central Intelligence Agency 2011). In part to meetthis goal, the government is offering firms in the servicesector the same rates for water, electricity and naturalgas currently enjoyed by firms in the industrial sector(NDRC 2011, chapter 17 section 2).How quickly the large Chinese economy can shiftaway from energy-intensive, export-oriented manufacturingand large infrastructure investments and towardincreased services and domestic consumption is openfor debate. Though the government’s intentions are clear,it has yet to put forth a detailed and actionable plan tofacilitate the restructuring of the Chinese economy, beyondthe shift in resource pricing noted above. In ourview, a significant transition away from energy-intensiveindustries such as steel and cement, not to mentiondownstream sectors like building and rail construction,to more services could take decades.3.3 Growing renewable energyIn the past few years, renewable energy, especially wind,has witnessed explosive growth in China. As of 2010, thecountry had a total of 25.8GW of installed wind capacity,second only to the United States in absolute terms.More than half of that capacity, 13.8GW, was added in2009 alone (GWEC 2011, 4). China has become a hugemarket for renewable technology deployments, whichhas enticed the participation of the world’s leading energycompanies. At the same time, China’s own greenindustries – particularly solar panel production – havethemselves become globally competitive players.The two national grid companies are required by lawto purchase energy from wind and solar farms at higherrates, which will ensure that renewable power plantscan cover their cost and maintain a profit margin.The current build out of renewable energy infrastructurein China will likely continue on the back of strongerpolicy support. The two national grid companies are requiredby law to purchase energy from wind and solarfarms at higher rates, which will ensure that renewablepower plants can cover their cost and maintain a profitmargin. This pricing policy allows the nascent wind andsolar industries to expand despite being more expensivethan conventional energy. China’s major power producers,especially the five firms known domestically as the"Big Five," have been in negotiations with local governmentsto secure rights on land and at sea to develop newrenewable resources. Ocean front investment agreementsfrom the Big Five can exceed RMB 100 billion (USD $15billion) in committed funds (Zhang 2010a). This showsthe scale of some of the investment in renewable energy.Similarly, there has been a wave of land deals in westernChina’s vast deserts with high solar potential (Dong2009). Numerous hydroelectric projects are also on thedrawing board. China’s grid companies are also investingin a new transmission system that will help overcomecurrent transmission bottlenecks and facilitate the integrationof renewable sources into the grid.Renewables have the benefit of being zero emission,but that is not the primary reason for the government’smassive investments. Rather, investing in alternativeenergy resources is desirable because such investmentsallow China to both diversify its energy portfolio andexpand its domestic energy supply. The reality is thatthe expansion of renewables along with other non-fossilfuel sources like nuclear will not have a large impact onChina’s energy landscape or emissions. Not only is thegovernment’s target of 15% non-fossil fuels in the primaryenergy consumption by 2020 rather modest, but amajority of that 15% will come from hydroelectric power(Zhou 2010).Green Growth: From religion to reality 79