China’s Policies on Climate Change: a Perspective of Development

Ji ZOURenmin University of China

The Harvard Alumni Association and the Harvard Clubs of AsiaGlobal Series: China / Asia, Harvard and the WorldPudong Shangri-La, Shanghai, March 28~30, 2008

Outline

• Development strategies: goals, path, and constraints

• Demand: investment, consumption, and net export

• Energy use and GHG emissions

• Response measures

• Obstacles and challenges

• Conclusion

Development Strategy: Goals 1• GDP: Re-doubling the amount of GDP per capita

in 2000 by 2020 (with 7.2% annual growth rate in average)

• Industrialization: lowering share of agriculture, raising share of manufacture and service with higher technological competitiveness and value-added

• Urbanization: higher share of urban population (from 45% in 2005 to 60% in 2020 and 75% in 2050) to and adequate urban infrastructure (tap water, sanitary system, energy, transport, housing, other public facilities, etc)

Development Strategy: Goals 2

• Full employment – a socioeconomic matter: surplus labor forces, weak social security system, and increasing income gap

• Economic stabilization: inflation, increasing cost of labor, energy and environment

• Trade – export or domestic market-oriented? Environmental and energy conditions of accessing to market; flows-in/out of goods, resources, capitals, and technologies for whom?

Development strategy: path

• Contribution of factor input growth and efficiency improvement to the gross-growth rate

• Kaya Equation:

PopPop

GDP

GDP

energy

energy

emissionEmission ***

efficiencyfinputf GGG

6

It’s a matter of development paths: Conventional v.s. Innovative (SD)

GDP per capita

GH

G

Em

ission

1. Install low carbon technologies

2. Human resources

3. Policies and measures

Conventional path

Innovative SD path

Limits of GHGs emission

4. Financial resources

0

How to make this shift?

Inputs:

Development Strategy: Constraints• Accumulative capital in early stage of

development: from farmers/agriculture and the environment/natural resources via low price of labors and primary products

• Huge amount of surplus labors (~130 million) and lack of qualified human resources

• Growth pattern: the growth relies on high rate of investment (up to ~40%) and low efficiency of factor input

efficiencyfinputf GGG

Energy Use and GHG Emission in China

China’s Energy Use （Mtoe）

2000 2001 2002 2003 2004 2005 2006

Total energy

consumption

966.7 1000.0 1057.8 1228.7 1423.5 1566.7 1697.8

Coal 656.7 697.6 733.6 871.9 1012.1 1119.8 1212.3

Oil 223.6 227.9 247.4 271.7 318.9 327.8 349.8

Natural gas 21.5 24.1 25.7 29.9 35.0 41.2 50.0

Hydroelectricity+Nuclear 54.12 66.74 70.86 74.01 91.43 101.86 106.59

Source： BP Statistical Review of World Energy June 2007

Alternative Projections of China’s Primary

Energy Demand in Future

IEA, 2007 2015 4073 Mtce

2030 5456 Mtce

ERI, 2007 2020 3000 Mtce

2030 3857 Mtce

DRC, 2004 2020 3280 Mtce

Wang, 2007 2020 3974 Mtce

2030 6028 Mtce

Energy intensive Demand: Investment, consumption, and net

export

• Industry used about 71% of the total energy in 2005 and 2006;

• Such six sectors as (1) ferrous and (2) nonferrous metal, (3) raw chemical materials and chemical products, (4) non-metallic and (5) metallic mineral products, and (6) petroleum refining, coking, and nuclear fuel, account for 72% of the industrial energy use, more than 50% of the total.

• A large gap exists in energy efficiency in these sectors between China and international standard.

Estimation of China’s Recent GHG Emission (Mt-CO2)

• IEA： 5101 in 2005

• WRI： 5204.8 in 2004

• CDIAC ： 5010 in 2004

• China： 5600 in 2004

Alternative Projections of China’s GHG

Emissions in Future

IEA 2007 2015 8,631 Mt-CO2 2,354 Mt-c

2030 11,447 Mt-CO2 3,122 Mt-c

ERI 2007 2020 6,563 Mt-CO2 1,790 Mt-c

2030 8,617 Mt-CO2 2,350 Mt-c

DRC 2004 2020 7,231 Mt-CO2 1,972 Mt-c

Wang, 2007 2020 8,177 Mt-CO2 2,230 Mt-c

2030 10,630 Mt-CO2 2,899 Mt-c

Scenarios of Primary Energy Demand in China (BAU) -RUC

0

100000

200000

300000

400000

500000

600000

700000

2005 2020 2030 2050

年 份

万吨

标准

煤

煤炭 石油 天然气 水电

核电 生物质能 风能 太阳能

Scenarios of Primary Energy Demand in China (with policies) - RUC

0

100000

200000

300000

400000

500000

600000

2005 2020 2030 2050 年 份

万吨

标准

煤

煤炭 石油 天然气 水电

核电 生物质能 风能 太阳能

Scenarios of CO2 Emission from Fossil Fuel (BAU) - RUC

1000

1500

2000

2500

3000

3500

4000

2005 2020 2030 2050

年 份

百万

吨碳

基准情景 政策情景

Coefficients for both BAU and Policy Scenarios - RUC

Indicators BAU With Policies

Energy Use（ 100 Mtce）

2020： 44

2030： 51

2050： 58

2020： 39

2030： 45

2050： 50

Growth Rate of Energy Use %

2005-20： 5.1

2020-50： 0.9

2005-20： 4.2

2020-50： 0.8

Elasticity of Energy Use

2005-20： 0.65

2020-50： 0.22

2005-20： 0.54

2020-50： 0.20

CO2 emission (t-C) 2020： 32.7

2050: 36

2020: 26.8

2050: 28.6

Response Measures

Near-term (5~10 years)• Public awareness improvement: low carbon

economy, new lifestyle• Development of policy implementation system• Infrastructure investment with high-efficient

technologies (power, transportation, and buildings) to prevent from Lock-in Effects

• Efficiency improvement in high-energy-intensive sectors

• LUUCF for keeping and increasing carbon sink• Capacity building for R&D of low-carbon

technologies and policy enforcement, and development of human resources

Long-term (20~30 years)

• Mature policy and institutional system (standards/norms, Cap-and-Trade, and environmental taxation; monitoring and verifiability, etc)

• Much higher R&D investment and companies become a major driven force

• Mature financial mechanism linking capital markets: Public-Private-Partnership

• Commercialized ESTs in major sectors at international level

Technology change will be a key

• What’s technology? (a system)• What’s transfer of technology? (in place and

effective)• What’s development of technology?• What’s diffusion and deployment of technology?• What conditions and infrastructure are needed?• What awareness we need to develop to address

the contradiction between the protection of climate change as global public goods and IPR as private goods? How can we coordinate this?

Preliminary identification of barriers of technology transfer

• barriers from provider side– Political will and politician and entrepreneur’s

awareness on global public goods– Technology export ban– Market forces: e.g. monopoly tendency by

technology owners– Very high expectation for revenue– Inadequacy of economic incentives from

public policies

Preliminary identification of barriers of technology transfer

• Barriers from receiver side– Awareness– Knowledge and information– human resources– Financial resources– Lack of monitoring and enforcement of technological

norms and regulations– Lack of economic incentives: taxation, clarification of

PR, including IPR– Divided institutional arrangement

• Infrastructure Barriers– Transportation and telecommunication– Enabling legal basis and policies

Risks and Challenges• Awareness and lifestyle• High pressure of population and employment

call for high growth rate and lead to massive inputs of resources

• Rural population and infrastructure: incremental energy use

• Lock-in by low efficient technologies in infrastructure (transport, power, and buildings)

• Human resources for next several decades• Managing increasing financial resources

Conclusion• China’s energy use and GHG emission will conti

nue to increase, but may be in a more sustainable manner

• Awareness and policy infrastructure should go in advance of the implementation of policy instruments as a learning process

• Recent focuses should be on specific sectors and technologies

• International cooperation is needed, incl. an innovative, PPP-based financial mechanism to support R&D, transfer, and deployment of CSTs

Thank you for your attention!

zouji@ruc.edu.cn