Environment & Sustainability

China, a giant in action

Could China lead the world’s transitions to low carbon and greater resilience to climate change? While the US lags behind, stuck on President Trump climate change denial positions, the Red Dragon strengthens its economy transition efforts, leading the way toward sustainable policies and investments.

 

Every fairytale needs a villain. The Paris Climate Agreement seems to have found its one in the US, or, more precisely, in the US new President, Mr Donald Trump. The recent G20 summit in Hamburg saw the emergence of a G19 grouping on Paris Agreement commitments, isolating Trump in its decision to withdraw from the Agreement. The G20 (G19…) leaders issued a statement saying that the Paris Agreement on Climate Action is “irreversible” and agreed on a climate and energy action plan which sets out concrete steps to accelerate the world’s transitions to low carbon and greater resilience to climate change.

Worldwide, Trump statement is not discouraging the 153 Parties – out of 197 Parties to the Convention – that so far have ratified the Agreement, including the US itself: California Governor Jerry Brown and Michael Bloomberg launched “America’s Pledge on climate change” initiative to compile and quantify the actions of states, cities and businesses in the US to drive down their greenhouse gas emissions consistent with the goals of the Paris Agreement, as many US states, cities and businesses are showing they fear to lose the chance to lead the world economy green transition.

While the US risks to lag behind in the new research and investment opportunities China is setting to become the leader of this transition, strengthening its efforts to drive the National and worldwide economy toward more sustainable development patterns.

The planet’s largest emitter

China is by far the larger producer of CO2 emissions worldwide, with a share of 28% in 2015 on total emissions, while US emissions in the same year were the 16% of the total. India sets at the third place with a 5.8% share. China surpassed the US a decade ago, but the US remains historically responsible for more emissions than any other country, and since China has four times as many people as the US, the China’s average per capita CO2 emissions are less than half of the America’s.

China’s 2015 Intended Nationally Determined Contributions (INDC)

The Paris Agreement requires all Parties to put forward their best efforts through “nationally determined contributions” (NDCs) and to strengthen these efforts in the years ahead, reporting regularly on their emissions and on their implementation plans. Current NDCs are ‘intended’ as proposed ahead of the Paris Agreement being finalized. In 2018 Parties will take stock of the collective efforts in relation to progress towards the goal set in the Paris Agreement, and then, every five years, the collective progress will be assessed to inform further individual actions by Parties. According to the UNFCCC latest update on INDCs the aggregate effect of the 161 INDCs communicated by 189 Parties by 4 April 2016 will be holding the average global temperature rise below 2 Celsius degrees and 1.5 Celsius degrees above pre-industrial levels.

Based on China’s 2015 INDC the country nationally determined its actions by 2030 as follows

  • To achieve the peaking of carbon dioxide (CO2) emissions around 2030 and making best efforts to peak earlier
  • To lower CO2 emissions per unit of GDP by 60% to 65% from the 2005 level
  • To increase the share of non-fossil fuels in primary energy consumption to around 20%
  • To increase the forest stock volume by around 4.5 billion cubic meters on the 2005 level

China’s emissions will keep on growing, compared to the historical levels, at least up to 2030. This emission increase prospects, notwithstanding the non-fossil fuels growing share in the energy mix and the CO2 per GDP unit decrease pledges, are essentially linked to the strong economic growth outlooks of the country. As things stand at present, considering national circumstances and development stage, an immediate or much earlier CO2 emissions peak would probably entail a sharp negative impact on the national economic growth.
Although this commitments could be seen as of limited scope, especially if compared to the EU 2030 target of a 40% cut in greenhouse gas emissions versus 1990 levels, with a a population of 1.4 billion and, despite the the recent slowdown, a GDP growth of around 7% over the last couple of years, the second largest economy of the world remains a developing country, with per capita income still a fraction of that in advanced countries.

China’s 13th Five-Year-Plan on Energy Development

With the 13th Five-Year-Plan on Energy Development (Energy 13FYP), released on January 5th 2017 by the National Energy Administration, China raised its low carbon commitments for 2020 with respect to to the targets already announced by the Chinese government in its Strategic Energy Action Plan 2014-2020.

Key Energy 13FYP targets for 2020 are:

  • A total energy consumption cap of no more than 5 Gtce (2015 actual: 4.3 Gtce)
  • A percentage of coal in primary energy consumption of less than 58% (2015 actual: 64%)
  • A percentage of non-fossil fuel in primary energy consumption of more than 15% (2015 actual: 12%)
  • A total wind energy installed capacity of more than 210 GW (2015 actual: 129 GW)
  • A total solar energy installed capacity of more than 110 GW (2015 actual: 43 GW)
  • A total hydro energy installed capacity of 380 GW (2015 actual: 320 GW)
  • A total coal energy installed capacity of less than GW (2015 actual: 900 GW)

China is therefore planning to squeeze out coal’s share in the country’s energy mix, increasing non-fossil fuels, with a special focus on wind and solar new generation capacity.

Other policy targets include: lead renewable technology innovation; further support the development of the national renewable energy industry and decrease reliance on foreign companies; resolve renewable curtailment issue. Renewables curtailment (15% of total wind energy in 2015) is mainly due to the transmission bottlenecks (renewable capacity far from where the demand is concentrated) and the overcapacity problem China’s power sector is currently facing, due to economic slowdown and the slashing of energy intensive industries.

Coal issues and recent trends in China

Despite the above mentioned overcapacity problem, the Energy 13FYP foresees a build-up of coal-fired power capacity. Many of those projects where approved before the arising of this issue, when the economic growth prospects were much higher than today. China authorities considered the opportunity to put a “freeze period” of two years for the approval of new coal-fired power plants projects, but finally they came up with the decision of setting an upper limit to total new capacity.

According to the IEA World Energy Investment 2017 investment in the global coal power sector is set for decline, having passed an all-time peak, and the decline in coal-fired power generation capacity which is under construction is especially visible in China. The Chinese electricity sector overcapacity could weight on future coal demand, since most of the new planned plants are in China, but, assuming that they will be built, the increase in generation could be negligible.

The world’s largest carbon market

Last but not least, within 2017 China should establish and launch its own national emission trading system (ETS), setting up the world’s largest carbon market.

In the context of the EU-China Partnership on Climate Changethe EU supported the design and implementation of a national ETS in China, and trained Chinese carbon market experts. In October 2011, seven ETS pilots (Beijing, Shanghai, Tianjin, Chongqing, Guangdong, Hubei and Shenzhen) were approved by the Chinese government. Starting in 2013 and 2014, they were designed to lay the foundation for a national ETS to ensure that carbon and energy intensity targets are achieved while minimizing abatement costs. In fact, the Chinese government has, over time, shifted from a command and control approach towards more market-based measures to deliver its carbon and energy intensity targets.

Here some expected key features of the Chinese ETS

  • The cap is likely to be determined by a bottom up process, contributing to the carbon intensity target outlined in the a Energy 13FYP and in order to be consistent with China’s NDC
  • Based on the sector coverage released by the National Development and Reform Commission on 11th January 2016, it is expected that eight sectors will be covered by the national ETS: power, petro-chemical, chemical industry, building material, steel, non-ferrous metal, paper making, civil aviation (domestic flights only)
  • The majority of allowances will initially be allocated for free, with the number of allowances paid for gradually increasing over time.

All in all the Asian giant is moving forward to lead the way in addressing climate change and other current environmental issues.

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