Four Obstacles to a Low-carbon Economy

By ZHAO ZHONGXIU

EXPLORING low-carbon energy sources, developing a low-carbon mode of production and popularizing low-carbon lifestyles are the anchors of China’s new economy-in-the-making. However, after great effort and even some significant achievements in energy conservation and emissions reduction, the path towards China’s goals remains strewn with obstacles.

A Long Stretch to the Prize

In the early 1990s China launched the transformation of its economic growth mode. Entering the 21st century China added to the economic dimension its goals for social harmony and sustainable economic development. The 11th Five-year Plan (2006-2010) set a new target: cut the energy consumption per unit of GDP by 20 percent off the 2005 level by the end of 2010. In 2009, China made a solemn promise to the world that by 2020, that measure would decrease by 40 to 45 percent of the 2005 level, making this a binding standard for its mid- to long-term development plan. China also envisioned that by 2020, non-fossil fuels would make up 15 percent of its total primary energy consumption, and carbon sinks would be powerfully enhanced.

The year 2010 closes on a milestone. If the 20 percent decrease is realized as scheduled, at least 1.5 billion tons of carbon dioxide never made it into the air between 2006 to 2010. In its 12th Five-year Plan (2011-2015), China will continue to set clear-cut targets for energy conservation and emissions reduction, so as to dovetail this five-year plan with the mid- to long-term development strategy.

China’s serious intentions regarding climate change response are reflected in its legal and administrative measures. The National Leading Committee on Climate Change, headed by the premier, was established in 2007. Soon afterwards, the panel drew up China’s National Climate Change Program, and close on its heels came the white paper China’s Policies and Actions for Addressing Climate Change and, in 2008, the 11th Five-year Plan for Renewable Energy Development. Since 2006, an accompanying series of laws have been promulgated, among them the Energy Conservation Law, the Renewable Energy Law, Cleaner Production Promotion Law and Circular Economy Promotion Law.

Developing a low-carbon economy in China is no cakewalk. China is a country with a huge population and a relative scarcity of natural resources. Its energy use structure is incompatible with the demands of a low-carbon economy. From the development angle, China has a lot of ground to cover to get its citizens’ incomes on par with international standards. Despite her big urban centers entering the final stage of industrialization, most areas have only covered roughly half of the industrialization journey.

Tools Are Not on Hand

China faces pressure on four areas of weakness. The first obstacle to achieving a low-carbon economy comes from its imbalanced energy structure. At least 70 percent of China’s primary energy consumption is dominated by coal, whose mining recovery ratio and utilization efficiency are only half the standard maintained by developed countries, and its carbon emissions are voluminous. This means there’s plenty of potential for China to save energy and reduce emissions, and it also reveals how backward the nation is in the application of clean coal technology. China needs to strengthen its technological research and development and, related to that, its international cooperation before clean use of fossil fuels comes within reach.

The prize is attractive: half of China’s scheduled carbon emission reductions could be realized based on achieving developed-world efficiency in coal use. But for this, China needs technical assistance from developed nations, which it argues should be extended under the principles of the United Nations Framework Convention on Climate Change and the Kyoto Protocol.

Lack of Concentration

The second pressure comes from low industrial concentration. Medium-sized and small enterprises constitute a huge proportion of China’s manufacturing sector. Generally their energy efficiency is low, as are their abilities to conserve energy and reduce emissions. Easy market access, enjoyed by most sections of the manufacturing industry, works against eliminating backward production capacity, essentially buffering poorly equipped, carbon-intensive operations from today’s realities.

China now exerts its own pressure on enterprises for increased investment in energy efficiency and progressive production methods. However, because of information gaps and conflicts of interest between central and local governments, and the enterprises themselves, measures are not fully implemented. Redundant construction of backward production capacity happens every now and then.

Nevertheless, medium-sized and small enterprises play an important role in providing jobs, so the state should provide them with more financial and technological aid for cleaning up and reducing their consumption, rather than simply closing them down, suspending operations, merging them with others who are succeeding, or changing their product. None of these appeal at a time when China is struggling, despite the global financial crisis, to sustain the employment rate and maintain people’s living standards. One of our main challenges in developing low-carbon economy is in fact to ensure the growth of these enterprises, while encouraging them to save energy and reduce emission.

Emissions Double-think

The third pressure comes from China’s foreign trade structure. China makes a vast amount of industrial products for exports, and the carbon emission embedded in these products represents one-fourth to one-third of China’s total carbon emission.

Globally, China assumes first place in exports and second in imports, a result of jumping on the globalization wagon and adapting to the international “division of labor,” two forces that propel the rational distribution of resources and productivity worldwide. Inside and outside China, it all makes good sense.

The current world trade and value-chain entanglements create a situation where China’s carbon emissions from manufacturing and trading are not compensated for in its share of the added value the products generate. When a “Made in China” Barbie doll is shipped out, it leaves in China just one-tenth of the mo-netary value it generates but three-fourths of the carbon emissions generated over the process from manufacture through to purchase. Emission volumes are 13 times the profit volume, a stark disadvantage for countries at the lower end of the value chain like China.

International societies should be grateful for the “Made in China” scenario, and assist China’s export sector on energy conservation and emission reduction, rather than laying the blame for the world’s pollution on our doorstep. After the diner savors the delicacy, the cook and waiter should be acknowledged for their services; imposing a carbon tariff on Chinese products is like the customers rebuking the chef for creating a mess in the kitchen.

Under globalization China chose to improve its trading structure and get more involved in the international “division of labor,” instead of closing the door to the rest of the world. China will be busy with the onerous task of upgrading its foreign trade structure over a long period, because a good number of multinational enterprises have moved their operations to China or contracted manufacturing to Chinese factories. This migration of energy-intensive operations only increases the challenge of meeting China’s emission reduction obligations. Insult is added to injury when green technologies are peddled at whooping high prices just to take advantage of China’s woes. The less than obvious relationship between outsourcing carbon emissions activity and raking back added value will surely draw more attention and fire in days to come.

Demographic Pressure

The fourth pressure comes from the magnitude of China’s population and its structure. China has a population of more than 1.3 billion, and will inevitably see an annual increase of eight to ten million in the next 15 years. Compared with developed nations, China still has a lower per capita carbon emission level. But while China rides the wave of its expansion, people’s income and living standard are on the rise, and the country’s carbon footprint expands accordingly.

On the other hand, urbanization also figures into the cause of stress. Currently, about 57 percent of the population lives in rural areas. In the next 15 years, about 30 percent of Chinese will move from the countryside into cities, straining the labor market and putting the squeeze on China’s government to achieve its economic goals. Along with these changes come others – in domestic lifestyle and family structure. These factors are all directly or indirectly connected with the development of a low-carbon economy.

The upcoming Cancun Conference finds China full of expectations. As a developing country struggling to honor its commitments, China wishes that developed countries would face the facts about China and keep their own promises. Substantially cutting emissions and setting clear energy conservation and emission reduction goals in accordance with the principle of “common but differentiated responsibilities” is inscribed in the United Nations Framework Convention on Climate Change. We also need to deliberate with developing nations on technological development and transfer, and associated financial support and action plans. That’s what would make the Cancun talks practical, significant and, ultimately, a boon to humankind.