The CEQ on FT.com: More than hot air

By Deborah Seligsohn

China has a robust domestic climate change policy, including ambitious energy efficiency and renewable energy goals.This may come as a surprise to readers accustomed to hearing about China’s growing greenhouse gas emissions.

International observers often dismiss China’s efforts as being driven by industrial policy aims rather than a concern for the global environment. But it is precisely because China’s energy efficiency and pollution-abatement programmes have support from industrial planners that they are likely to be successful.

One of the key drivers of China’s emerging climate change policy is energy security. Fluctuating prices, political instability in oil-rich regions, and growing global criticism in the last several years of China’s increasing energy demand – especially in the United States – has deepened domestic fears about China’s ability to import energy resources and greatly increased Beijing’s concern about relying on international sources for energy.

At the same time, Beijing’s awareness of the damage caused by domestic pollution has grown rapidly. Environmental action was catalysed by a large spill of toxic chemicals in the Songhua River in China’s industrial northeast in November 2005 that shut down the water supply for the city of Harbin for several days.

As the first Chinese environmental catastrophe with national reverberations, the spill helped propel the Chinese leadership away from a narrowly economic view of development and toward a broader definition encompassing ideas like a healthy populace and attractive, environmentally sustainable cities.

Added to these local environmental concerns was Beijing’s deepening understanding of how China would be affected by climate change. Policy makers were particularly worried by predictions of exacerbated droughts in the arid north and west, and aggravated flooding in the wet south and east.

The upshot of these concerns was that Beijing enshrined strong energy efficiency and pollution abatement goals in the 11th Five Year Plan (2006-10), notably requiring a 20 per cent reduction in energy intensity relative to GDP and 10 per cent reductions in sulphur dioxide and chemical oxygen demand (key measures of air and water pollution respectively).

International observers frequently criticise China for announcing grand-sounding policies and failing to implement them at the local level. But this view fails to appreciate the iterative nature of Chinese policy enforcement: a policy is announced, implementation perhaps falls short, the problems with implementation are studied, and increasingly precise rules and monitoring systems are introduced.

It often takes three to five years before the results of a policy initiative become evident on the ground. After China failed to meet energy efficiency goals in 2006, provincial governments and major industries were publicly criticised by Premier Wen Jiabao and forced to produce better plans for meeting their energy targets.

The result was a greatly strengthened Top 1,000 Enterprises energy efficiency programme, which imposes energy efficiency targets on the nation’s biggest industrial enterprises, and which is being replicated on the provincial level.

Other measures included the elimination of VAT rebates on energy intensive exports, including steel and cement, and the closure of inefficient plants. In 2007, China closed 14.4 gigawatts of electric power plants, more than 1,000 obsolete cement plants, and thousands of aluminium, steel, glass and paper factories.

These renewed efforts produced both energy efficiency and industrial policy benefits. The annual reduction in energy intensity jumped from an anaemic 1.6 per cent in 2006 to 3.7 per cent in 2007. Meanwhile, market-leading firms with above-average energy performance have benefited from the elimination of inefficient competitors.

As domestic momentum behind the energy efficiency and pollution abatement policy grew in 2007, international developments helped drive China towards a fully articulated climate change policy. The G8 Summit in May 2007 was the first time the Chinese head of state was called upon to focus directly on climate change in an international meeting, and that was only one of five major meetings that year in which climate change was emphasised.

Together, these factors created a greater willingness in Beijing to help move the global process forward, culminating in the issuance of the National Climate Change Policy in June 2007 – China’s first formal statement in the international arena tying its energy policy to climate mitigation.

The result is that China has now implemented measures to increase energy efficiency and curb greenhouse gas emissions, and it is investing heavily in new technologies. And these measures and investments are being conducted within a comprehensive policy framework with clear and measurable targets.

Far from being an environmental laggard, China’s efforts to reduce the rate of growth in greenhouse gas emissions are impressive. The National Development and Reform Commission estimates that in the current five-year plan period (2006-2010), China will emit 1bn tonnes of CO2 less than it would have without these new energy efficiency and emissions measures. But while China has willingly adopted domestic goals and quantified them, they are reluctant to submit to international pressure for targets – especially when China is held to the same standard as much richer nations.

It is important for Westerners to understand that China’s per-capita energy consumption and greenhouse gas emissions are still only approximately one-fifth of US levels and one-third of Europe’s. Reducing the base would actually require a new kind of energy economy – one yet to be demonstrated in the richer developed world.

Investment in this new energy economy is beginning with the Chinese stimulus package, with its strong investments in rail, electricity grid improvements, energy efficiency and environmental protection. And the prospects for green investment in the United States appear promising. If the developed world invests in its own green transformation, prices for these technologies will fall, and all of us – including China – will benefit.

Deborah Seligsohn is a Beijing-based senior fellow of the World Resources Institute, a Washington, DC-based environmental think tank

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