Considering China’s circumstances and strategic requirements on the energy front, discussed in the previous section of this article, there are three aspects of the situation that need attention if the country is to make the technical and policy preparations for CCS.

First, China needs more more capacity building:

* CCS technology is not yet mature. China needs to focus on research-and-development, particularly with attention to the country’s energy security; hold demonstrations of coal-to-liquids, IGCC and CCS technology; explore the economic sustainability of enhanced oil recovery and enhanced coal-bed methane; and analyse and evaluate future CCS technological pathways.

* China’s geology is complex; the country needs to conduct more more surveys of on-shore and off-shore coal, oil, gas basin and salt formations that have the potential for carbon sequestration. Comprehensive surveys of geological structure, storage potential, the risk of leakages and the feasibility of monitoring are necessary.

* There needs to be risk evaluation and management for all stages of CCS: capture, transportation and storage.

* China must establish CCS management structures, laws and regulations.

* China needs to increase public awareness of CCS, which means increasing public knowledge of the value and the risks of the technology.

Second, sources of funding should be expanded. Currently, fund transfers mainly take place via the international carbon market. As the funds available for CCS in China are very limited, international financial investment and support are very important.

The Clean Development Mechanism (CDM) is one of the Kyoto Protocol’s three mechanisms, and is a key part of encouraging developing nations to participate in global emission reductions. Currently, its executive board has raised the possibility of allowing CCS projects under the CDM. This is still highly controversial; opponents hold that CCS emissions reductions will weaken the effectiveness of the CDM’s market in Certified Emission Reductions (CERs).

In the current market, carbon dioxide (CO2) costs between 8 and 23 Euros (US$12 to $34) per tonne: much less than the cost of CCS (from 50 to 100 Euros, or US$75 to $150, per tonne of CO2). Even if CCS were included as a CDM project, there would be a significant price gap, which means CCS would have to be funded through other channels.

The fluctuating price of CERs also means that CCS will struggle to attract stable investment through this channel. Sectoral emissions reduction mechanisms may bring the power sector as a whole into emissions reduction arrangements, but this is still at an exploratory stage. Therefore, an international climate-change agreement must find new financial mechanisms to meet the needs of CCS implementation.

Third, we must strengthen international cooperation. International probes into CCS are still underway. The United Kingdom has legislated that new power plants must be “carbon-capture ready” if they are to connect to the power grid. The United States has announced an investment of US$1 billion to restart the FutureGen project, and is to build an IGCC+CSS demonstration plant in the mid-western state of Illinois. The European Union’s economic stimulus plan includes 1.05 billion Euros (around US$1.6 billion) in investment for CCS technology at seven power plants, with a “CCS Alliance” of 12 demonstration plants to be formed by 2012. In July 2009, China and the US announced plans to develop the “US-China Clean Energy Research Center”.

As cooperation between China and the US, Canada, the EU, Japan, Australia and other countries continues in the CCS field, China will form global links to the CCS industry, remain up-to-speed with technical advances and exchange know-how. This will lay the foundations for China to master the technology – and participate in the global effort to address climate change.

For more information, download the full report Real Drivers of CCS in China and Implications to Climate Change Policy by Richard Morse, Varun Rai and Gang He.

He Gang is research associate at Stanford University’s Program on Energy and Sustainable Development. ghe@stanford.edu

Carbon capture and storage (CCS), a technology that stops carbon dioxide produced by coal plants being released into the atmosphere, is essential in order to cut carbon emissions and thus mitigate the impacts of climate change. Accordingly, China’s ministry of science and technology already has a range of CCS technology projects underway. CCS has also featured prominently in the government’s National Outlines for Medium and Long-term Planning for Scientific and Technological Development (2006-2020), the National Climate Change Programme and other national plans on basic and high-technology research and development.

Existing demonstration projects include: the GreenGen project, which is a joint initiative by Huaneng and major state-owned energy giants, combining integrated gasification combined cycle (IGCC) technology with CSS; Shenhua’s coal-to-liquids and CSS project in Ordos; Huaneng’s post-combustion capture project in Gaobeidian in Beijing; and a new project in Shidongkou, in Shanghai.

China is also engaged in international partnerships, such as the UK-China NEZC initiative and Cooperation Action with CSS China EU (COACH). China also participates in the United States-led Carbon Sequestration Leadership Forum and is a part of the FutureGen Alliance. Cooperation agreements are also underway with Japan and Australia.

China is carrying out research, development and demonstration of CCS technology, but it is still at an early stage. According to predictions by the International Energy Agency, by 2050 CCS will provide 14% of the emission reduction required to stabilise the climate, 20% to 25% of which will come from China, with 60% of those cuts coming from the installation of CCS technology in power plants.

Given China’s circumstances and strategic needs, our most pressing task is to make preparations for CCS technology and policy.

The importance of CCS

China is a coal-rich country, but lacks oil and gas. According to BP, the country has 114.5 billion tonnes in its coal reserves, about 13.5% of the global total, compared to 2.1 billion tonnes of oil and 66.54 billion cubic metres of natural gas, accounting 1.3% and 1.1% of the world total respectively.

In 2008, China imported 179 million tonnes of crude oil, meaning it relies on imports for 49.8% of its oil consumption. This reliance is increasing. Rocketing oil prices in 2008 gave coal-to-liquids technology a boost, with experts predicting that by 2020, China will be able to produce the equivalent of 35 million tonnes of oil with this method: enough to replace about 25% of oil imports.

However, coal-to-liquids technology is also a significant producer of greenhouse gases, and it will be necessary to reduce those emissions. Therefore, the combination of CCS with coal-to-liquids will be important.

IGCC technology currently achieves 40% to 43% efficiency, and can achieve as high as 50% efficiency. Although the costs are higher than that of super-critical or ultra-super-critical turbines, taking CCS costs into account gives IGCC a clear advantage. Also, IGCC reduces pollutants such as nitrogen oxides and sulphur. IGCC is expected to contribute significantly to energy security, though still with some risks due to high costs and technological uncertainty.

These advanced technologies are integral to future energy strategy. This is important not only for China, but also for other nations who can gain valuable lessons from the country’s experiences.

If China uses its late-starter advantage and quickly masters proprietary manufacturing and innovations, it will find advantages in manufacturing costs, personnel and capital, potentially becoming a new centre of manufacturing and exporting.

CCS is a wide-ranging area, covering chemical, power-generating and geological fields. The research, development and demonstration of the technology will lead to rapid progress and technological innovation in these fields.

Obstacles

The costs of capturing carbon are huge. Research from Energy Technology Innovation Policy, at Harvard University in the United States, found that carbon capture alone (not taking into account transportation or storage, for instance) in a first of a kind power plant would cost US$100 to $150 per tonne of carbon that is abated, increasing the cost of power by US$0.10 per kilowatt-hour in comparison to a super-critical pulverised coal plant. Using mature technology, the costs would be approximately US$30 to $50 per tonne of carbon abated. The Special Report on Carbon Dioxide Capture and Storage from the Intergovernmental Panel on Climate Change (IPCC) shows that the addition of CCS technology increases electricity generation costs by 40% to 80%. So, although combining IGCC and CCS can reduce the costs of CCS, the overall costs of electricity generation will still increase 40% to 60%.

China’s potential for geological carbon sequestration is huge – but not currently quantified. Joint research by the Pacific Northwest National Laboratory in the United States and the Wuhan Institute of Rock and Soil Mechanics at the Chinese Academy of Sciences calculated a theoretical capacity to store 2,300 billion tonnes of carbon. By calculating distances between potential storage sites and 1,620 major emissions sources, the cost of transportation and storage (not including capture) was estimated to be below US$10 per tonne of carbon.

Due to China’s complex geology, there is uncertainly over carbon sequestration. Of the storage methods currently being investigated, CO2 enhanced oil recovery (EOR) and enhanced coal bed methane recovery (ECBM) have the greatest potential, due to the potential for profits.

Public acceptance of CCS also impacts on the feasibility and risks of its adoption. Vattenfall’s first CCS demonstration project at Schwarze Pumpe in north Germany had to be abandoned due to public opposition, with the carbon captured pumped straight back into the atmosphere.

Furthermore, the IPCC special report on CCS shows that the addition of CCS reduces the efficiency of coal-burning power generation by 20% to 30% due to energy penalties: a plant operating at 40% efficiency would be reduced to between 25% and 30% efficiency.

In China, the cost of post-combustion capture in power plants would be US$130 per tonne of carbon abated, increasing generating costs by 20% to 30% and reducing efficiency by 8 to 10 percentage points. Therefore, the addition of CCS will require the burning of roughly 25% more coal in order to generate the same quantity of electricity. In 2008, China burned 2.72 billion tonnes of coal, 1.18 billion tonnes of which was used in power generation. If CCS was added to all of China’s power plants, an extra 290 million tonnes of coal would be required to generate the same amount of electricity.

The cost of that extra coal consumption will be passed on through the entire coal industrial chain: to personnel, capital, road, rail and water transport, as well as in coal mining, transportation and storage. Factoring these expenses into the overall cost, it is clear that even greater pressure will be exerted on a coal industry already stretched to the limit. And costs would be even higher if “externalities” such as environmental impacts and safety were considered. So, calculating the costs of CCS can not be restricted to the costs of installing and running the technology: the extra costs the energy system will incur as a result of CCS must be considered.

The price of coal itself accounts for 80% of the costs of generating electricity, hence power plants are very sensitive to changes in the cost of coal. Low margins in the power sector mean it cannot absorb the costs of CSS. Although China’s coal sector is gradually starting to operate on market principles, the power industry is still very much under central control. The state has introduced some changes in pricing, but electricity prices are still managed in order to ensure economic growth and social stability.

According to the China Electricity Council, increases and fluctuations in the price of coal last year caused losses for power generators of 70 billion yuan (US$10.3 billion), 40 billion yuan (US$5.9 billion) of which was lost by the five major power firms alone. Therefore, power companies are unable to pass the increase in coal costs on to consumers, much less the costs of CCS.

This is a crucial time for energy saving and emissions reduction, as well as a stage of rapid development in hydro, solar, nuclear and other new energy sources. In 2008, wind power generation capacity increased from 0.76 gigawatts to 13.24 gigawatts. Increasing that to the target of 30 gigawatts will require over 1 trillion yuan (US$146 billion) in investment. For solar power to reach its target of 10 gigawatts, there will need to be around 300 billion yuan (US$44 billion) in investment. Furthermore, the country needs 750 billion yuan (US$110 billion) to achieve its aim of having 5% of all electricity generated by nuclear power by 2020.

The National Energy Administration predicts that China needs 2.5 trillion yuan in investment to meet the target of drawing 16% of all power from renewable sources by 2020. CCS will have to compete with these new energy sources for funding. New energy fits in with China’s future overall energy strategy; it will have knock-on effects in terms of upgrading industrial capacity and increasing employment. Therefore, it should be the focus of investment. Currently, there are huge opportunity costs associated with widespread implementation of CCS.

The implementation of CCS in China faces the same obstacles it does globally: issues that arise from the costs, the storage, the risks and the uncertainties. But the coal-and-electricity relationship in China means that the costs of CCS cannot be passed on to end-users with higher prices; the extra expenses will have to be absorbed by the entire energy system.

Therefore, if CCS is to be implemented on a large scale in China, international climate-change mechanisms will need to take financing into account. Without stable external sources of funding, CCS is unlikely to be a priority for development in the short term. The more closely international climate policy is aligned with China’s own incentives and the unique context of its coal and power markets, the better chance it will have of realising the optimal role for CCS in global climate efforts.

As humanity confronts the climate crisis and the financial crisis, we can grasp a new opportunity to develop both our economies and new energy sources. Here, we argue that cooperation between the United States and China on low-carbon cities may offer this chance.

The transition to new energy sources and a low-carbon economy could help slow climate change – but negotiations between the industrialised world and developing nations, such as China, mostly remain limited to technology transfer and financial support. Without a going beyond these old frameworks, the Copenhagen climate-change conference will struggle to provide a solution.

New energy sources and the low-carbon economy can play to the strengths of China and the United States. China’s knowledge economy is in its early stages, but there is a huge potential to develop new energy technology and to “leapfrog” in terms of the development of the low-carbon economy. There is experience in developing the knowledge economy in the service-orientated United States; there is also more knowledge about the rapid deployment of new technology. Add in both countries’ massive stimulus packages, and Sino-US cooperation could be the way to rapidly develop new energy technology and products, with the vast American market helping rapid adoption and reducing costs. It would also help to create “green jobs” in the United States.

Low-carbon cooperation between the two parties would not only help establish the knowledge economy, improve IP protection regimes and increase transparency, but also it could help to set global standards on emissions reductions. There is currently no single global standard for emissions – different nations propose reduction targets, but the measurement of those reductions has not been adequately explored. Standards established by the United States and China in the course of cooperation could be used as an international standard by other nations.

Preparations for demonstration projects on low-carbon cities partnerships in special zones of selected US and Chinese cities are already underway. These plans will be officially unveiled at the China-US Clean Energy Partnership Strategy Forum, to be held at the China Institute of Strategy and Management from October 21 to 23, 2009. On October 26 and 27, at the UN Global Compact’s corporate training event in New York, the project will explain the business opportunities it offers, and preparations will be made for the first round of mayoral training.

These low-carbon cities partnerships will not be created on a city-to-city basis, rather there will be an alliance of cities – mostly of small or medium size. Projects will start with capacity building training for mayors to bring them up to date on the latest thinking about low-carbon cities. As soon as a city shows an interest in joining up, the project will arrange training for executive officials and experts, addressing the different needs and characteristics of each city and working with the locality to produce suitable low-carbon action plans and assist in their implementation, realising measurable energy savings and emissions reductions. A report on the achievements of the first batch of demonstration projects will be produced before the 2012 climate-change negotiations.

This is an entirely bottom-up project: it has been designed so that local governments can take the lead – setting up demonstration projects in designated areas, with businesses undertaking sustainable commercial projects. Therefore we hope to work with local governments, businesses and universities – with central government support – to establish projects and make real emission reductions.

Existing low-carbon city projects all claim some successes, but the complexity of large cities confounds attempts to measure emission reductions. This proposed project will focus on designated areas and small to medium-sized cities so that emissions reductions can be more effectively measured and standards set. Demonstration zones will form centres of low-carbon innovation, which will attract personnel, funding and technology, creating a knowledge-based form of economic growth. The project will lead to more rapid adoption of low-carbon and new energy products worldwide. One of the routes to low-carbon city-building and economic recovery will be solar power. This is the new energy source with the greatest potential. However, both monocrystalline and polycrystalline silicon solar power remain expensive, and the production of raw materials can cause serious environmental pollution.

At the same time, competition between solar energy firms is concentrated in upstream markets, and state economic assistance is limited to solar electricity generation and integration into buildings, ignoring the importance of developing end-user products. The demonstration of end-user products would bring sustainable economic benefits for downstream firms. Supporting commercial applications of solar power, particular the use of thin solar membranes in road lighting, bicycles, wheelchairs, waterwheels and pumps, would reduce the costs of upstream development and inject new vitality into the sector.

Long-term cooperation between the US and China on low-carbon cities would not only help emissions reductions in the two countries, which account for 40% of all global carbon dioxide production, it would also send a strong signal to the world and set an example for others to follow. The partnership would make the development of low-carbon cities an effective means of economic growth in the post-Kyoto era, thus reducing negative attitudes towards climate negotiations and providing lessons for future negotiations.

Du Tingting works for Peking University Environmental Fund.

CS Kiang is chair of the Peking University Environmental Fund. He helped to write A Roadmap of US-China Collaboration on Energy and Climate Change. Kiang has presented his ideas on low-carbon city partnerships at international events, including the Manchester Climate Change Task Force Workshop, the Global Forum 2009, the Williamsburg Conference in Japan, and the Energy Forum for Asia.

China is already a leading force in the low-carbon economy, says a new report from the Climate Group.

The study, titled China’s Clean Energy Revolution II: Opportunities for a Low Carbon Future, claims that “China’s businesses have already become global leaders in a range of low-carbon products and services, particularly the renewable energy sector.”
[Editor’s note: this quotation and some of the other selections below do not appear in the English version of the report, but have been translated into English from the Chinese version [pdf].]

“[I]n an incredibly short space of time China has taken the lead in the race to develop and commercialize a range of low carbon technologies,” says the English-language press release.

There is a global consensus that addressing climate change requires a transition to a low-carbon economy; this is the focus of the latest round of international economic competition. And for a long time, China was at the back of the pack, much as it is in the men’s 100-metres sprint. So, has China now produced an overnight miracle – and become the Usain Bolt of the low-carbon race? Unfortunately, it seems to me that it has not.

According to the report, China’s low-carbon leadership is best demonstrated in the renewable-energy sector, such as wind and solar power. Of these, wind power performs best. In less than eight years, China’s wind power generating capacity has passed 12 million kilowatts, overtaking India to become the largest wind-power generator in Asia. China’s installed wind power capacity is set to overtake that of Spain and Germany next year, putting it second in the world only to the United States.

However, the technical and market weaknesses behind these successes are hard to conceal. Wind power in China is not developing well, a fact that the industry is well aware of.

A year before the Climate Group report, China’s State Electricity Regulatory Commission (SERC) published its own survey of the state of China’s wind-power sector. The research was carried out by experts at the Chinese Academy of Sciences and the China Electric Power Research Institute, who confirmed that progress has been made by the wind power sector, but also expressed concerns: China’s research, development and innovation in wind turbine technology lags far behind other countries, and there have only been certain limited advances in the selection of materials and some technical issues. China lacks the technology and staff it needs to master turbine design: the country still relies on imports of key components, such as transformers, bearings and blades. In other words, China’s wind turbine manufacturers are little more than assembly workshops for foreign companies.

Moreover, there are quality and reliability issues associated with the turbines assembled by Chinese firms; the availability ratio for Chinese turbines is lower than the equivalent foreign machines. Even the Climate Group report notes this technology gap faced by domestic firms. For example, Goldwind, China’s leader in turbine manufacturing, “spends the bulk of its research-and-development funds on prototype turbines, and 90% of that is spent procuring imported components.”

The solar energy sector, which the report sees as strong, does not give much cause for optimism either.

China has become the world’s largest exporter of photovoltaic (PV) cells. At the United Nations climate-change talks in Bali in 2007, Alexander Karsner, then US assistant secretary of energy, used the Jiangsu-based company Suntech as an example of China’s advances in low-carbon technology, calling into question the country’s demands for technology transfer from developed nations.

But Suntech’s success does not mean China is a leader in solar-power generation. As the Climate Group report says, “most Chinese PV enterprises are in the mass production category, where the technology is not advanced.” In the production of polycrystalline silicon, which is at the higher end of the PV industrial chain, China’s manufacturers still rely on imports of key technologies and equipment.

Some of these firms are even dumping poisonous silicon tetrachloride, a by-product of the manufacturing process, a practice that casts a shadow over the whole “clean” industry. It is a phenomenon described by some as “spending abroad, polluting at home.”

Recent years have seen both wind and solar power become favourites for investors; many local government officials see new energy as a way to boost their careers. But rapid development can obscure problems. China has failed to develop the grid to keep up with wind power expansion, meaning that electricity cannot be transmitted to other places. Inner Mongolia, in north-west China, has three million kilowatts of wind power capacity, but no way to get that power to the rest of the country. The SERC report also notes that errors in evaluating wind resources, poor positioning of wind farms and incorrect selection of equipment mean that many wind farms struggle to survive, or even operate at a loss.

The Chinese government is already aware that the solar and wind power sectors are “overheating”. On August 26, the State Council pointed out there is a tendency to duplicate capacity in new industries, such as wind power and polysilicon. The real winners in these “Great Leaps Forward” have been overseas turbine manufacturers and polysilicon equipment providers. They struck gold in China’s low-carbon markets, but China does not have the advanced technology it wants.

It is not a bad thing for China to focus on developing wind and solar power, but this needs to be done rationally, with an emphasis on technical innovation and efficiency. It is also crucial to note that the low-carbon economy is not limited to wind and solar power. In the long-term, coal will remain China’s major source of power. Increasing the efficiency of coal use and developing clean-coal technology should be at the heart of decarbonising China’s economy.

However, these pose significantly more difficulties than simply building new wind farms – and there will not be the same opportunities for advancement for local government officials. China’s low-carbon economy will also be enhanced by reducing energy consumption and emissions from buildings and transportation. In these areas, China is still far from a world leader.

In fact, the Climate Group is clear on some of the challenges that China’s low-carbon economy faces. It will depend “in great part” on policy direction, the report says. “It should also be clear that a simple reliance on administrative measures to promote the low-carbon economy will lead to a long term lack of impetus. If future policy focuses more on overall strategic coordination; on sustainability and implementability; encouraging the research, development and popularization of technology; and using market methods to adjust and promote innovation in commercial models and financing methods – then the low carbon economy will grow more quickly and more stably.”

Recent years have seen some progress towards a low-carbon economy, but there is a long way to go before China becomes the low-carbon Usain Bolt.

Li Taige is a Beijing-based journalist. He obtained a masters degree in engineering from Sichuan University in 1997, and studied as a Knight Science Journalism Fellow at the Massachusetts Institute of Technology (MIT) in 2003-2004.

China needs a low-carbon economy not only to meet the challenges of climate change, but also to address its other environmental problems – and its energy security. The country’s immediate ecological problems are plain to see; here, I will attempt to understand China’s energy problems.

China has large total energy reserves, but its population is huge – and thus its per capita reserves are low. Per capita extractable reserves of coal, oil and natural gas are in fact far lower than the global average. If China’s massive population increases its energy consumption, that scarcity will become more apparent.

China is better off than Japan in this regard, but China’s economy is still developing and it faces more severe challenges than Japan did at the same stage of its development. Japan’s industrialisation was aided by cheap energy and a lack of environmental concerns. Late-developing economies face greater energy and environmental constraints as they industrialise and urbanise: energy costs are rising, and environmental options are contracting. The costs of dealing with environmental damage further increase the costs of development. China’s biggest challenge this century will not be today’s financial crisis; it will be the energy and environmental pressures of tomorrow.

International energy markets are small when confronted with Chinese demand. However, if we compare primary energy consumption across major countries, we find that Chinese energy demand is rising, but per capita consumption is still low – although that of India is even lower. Between now and 2030, energy demand in China will double; in India it will triple. Developed economies, such as the United States and Japan – where industrialisation and urbanisation have been achieved – will only see low levels of growth in their energy consumption.

However, despite growth in India and China, per capita figures will remain far below those of the developed world. In 2030, per capita energy consumption in China will be a little more than one-third of that in the United States; India’s will be one-tenth. China’s massive demand for energy will also have an impact on international energy prices; historically, anything that China buys has gone up in price, and the country’s growth will be further impacted by high prices.

Comparing energy consumption structures across major countries in 2007, we find that China’s primary energy came mainly from coal: a crucial factor in terms of pollution. Although the use of oil, natural gas, hydropower and renewable energy sources has increased in recent years, coal still accounts for a very high proportion of China’s energy consumption: 69.5% in 2007, compared with 20.1% for oil, 3.3% for natural gas and 0.7% for nuclear power. India’s energy mix is also dominated by coal, which provides 51.5% of its power. Japan and the United States draw less than one-quarter of their energy from coal.

As a country rises out of poverty, short-term benefits often trump long-term concerns – hence energy resources and the environment do not receive the strategic planning and protection they deserve. At the moment, there is a thirst for power in China, and if the government allows it, this demand will be met with cheap coal. China is currently the world’s second largest producer and consumer of energy, and is undergoing a phase of rapid development characterised by intense extraction and consumption of energy. Hence the tension between sustainable development and limited energy reserves increases, and China’s own need to save energy becomes ever more pressing. It is generally accepted that China has significant scope to save energy; overall energy efficiency is around 33%, 10 percentage points below developed nations. This is often used as evidence that China is energy-inefficient – but that is not the whole truth of the matter.

In fact, China’s energy consumption per capita is far lower than that of the United States or Japan when they were at the same GDP per capita level, according to research by the Center of China Energy Economics Research at Xiamen University. The US and Japan reached a GDP per capital level of US$2,000 (13,655 yuan) in 1951 and 1970 respectively. It is estimated that when China reaches that GDP per capita level, energy consumption per capita will be only one-quarter of that of the US, and half of Japan’s (and slightly lower than the comparable point in the history of Taiwan, which reached a per capita GDP of US$2,000 in 1979, and was then consuming the equivalent of 2.1 tonnes of coal per capita). Therefore, it doesn’t seem correct to blame China for wasting energy: we can only say that the times have changed, as has the situation regarding energy and the environment.

Comparing energy utilisation rates across different countries at the same stage of development, China’s energy efficiency during industrialisation is no worse than that of the US and Japan during the equivalent phase of development. Energy was cheap while the US and Japan were industrialising and there were no environmental constraints: the two nations could use energy as they liked. Improved technology is clearly helping to change this situation: for instance, in the past five years the bulk of China’s coal-fired plants have been built to high international standards; they are significantly more efficient compared with older US plants.

However, China’s low energy efficiency compared to developed nations indicates the scope for the development of a low-carbon economy. Current levels of technology allow for further energy-efficiency improvements: several percentage points of energy saving would have a huge impact. China’s massive population means there is great scope for energy savings through the adoption of low-carbon lifestyles.

Like developed nations, China must go through a stage of urbanisation characterised by high energy use and emissions. But unlike those countries, China’s urbanisation faces challenges that include addressing climate change, ensuring food security and combatting energy shortages. The financial crisis will impact on China’s short-term economic growth, but the country’s rapid expansion will continue: the process of urbanisation is unstoppable, and energy demand will continue to grow. A correct understanding of China’s energy security and environmental issues should be the starting point for low-carbon development, and for setting the targets for that guide that development.

China’s low-carbon growth is of great global significance. The efforts of developed nations to cut emissions will be of instructive value to developing countries, but they are not entirely relevant: there are differences between populations of different developmental stages in terms of the inclination and ability of people to pay environmental costs. As a developing country, China’s experiences of creating a low-carbon economy will be of greater value for other developing nations.

Controlling greenhouse-gas emissions means controlling emissions growth. India is a factor that cannot be ignored. Its population will overtake that of China; since it mainly relies on coal power, India will face similar challenges to China in terms of emissions. Therefore, developing China’s low-carbon economy is not just a mission for China, it is a global one. If China can find a low-carbon path, India and other developing nations will be able to follow in its footsteps.

Lin Boqiang is professor at the Center of China Energy Economics Research, Xiamen University, and a member of the Changjiang Scholars Program.

Qiu Dengke (QD): How do you view the differences between developed and developing nations when it comes to climate change?

Li Lailai (LL): Nobody can doubt that the developed nations brought about our current predicament, a crisis which humanity – rich and poor, developed and developing – must face together. To put it simply, developed nations have deprived the developing world of development opportunities.

If we overlook regions and borders and make a sweeping generalisation, we could say that the poor suffer most and have no ability to react. Sociologists would say that the difference between rich and poor is the ability to allocate resources. With climate change creating disasters and increasing the frequency of extreme weather events, the rich can allocate resources to mitigate their circumstances, while the poor can only wait for disaster to strike.

QD: This leads to our “common but differentiated responsibilities”?

LL: It is a challenge to the common wisdom of humanity. We need to ensure a decent standard of living in developing nations, and also mitigate climate change. This needs joint action, it is not something that can be tackled unilaterally – so the proposal of “common but differentiated responsibilities” is a wise one.

QD: The post-Kyoto climate-change talks have continued on that basis. What suggestions do you have for China’s stance at these talks?

LL: First, we need to clarify the different responsibilities of developed and developing nations.

Let’s start with technology transfer: undoubtedly, less populated and more technologically advanced developed nations should be aware that they have written the rules of the game, and thus have a natural advantage. But climate change cannot be tackled unless everybody has the necessary technologies – hence technology transfer is needed. The largest obstacle here is that developed governments maintain that these technologies belong to private companies, and that governments cannot interfere in the market-led exchange of technology. But this is merely an excuse and avoids responsibility. Governments need to take action on climate change, removing intellectual property and other trade barriers, so that developing nations can get the technology to combat climate change – or there will be no joint action to speak of.

Second, there are finance issues. This is somewhat easier: there are huge potential markets for new technology in developing nations, and developed nations can invest here. There is massive potential, but how it will actually work needs discussion – and that’s the point of the negotiations. My suggestion is that developing nations – without making commitments to emissions cuts – adopt national sustainable development goals, with voluntary emissions reductions in exchange for technology and funds. This will allow the strengths of both parties to complement each other, and will be acceptable to both. The achievements of China’s three decades of economic reform provide lessons for today’s reform in energy saving and emissions reduction. This time around, China could achieve even larger-scale technological advances.

QD: International criticism of China currently focuses on the country’s supposed avoidance of negotiations and its failure to take concrete action on addressing climate change. How do you view those criticisms?

LL: I don’t know about the issue of avoiding negotiations. As for taking concrete action, I don’t think there is any basis to western criticism of China on these grounds. In the eleventh Five-Year Plan [2006 to 2010], China set a target for reducing its carbon intensity by 20%, which meets the call for measurable, reportable and verifiable targets in the Bali road map.

On the issue of negotiations, I think there is a reason that developed countries have their view. China does not have an overall plan, rooted in its own interests, to deal with climate change. It does not have a unified technology platform; it does not have a trading platform linked to international markets; it lacks a “national team”.

The rules of the game, as they stand, were set by the developed nations and are best represented by the European Union. Countries participate in climate-change politics at the national level, whether they are in high-level negotiations or addressing detailed technical issues (such as setting standards and market entry mechanisms). Most countries create technological, economic and political groupings to play to their strengths. There is only one reason for that: national economic interest. Therefore, China should have its own “national team” and set up similar groupings to represent its own best interests.

Take energy saving and emissions reduction as an example. China’s binding target to reduce carbon intensity by 20% is a measurable emissions reduction plan – it couldn’t be more concrete. China could use this to invite developed countries to share the associated cost burden. Incomplete statistics put government and business spending towards that target in the first two years of the eleventh Five-Year Plan [2006 and 2007] at 80 billion yuan (US$11.7 billion). If we set similar targets for the twelfth, thirteenth and fourteenth Five-Year Plans, then even with quite rapid economic growth, carbon dioxide emissions will peak by 2030 or earlier. During the current plan, China has made massive investments in independent, voluntary emissions reductions. To quote one local government official, “we will do whatever it takes to complete the national targets.” It is not just the Chinese that benefit from those investments: it is a public good for humanity as a whole. Should China, a developing nation, continue to take these independent undertakings? Can it afford to bear these costs? If international climate-change cooperation does not come into play at this point, is the Bali road map anything more than empty rhetoric?

chinadialogue: Many Chinese people who oppose a commitment to emissions cuts say that to do so would harm China’s interests and slow development. This is also the view of many of your critics.

Hu Angang: There would be no loss to China. In fact, it’s a huge opportunity. Twenty years ago, in national situation reports such as “Survival and development” and “The ecological deficit”, I first proposed a sustainable development strategy. In 1994 this became the national strategy. Then, at the start of this millennium I proposed the concept of “environmentally friendly development”. This is actually a Chinese invention: our ancestors spoke about nature and man as one. Environmentally friendly development is proactive, sustainable and of benefit to green industries and green power, and thus it presents huge business opportunities. It is based on social needs and market mechanisms, unlike the idea of sustainable development, which relies on the role of government. Also, I am very aware that we need to launch a fourth industrial revolution. The first two industrial revolutions were lead by the developed nations, with China nowhere to be seen. In the information revolution, China was originally left behind – but now it is in hot pursuit. This time round, we stand shoulder-to-shoulder with the developed nations on the starting line of the green revolution. Mastery of green technologies will be vital, and the development of green industries will provide core competitiveness. If we fail to see that, we let down our descendants.

I have written several articles over the past few years that suggest China makes an environmental contribution to the world. This echoes Mao Zedong’s statement in 1956 that in the twenty-first century, China would make a contribution to the world. He never specified what kind of contribution, but I do: a green one. China’s leaders have already stated they will make a “peaceful contribution”, but that alone is inadequate – there must also be an environmental contribution.

China should play a larger, positive role in international affairs. An editor at The Economist asked me quite a specific question: “What can China do to restore the economy as quickly as possible – and thus promote recovery of the global economy?” In the past, when humanity faced disaster or crisis, the world would never look to China to play any kind of role. But this financial crisis has been different, in a way that would have been unimaginable before. Similarly, the world’s gaze has again turned to China when tackling global climate change. And I believe that the financial crisis is a temporary one; climate change is the true threat. We need to ask what the most important challenge is, and what the most pressing task is. The most pressing tasks are not always the most important challenges, which are often ignored due to the perceived urgency of the former. The financial crisis has weakened people’s awareness of the greater threat to humanity. Look at the two recent summits in Washington last November and London this April. There was little mention of climate change. This year is crucial – we must see consensus, joint undertakings and action at Copenhagen.

An example of successful joint action was the Millennium Summit in 2000. Consensus was reached on poverty reduction, and humanity agreed on the Millennium Development Goals, of which the first is to reduce absolute poverty to half of 1990 levels by 2015. China achieved its part in this undertaking early – without that contribution, the world could not meet its target. China’s success led to global success.

History again offers us a rare opportunity. Humanity faces a grave threat, and as the largest emitter of greenhouse gases, China will play a decisive role in the success or failure of joint action. I hope the Chinese leaders will sign a deal at Copenhagen, just as Jiang Zemin signed on to the Millennium Development Goals in 2000.

cd: Have China’s leaders seen your reports on climate change?

HA: They have received them. My national situation reports could constitute a kind of political pressure. I have made it explicit that on such a crucial global issue, a 1% error in China’s decision-making will result in total global failure. China could bear great responsibility for any failure to reach an agreement at Copenhagen. Speaking in the Czech Republic on May 20, premier Wen Jiabao called for positive results at Copenhagen. That was gratifying to hear, but it still needs to be proven in practice.

cd: One scholar in the government told us that people like yourself can play a very important role. Politicians largely get their information from reports published by the Chinese Meteorological Administration, the Chinese Academy of Sciences, the National Development and Reform Commission and the ministries. They then look to opinions from academics. They get a lot of information from within the system, but important academics play a balancing role.

HA: I have published seven national situation reports on climate change in the last two years. I don’t do pure scientific research; climate change isn’t a purely scientific issue. I have seen very clearly the historical trends and the international trends. If this administration doesn’t take action, then the next will have to. This issue is always raised when our leaders meet foreign politicians – it’s unavoidable. I’ve put myself in their position and felt the international pressure they are under. We can’t claim that as a developing nation we don’t have to accept responsibility. The Millennium Development Goal I mentioned earlier is one example of success – and I have advised them to look at what Jiang Zemin did, and also to look at Deng Xiaoping. The implication is that they must not let this opportunity pass.

cd: How is climate-change policy formed at the moment? What institutions work together to produce policy?

HA: The formation of climate-change policy is not as open, transparent and democratic as, for instance, the drafting of the eleventh Five-Year Plan. It is discussed internally within a small number of departments – and that is very rare. With such a major issue, it is wrong not to seek expert opinions, and it is in breach of the working principles of the State Council. The fourth article of the principles is clear: policy-making by the State Council and its ministries must include public participation and expert consultation. When the ministries request that the State Council make important decisions, the necessity, feasibility and legality of the policy must be examined by expert institutions. Relevant authorities or localities must be consulted; in cases where the public interest is affected, public opinion must also be solicited – if necessary, through public hearings.

However, I’ve never attempted to influence the ministries. It is enough to influence the nine members of the Politburo. The ministries have never been major policy-makers, they only provide information. I need to break that monopoly on information, to compete with them. They provide their information, I provide mine – and not just to one person, to all nine. Central policy-making is handled by the Politburo, not by one individual: it’s not like it was in the era of Mao, Deng or Jiang. Now there are policy-making mechanisms with democracy, political consultation and votes. Your influence over those nine people is your influence over the policy-makers. That is not to say that they do accept my views and suggestions – that’s a different matter. But I have presented them in writing. That’s very important: the policy-makers don’t just need information, they need to hear both sides. The former premier Zhu Rongji and the current premier Wen Jiabao have both said that experts have a duty to provide these materials. So I do – I just hope they don’t find it troublesome. I joke – but we can provide valuable information. Sometimes I read chinadialogue, if necessary I quote it.

cd: On May 20, the government published China’s Position on the Copenhagen Climate Change Conference. One expert told us that he felt the official attitude was still very firm.

HA: That document wants developed nations, who represent less than 20% of the world’s population, to cover the costs for the rest of the world. It basically says: if developed countries won’t pay for it, we won’t reduce our emissions. That position might garner political support from some developing nations, but there are different kinds of developing countries – many island nations and ecologically impoverished countries are in opposition. If this is the position, the Copenhagen talks will fail – with no consensus or agreement. I do not know how likely that is, however, as Wen Jiabao has said that China will promote cooperation. We can only watch. Every country has put forward its policy: US president Barack Obama has put forward his; the European Union has put forward very clear policies; and now China stands alone. With global policy you need to compromise and make concessions – to be rational, pragmatic and practical.

Hu Angang is one of China’s best-known economists. He is professor at the Chinese Academy of Sciences and Tsinghua University and the director of the Centre for China Study, a leading policy think-tank. Hu has worked as the chief editor for China Studies Report, a circulated reference for senior officials.

Hu’s article has received both fierce criticism and enthusiastic praise. A member of the Chinese delegation to the climate change talks in Bonn commented on chinadialogue that Hu’s standpoint “lacks intrinsic knowledge about how climate-change problems have appeared and lacks any common sense of history or knowledge of the current situation of international politics.” However, an NGO observer at the talks responded, “if China keeps repeating the hackneyed refrain of ‘equality and justice’ in the few months left before Copenhagen round of talks, rather than putting forward its own views and propositions on this issue, it will find itself stuck in an ever unfavourable position. I believe professor Hu has made a good motion by airing his viewpoint and sparking a popular discussion. The sooner we do this the better.”

Liu Jianqiang and Yi Shui, editors at chinadialogue in Beijing, interviewed Hu to ask him how China should deal with the climate-change problem.

chinadialogue: Some commentators say that although you are an expert on China, your work on climate change does not reflect that expertise. As an economist, how and when did you come to research climate change?

Hu Angang: Actually a lot of people think it’s strange: “Hu’s an economist – an expert on the nation, why is he interested in climate change? How has he come up with these new and distinctive opinions so quickly?” However, a mature point of view does not just appear; it took 10 years, 20 years or longer.

Twenty years ago I wrote a report with Niu Wenyuan and Wang Yi, two colleagues at the Chinese Academy of Sciences, called “The ecological deficit: China’s greatest future challenge”. We wrote that the ecological crisis would evolve into the central issue of human existence and development in the twenty-first century. We covered seven major ecological and environmental issues, the very first of which was global climate change and rising sea levels. In 1989, academics had calculated that by 2030 global temperatures would have risen by between 1.5 and 4.5 degrees Celsius, with sea levels of between 20 to 140 centimetres. We were very concerned about the impact of that on China’s coastal regions and agriculture, including the availability of fresh water.

cd: What were your conclusions?

HA: Our basic conclusion was that this was a crisis for humanity as a whole. One nation’s pollution impacts on its neighbours by exacerbating climate change. The greenhouse gases emitted by one country do not remain in that particular country. Humanity had to respond in concert.

Thus in 2008 I paraphrased the Olympic slogan, “one world, one dream”, adapting it to climate change. “One world” is to say that our world continues to get smaller; “one dream” refers to our need to adopt environmentally-friendly practices – that’s our dream. I would also add “one action”: we need to reach agreement at Copenhagen to reduce emissions together.

As early as 1989 we had discussed the consequences of the environmental crisis for China’s security. Rising sea levels would have a grave impact on China’s three densely populated and economically crucial river deltas [the Pearl River Delta, the Yangtze River Delta and the Yellow River Delta]. Those are China’s three most developed areas, and also the areas most frequently hit by natural disasters; thus the potential for economic losses is huge. In 2008, I visited Caofeidian, in Hebei province, a development on land that has been reclaimed from the sea. However, have they considered rising sea levels? If they were to, the costs would rocket. In February 2008 I went to Zhuhai, in Guangdong province. There, they take rising sea levels into account when reclaiming land and building infrastructure. But are there many more areas that are not taking such questions into account? It is very likely there are, and nobody knows how far sea levels will rise. The impact of climate change also means that disasters that at one time would only strike once in a century, now might hit every decade or even more frequently.

In 1989 we also discussed the major environmental impact that China had on the planet. At that point I was already pro-globalisation. First, China is the world’s most populous nation, so it has a major impact on environment and climate-change issues as a result. China is already one of the world’s largest emitters of greenhouse gases. Second, China is the world’s largest producer and consumer of coal, a huge contributor to global warming, and no other nation can ignore this. That inevitably leads to frictions. We were saying that this background was important, that it gave China no choice but to view environmental management as of great strategic import, in order to participate in humanity’s efforts to protect the environment and save the planet. That view is still valid today. It was basically my view on global climate change and the environment 20 years ago.

In 1997 I co-authored a report with experts from the Institute of Geographical Sciences at the Chinese Academy of Sciences called, “China’s natural disasters and economic development”. I was the first of China’s economists to research the country’s natural environment and economic development, because growth and social progress is founded on an understanding of the environment, on protection and investment in natural systems. Through that research, I found that the climate is often the cause of natural disasters in China, making the country the largest victim of natural disasters, and the biggest victim of climate change. I went on to do some initial calculations and research, and found that the impact of disasters has increased rapidly since the 1950s. In that decade, 3.8 million tonnes of grain were lost per year, compared to 34 million tonnes per year from 2001 to 2006. In terms of the percentage of total production, in the 1950s that was 2.1%, in 2001 to 2006 it was 7.4%. On the one hand you have increased production, but on the other you have wider areas affected by disasters. We concluded that China would be the biggest victim of global warming, even before we considered that receding glaciers, rising snowlines and melting permafrost are putting the “water tower of Asia” – the source of our rivers – in grave danger.

In my book, Survival and development, I calculated that the frequency of natural disasters increased from the Sui Dynasty (581 to 618 CE) to the Tang Dynasty (618 to 917), from the Tang to the Song (960 to 1279) and increased again in the Qing (1644 to 1911). Historical data shows that disasters have increased in frequency since the 1950s; I inferred that this will continue. In the future, more scientific predictions will be made, but the conclusion will not be much different.

cd: When it comes to climate change, what would you say China’s “national circumstances” actually are?

HA: First, China is the largest victim of climate change. Second, adapting to climate change is in China’s core interests.

It would be petty of us to discuss how best to haggle with the foreigners at Copenhagen. We should start with the question of China’s own interests. In The second transformation: construction of state systems, I wrote that ecological security and environmental protection were two of our five core national interests. And this is not because of pressure from the United States and western nations. Unfortunately, many do not realise that addressing these issues is in China’s own interests, and those of all humanity – they are the shared core interests of China and the rest of the world. If our leaders can realise this, they will agree to make emissions cuts, rather than continuing to refuse. But as you know, I am the only Chinese academic openly calling for emissions cuts, and that is just lamentable. I need to spread this idea, no matter how long it takes. I believe that ultimately it will become the consensus among both China’s leaders and its people. So, that is how I sum up my views on China’s environment and climate change: it’s in China’s core national interests, and I’m saying so publicly.

NEXT: How is Chinese climate-change policy formed?

Hu Angang is one of China’s best-known economists. He is professor at the Chinese Academy of Sciences and Tsinghua University and the director of the Centre for China Study, a leading policy think-tank. Hu has worked as the chief editor for China Studies Report, a circulated reference for senior officials.

The toughest targets in China’s eleventh Five-Year Plan relate to energy-saving and emissions-reduction. Rapid economic growth in 2006 and 2007 meant leaps in energy consumption and a rise in pollution levels, but then the financial crisis hit China in the second half of 2008. By the fourth quarter, the declining economy had relieved some of the pressure to reach energy-saving and emissions-reduction targets.

The Five-Year Plan, released in 2006, contains quantifiable and binding targets for energy-saving and emissions-reduction: by 2010, energy consumption per unit of GDP (energy intensity) should have fallen by 20% on 2005 levels; absolute levels of SO2 and Chemical Oxygen Demand (COD) should have been reduced by 10%. These are tough targets, and there is an ongoing debate as to whether they were set too high.

However, the financial crisis means that energy consumption in China has been hit. Pollution has fallen, much as it did during the Asian Financial Crisis of 1997. According to the China Electricity Council, the demand for electricity dropped in September 2008: electricity generation fell by 3.4%. That trend continued, with a 4% fall in October. Excluding holiday periods, this was the first drop of its kind since 1999.

The financial crisis also caused China’s energy intensity to fall 4.59% in 2008, while COD and sulphur dioxide emissions fell 4.42% and 5.95% respectively, exceeding annual goals. In the past three years, energy intensity has fallen 10.08%, COD and sulphur dioxide emissions by 6.61% and 8.95% respectively.

The financial crisis has done China a favour, but it will pass – unlike the long-term challenges. In fact, the need to reduce greenhouse-gas emissions will only increase.

China’s current targets will now be reached easily, but longer-term aims will not be achieved so readily. Energy-saving and emissions-reduction are not the same as greenhouse-gas curbs. Energy-saving does reduce pollution, but atmospheric pollutants such as sulphur dioxide and particulate matter can be removed using technical fixes – with scrubbers, for example. Greenhouse gases can be captured and stored, but the methods for doing so are not yet commercially viable. Moreover, conventional pollutants, such as sulphur dioxide, do not increase much once per capita GDP reaches around US$10,000, but greenhouse-gas emissions are on the increase in countries with a per capita GDP of US$30,000.

Figure 2: Per capita greenhouse-gas emissions and per capita GDP (1960-2004)

Source: Pan Jiahua and Zheng Yan (2009)
X Axis: Per capita carbon dioxide emissions
Y Axis: Per capita GDP (US$ intl2000)
Right-hand key: Canada, France, Germany, Italy, United Kingdom, United States, Japan, Australia, Korea, Indonesia, Mexico, South Africa, India, China.

Figure 2 illustrates the relationship between income levels and greenhouse-gas emissions in 14 major economies between 1960 and 2004. Several features can be identified: first, income and emissions are related. Emissions increase sharply when per capita GDP is below US$10,000, but they start to slow over the US$15,000 level. Some nations, such as France and Germany, have seen their greenhouse-gas emissions fall despite increases in income. Greenhouse-gas emissions generally still increase with income, however. Second, countries with similar levels of income can have very different levels of emissions. North American countries and Australia have similar levels of income to European nations and Japan, but twice their greenhouse-gas emissions. On the surface, this appears to be because of differing availability of resources, but it is actually because of differing policy orientations. Europe and Japan emphasise public transport and energy efficiency and levy energy and climate taxes; the cost of fuel in Europe is around twice that of the United States. This shows that different methods of production and lifestyles can have a major impact on emissions. Third, developing nations, such as China and India, still have low incomes and low emissions per capita. Per capita emissions in South Africa, South Korea and Mexico are approaching European levels, despite their lower incomes. Therefore, if developing nations do not move towards low-carbon development, large quantities of greenhouse-gases will be emitted and pose a threat to the global climate. Similarly, developed nations need to reduce emissions and help the developing world to make low-carbon development choices.

Emissions in developed nations are slowing or even falling, while those in developing nations are growing, as incomes increase. So, what does the future hold? The International Energy Agency has calculated actual emissions for major countries from 1990 to 2006, and made predictions for 2030. Emissions in the developed economies have remained almost unchanged, with negative growth in Russia and other transitional economies. But there have been major increases in developing economies – around two-fold over the 16-year period. In China’s case, emissions have increased around 150%. If compulsory emissions reductions are not enforced by 2030, developed nations would maintain emissions at a stable level; emissions would fall in some countries, such as Japan. In contrast, emissions in developing nations will double, with India’s emissions possibly increasing threefold. By 2030, developing nations would account for the majority of emissions, with China potentially matching the combined emissions of the European Union and the United States.

In the long term, the financial crisis will not relieve the pressure on China to reduce emissions. China’s energy comes mainly from coal. Nuclear energy requires major investment and takes time to come onstream. Wind and solar power are not yet commercially competitive. Cleaning up China’s power will be a long and arduous task. Improvements in energy efficiency can mean maintaining the same output for a reduced energy input, but income increases will improve the quality of life, and private vehicles will become more common. These improvements, along with expanding populations, are a major source of increasing emissions for any developing nation. Developed nations have less room to improve quality of life, and they have stable or shrinking populations. In developed countries, cleaner and more efficient energy use will result in absolute falls in emissions, since they have seen stable or slightly falling emissions even without emissions reduction measures.

The economic crisis has taken some of the pressure off China, but only for a short while. China needs to deal with the current crisis, but also to make long-term plans for economic recovery and ongoing development – choosing a low-carbon path with improved energy efficiency and a better energy infrastructure, developing clean energy and preventing greenhouse-gas emissions from becoming a barrier to China’s economic growth.

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences

The financial crisis has spread from the United States to the world. China, as a part of the world economy, has seen a major impact on its economic growth – and its energy-saving and emissions-reduction measures.

Historically, such crises have had a large negative impact on economic development and resulted in reduced energy consumption and pollution. China has set lofty goals for economic development, energy-saving and emissions-reduction; the measures in the eleventh Five-Year Plan have been strictly implemented, though the actual results over the past three years have been unsatisfactory. Although the economy has slowed since August 2008 and energy use has fallen rapidly, with energy-saving and emissions-reduction no longer such a problem, the effect is only temporary. As the economy recovers, both energy use and emissions will rebound. In the long term, economic growth is inevitable and China faces energy-saving and emissions-reduction challenges. China cannot lower its guard.

Since the Industrial Revolution, economic expansion and the burning of fossil fuels have caused massive increases in pollution. But economic cycles and crises cause fluctuations in that economic growth, and hence in energy use and pollution.

The changes in per capita greenhouse-gas emissions for certain nations since the mid-nineteenth century can be seen in Figure 1. Due to the quality of data from the nineteenth century means some historical details are lost, but from the early twentieth century records improve and the data becomes more accurate. Therefore, the data can teach us several lessons.

Figure 1: A historical comparison (1855-2004) of greenhouse-gas emissions per capita in various countries
Source: Pan Jiahua and Zheng Yan (2009)

First, a recession leads to a large fall in energy demand and thus greenhouse-gas emissions. Energy consumption plummeted in Germany and Japan at the end of the Second World War, with emissions dropping by around 80%. The end of the Soviet Union and collapse of the Russian economy caused energy consumption to drop 40% in 1990. In the “Three Years of Natural Disasters” after the Great Leap Forward in China, energy consumption decreased and emissions fell significantly. Energy crises in 1973 and 1986 also reduced energy demand and emissions in major economies. The Great Depression also saw energy use and emissions fall by one third.

Second, the more globalised a nation is, the greater the impact of a global crisis. Developing nations, which are less integrated into the global economy, suffer less than the early industrialisers, such as the United States and countries in Europe.

Third, although per capita emissions fluctuate with the economy, the overall trend is upwards. When a crisis has passed, emissions quickly rebound and hit new highs.

Fourth, per capita emissions are almost in direct correlation with development. As the level of development increases, so do emissions per head. Europe and the United States have higher per capita emissions than developing nations, such as China and India.

Fifth, when development reaches a certain level, growth in per capita emissions slows, stabilises and even falls. Per capita emissions in Japan and the United Kingdom have been stable for almost two decades, while Germany has seen 30 years of negative growth.

So, why does an economic crisis lead to energy-saving and emissions-reduction? Table 1 illustrates the changes in China’s energy consumption during the Asian Financial Crisis of 1997. Figure 1 shows how China’s per capita emissions peaked in 1997, falling until 2001, when there was a quick recovery. Analysing the data in Table 1 explains why: first, the financial crisis caused a fall in demand for energy. Growth in energy demand fell from 8.3% in 1995, to 4.1% in 1996 and 0.2% in 1997. At its lowest point, total energy demand had fallen by 9.3%, which led to a drop in pollution. Second, looking at energy structures shows that coal, the most polluting source of energy, was hit hardest. Negative growth started in 1997, with a fall of 15.7% by 1999. Cleaner sources of energy – oil, natural gas and hydropower, for instance – were virtually unaffected. Thus energy became cleaner overall, and pollution fell. Third, when market conditions worsened, low-technology, small, inefficient and uncompetitive enterprises failed first; larger, more advanced and more efficient firms were better placed to weather the storm. This lead to an overall increase in energy-efficiency and a reduction in pollution.

Table 1 Growth in energy consumption during the Asian Financial Crisis (1997-2000)

Coal Oil Gas Primary

energy
Total energy

consumption

1995 8.3% 8.0% 2.2% 9.9% 8.3%
1996 2.8% 9.9% 12.1% 0.3% 4.1%
1997 -3.0% 10.3% 12.7% 2.8% 0.2%
1998 -7.8% 1.1% 2.9% 5.6% -4.9%
1999 -15.7% 6.5% 8.0% -2.7% -9.3%
2000 -5.2% 7.9% 7.9% 9.9% -0.3%
2001 10.5% 2.5% 11.5% 24.1% 9.4%
2002 19.5% 7.4% 7.7% 6.8

Source: China Energy Data Report 2004, LBNL, ERI/NDRC, 2006.

During a crisis, economic activity shrinks, demand falls and total energy demand follows suit. Thus a cleaner energy structure ensues. However, the demand for energy across different sectors changes in different ways: household consumption may change slightly, but not much, and the service industry is not affected badly. The largest impact is in the manufacturing industry, particularly raw materials and heavy industry. And while household and service sector energy comes largely from oil, natural gas and electricity, industry – particularly heavy industry – tends to rely on cheaper, polluting sources of energy, such as coal. Therefore, during a crisis the total energy demand falls and energy overall becomes cleaner.

NEXT: Can China meet its energy-saving targets?

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences