Late in 2006, the International Energy Agency predicted that China would overtake the USA and become the world’s largest emitter of Greenhouse Gas (GHGs) by 2009. At the end of May 2007, China’s State Council approved a national plan to address the challenges posed by climate change. At the beginning of July, the Netherlands Environmental Assessment Agency released the results of their analysis of the latest energy data which showed that China had become the largest emitter of GHGs even by 2006. These results from the Netherlands can be considered only as rough estimates and only as provisional, but this sequence of announcements shows that China features highly in the international agenda on climate change and that climate change is becoming increasingly important on China’s national policy agenda.
Despite this apparent convergence of thinking, a sharp contrast exists between the attitudes and approaches of Europe and those in China; I exclude the USA from this discussion, on the grounds of the great divergence of views in that country. The European Union has seen a dramatic acceleration of moves to address climate change over the last few months.
At the beginning of the year the European Commission produced a new energy policy document and this has been followed by national energy policy papers from major energy users such as the United Kingdom and Germany. In all cases the primary policy priority has been the need to address climate change, and conventional security of energy supply considerations have been ranked below climate change and other environmental concerns. As a result, the main policy measures have been instruments to encourage such things as clean energy, renewable energy, new forms of energy, and energy efficiency, and there has been a general acceptance that this may necessarily drive up the price of energy to the end user.
In China, by contrast, the attention of the government has been directed at security of supply, both domestic and international. The key priority in the energy sector has been to provide enough energy to industrial, commercial and residential energy users in order to allow the economy to keep growing and to provide improved living standards for the population; and all without raising energy prices to unacceptable levels. This has required a wide range of measures from encouraging domestic production of energy, diversifying sources of import, investing overseas, building energy transmission infrastructure, and, finally, encouraging energy efficiency and energy conservation, as well as renewable energy.
Energy efficiency and energy conservation are indeed important components of China’s energy strategy, as we discussed in last month’s column, and the country is taking great strides in promoting renewable energy. In this respect China’s approach is indeed similar to those of many European governments, but the principal motivation for China is security of supply: constraining the growth of energy consumption, and using more different sources of energy will contribute to alleviating the energy supply problem.
China’s ambivalent attitude towards climate change arises from a number of sources. The major sentiment concerns that of fairness. First, China is the world’s most populous nation, and in terms of emissions per person it still ranks well below developed countries. Second, most of the cumulative emissions that have caused climate change have been created by the rich nations as they themselves were developing their economies. Third, the ultimate priorities for government are national stability and continuing economic development. Consequently, China has been reluctant to acknowledge that there may be a need to compromise its economic and social goals for the sake of global climate change.
Three things have happened over the last two years which have caused China’s government to modify its public stance on climate change. There has been a gradual realisation that China itself will indeed be greatly affected by climate change, by progressive desertification in the north and by rising sea-level on the coastal east and south. The ever-increasing publicity about China’s high and rising level of emissions is seen as undermining China’s claim to “peaceful rise”. Finally, it has become clear to the government that the steps which they are taking to address energy security are, in some but not all cases, precisely those that should also be taken to address climate change – at least until carbon capture and storage technology becomes commercially available.
Thus it is hardly surprising that the government’s strategy to constrain the growth of GHG emissions builds on elements of what were already in the medium and long-term plans for the energy sector, namely: energy efficiency, energy conservation, renewable energy and clean energy.
The problem with this is that it brings us back to the discussion of how effective is the government’s current energy strategy likely to be. At the heart of this strategy lies the aim of reducing the nation’s energy intensity by 20% from 2006-2010. The current high level of energy intensity and of GHG emissions per unit of GDP, even compared to other industrialising nations, can be attributed to a number of factors: the high rate of economic growth, the large role of industry and particularly of heavy industry in this economic growth, the relatively low level of energy efficiency in industry and in appliances, urbanisation and rising living standards, the lack of a coherent transport policy, and the nature of the energy mix (heavily dependent on coal). The government has introduced a number of administrative measures targeted at certain industries, sectors and uses, and these will undoubtedly have some success.But they have been slow to develop effective economic instruments such as higher prices or taxes on energy use and effective financial instruments to encourage, through loans and other demand side measures, enterprises to invest in energy efficient machines and management practices. In particular, it seems that China’s banks and power companies are not fully engaged promoting energy efficiency amongst end users in ways that can benefit all parties. Further, there is little sign yet that the government has indeed been successful in its attempts to curb economic growth and adjust the structure of the economy. But is it indeed realistic to expect the government to be successful in these respects? Is it right to expect China’s government to dampen the aspirations of its people and to constrain the economic ambitions of local government leaders? And, even if it is right, can they be successful in implementing such policies?
Finally, it is quite evidently unfair for the West to point the finger at China, for we have exported our energy intensive industries and associated pollution to China, and in turn China has exported low inflation back to the West. Climate change is a shared problem and there must be a collaborative approach to the solution. In Economic jargon, the negative impacts of climate change are “international public bads”, and measures to deal with climate change are “international public goods”.