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China’s Inevitable Low-Carbon Future

By Xizhou Zhou
China's leaders are increasingly recognizing that policies to reduce emissions align seamlessly with their goal of a “great rejuvenation of the Chinese nation,” as articulated by President Xi Jinping in 2012, and again at the United Nations this year. In fact, achieving the so-called China dream may well make a low-carbon future the most likely scenario.

At this year’s United Nations General Assembly, Chinese President Xi Jinping generated headlines with an announcement that China would become carbon neutral by 2060.

Yet as extraordinary as this commitment may seem to outsiders, it is no surprise to those in China climate-policy circles. Quietly, government and industry leaders have been discussing carbon neutrality idea in earnest. As recently as January of this year, a group of senior Chinese officials and executives representing 28 influential industry associations gathered at an energy-investment conference in Beijing, where they produced a proclamation titled “Zero-Carbon China.” With a novel coronavirus beginning to spread and claim a rapidly growing number of lives, the event went largely unnoticed. But that doesn’t change China’s low-carbon trajectory.

For many of China’s leaders, the idea of acting more aggressively to reduce greenhouse-gas emissions is no longer controversial. On the contrary, they are increasingly recognizing that such action aligns seamlessly with their goal of a “great rejuvenation of the Chinese nation,” as articulated by President Xi Jinping in 2012. In fact, achieving the so-called China dream may well make a low-carbon future inevitable.

Anyone in Beijing needs only to look up – or breathe in – to understand why. China’s rapid economic development has produced infamously high levels of smog in its major cities, and increasingly vocal criticism from residents. During Beijing’s 2013 “airpocalypse,” smog peaked at 35 times the World Health Organization’s recommended limit.

In recent years, however, Xi has made fighting air pollution – or “bringing back the blue skies” – a top priority. Over the last decade, China’s government has forced old, inefficient coal-fired power plants with a total capacity of 119 gigawatts – enough to power all of France – into retirement, and shut down hundreds of thousands of small coal boilers used for steam generation or district heating. These measures have contributed to the marked improvement in urban air quality.

Critics will point to the fact that Chinese electricity companies are still building new coal-fired power stations, but even that story is more nuanced. Today’s state-of-the-art, highly efficient new plants are equipped with the latest pollution-control technologies. Many are intended to replace the older ones, while others are being used for matching the load profiles of intermittent wind and solar plants. The coal consumed at these new facilities is essentially offset by the retirement of older plants, allowing overall coal consumption to plateau.

Furthermore, in 2016, the Chinese government set a ceiling for total coal-fired power capacity by 2020, and is expected to stay beneath it. These policies may very well allow China to meet its Paris-accord commitment – peak carbon emissions by or before 2030 – ahead of schedule.

ECONOMIC TRANSITION
Specific energy-oriented objectives are just the beginning. China’s broader economic rebalancing – from heavy industries and export-oriented manufacturing to higher-value-added activities and domestic consumption – is naturally causing China’s economy to become less energy-intensive.

There is still a long way to go. Heavy industries and export manufacturing retain a dominant position in China’s economy, to the point that production of export goods accounts for an estimated 14% of China’s CO2 emissions – some 1.5 billion tons per year. That is roughly equivalent to the annual emissions of France, Germany, and Italy combined. Overall, China remains 10% more energy-intensive than the United States and 56% more than Japan.

But the Chinese government’s commitment to rebalancing economic growth, together with rising labor costs, which will cause export manufacturers to shift to lower-cost countries like Vietnam, means that the green trend will continue, and even accelerate. In other words, structural changes to the national economy – some by conscious efforts; others by external factors – will naturally decrease China’s energy intensity and lead to emissions reductions.

NEW OPPORTUNITIES
Similarly, policies to encourage new investment in areas such as solar, wind, battery storage, and electric vehicles (EVs) are aimed not only at reducing emissions, but also at creating a vast marketplace – and lucrative opportunities – for new technology players. For example, a surcharge on electricity consumers’ energy bills provides financing for the state-run renewable energy fund, which ensures that developers of renewable projects have strong incentives to proceed.

The incentives work. Today, more than one-third of the world’s operating wind and solar projects are in China. For Chinese companies, entering the renewable-energy industry is smart economics: demand for wind turbines, solar panels, and batteries is rising worldwide, and they want to be the ones to meet it.

In 2019, Chinese manufacturers supplied 42% of the world’s wind turbines, and 76% of the world’s solar modules originated in China, according to data from IHS Markit. Along the way, they also lowered the cost of renewable energy significantly – not only for Chinese, but for consumers everywhere. Here, too, what began primarily as industrial policies have yielded significant climate benefits.

The same goes for EVs. In 2009, when the Prius hybrid was leading the way in spurring EV adoption elsewhere, China’s then-Science and Technology Minister Wan Gang introduced an ambitious plan to leapfrog the hybrid with pure EVs, not so much to save the environment as to win the global technology race. Today, five of every ten EVs running on the planet are in China.

China’s new energy policies also promise to strengthen its security. China currently imports 70% of its crude oil and 45% of its natural gas. Whether piped in from Russia and Turkmenistan, or shipped from Iran and even the US through strategic hotspots such as the Strait of Hormuz and the South China Sea. Either way, it entails deft deal making and significant risk.

With China’s energy needs growing, and geopolitical tensions on the rise globally, Chinese leaders are eager to reduce dependence on foreign oil and gas. Generating electricity domestically – using wind and solar resources – and using it to power the country’s vehicle fleet provide a key pathway to decreasing energy imports.

AN ILLNESS STIMULUS
Given the far-reaching economic, technology, and security benefits of a “green transition,” the COVID-19 crisis is likely to accelerate, rather than discourage, progress. During a Chinese Communist Party Politburo meeting in March, the phrase “new infrastructure” became a fixture of discussions about economic stimulus.

Following the Great Recession ten years ago, China’s stimulus efforts included investment in traditional infrastructure, such as highways and bridges. Moreover, completing them was highly energy-intensive, owing to their dependence on inputs like cement and steel.

This time around, top officials decided, COVID-19 stimulus should focus on building infrastructure underpinned by the latest information technology – from 5G towers to EV charging stations and a high-voltage power grid that can absorb more renewables.

In addition, investments in “new infrastructure” will enable the expanded use of big data and artificial intelligence. This will help to optimize a wide range of processes, from factory operations to highway traffic management, all likely lead to greater energy efficiency and thus lower emissions.

ONLY NATURAL
In so many ways, emissions reduction is becoming an unavoidable by-product of the natural course of China’s development, defined by the changing demands of an increasingly affluent population, the desire to become a technological leader in a new economy, and the need for energy security. But even if that wasn’t true, China would have plenty of incentive to pursue a low-carbon future: its vulnerability to climate change.

The 900-page “Third National Assessment on Climate Change” – to which two ministries, two national academies, and many universities contributed – paints a bleak picture of China’s future if climate change continues unabated. Rising sea levels could affect more than a half-billion people living in coastal areas, including major cities like Shanghai and Guangzhou. More extreme weather, such as droughts, would lead to food shortages. And higher temperatures would accelerate the melting of glaciers on the Tibetan Plateau, increasing the flood burden in densely populated areas along the Yangtze River and elsewhere.

This explains why, as David Sandalow, a former under-secretary at the US Department of Energy, pointed out last year, “there are no known climate deniers in the Chinese leadership.” In the Intended Nationally Determined Contributions document that they submitted to the United Nations under the Paris climate agreement this past March, China’s leaders noted that their country “is among those countries that are most severely affected by the adverse impacts of climate change.”

It should not be surprising, then, that China’s leaders – including Xi himself – have repeatedly reaffirmed Beijing’s commitment to the Paris climate agreement, including the goal of reaching peak emissions before 2030. With the US having turned its back on the agreement, China’s commitment is all the more critical to global climate governance.

On the ground, things are progressing as well. As China emerged from its COVID-19 lockdown, the group that issued the “Zero-Carbon China” proclamation in January went back to work. On July 22, they met with the deputy mayor of Chengdu, China’s fourth-largest city, to discuss building low-carbon industrial parks, including using hydrogen to fuel the world’s largest production facility for fiberglass, a widely used material in applications such as automobiles, wind turbine blades, and aircraft.

This is only the beginning of their quest to get thousands of factories, residential communities, university campuses, and other organizations to become zero-carbon zones. These in turn could have a much wider impact in helping to fulfill Xi’s pledge for carbon neutrality, which is appearing increasingly inevitable.

Xizhou Zhou is a vice president and managing director of IHS Markit and heads the firm’s global power and renewables practice.

Published Date: Saturday, September 26th, 2020 | 05:28 PM

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