This week representatives from 194 parties are meeting in Durban, South Africa, for another two-week round of climate negotiations under the United Nations Framework Convention on Climate Change, or UNFCCC. As always, all eyes are on the United States and China—the world’s biggest carbon emitters and, according to some, the biggest hurdles to a global climate agreement.
China balks at a legally binding international climate commitment due to its still-developing economic status, and the United States refuses to sign a global agreement that does not include comparable—though not necessarily identical—action from China.
The Chinese are slowly changing course, however. Chinese emissions are steadily rising due to their strong economic growth but the country is working hard to manage its growing middle class and economic growth in a sustainable manner, as this column will show. China’s ability (or inability) to slow its emissions growth will have a huge impact on global warming.
The United States should be getting more serious about climate action at home, too, for many reasons. The race with China to reduce emissions, however, may be one of the most underappreciated reasons for domestic action. As China gets richer and greener, it will take a stronger leadership role in global climate negotiations based on the credibility of its reductions. If the United States does not keep up, it will suffer from a credibility gap on the world stage.
At some point—likely after 2020—China may be more willing to sign on to a binding international commitment. If the United States is unable or unwilling to match those efforts, it will be a disaster for U.S. leadership and our image abroad.
China targets efficiency and renewable energy production
Chinese leaders are still unwilling to make a binding international climate commitment. But they are absolutely dedicated to improving the country’s energy efficiency and reducing emissions.
The Chinese Communist Party promised their citizens to keep the economy growing at around 7 percent per year until the country reaches high-income status, which the World Bank defines as above $12,276 gross national income per capita. (China is currently upper-middle income with $4,260 GNI per capita.)
The Chinese depend on imported fossil fuels, particularly coal, for their energy needs. But coal cannot fuel China’s forecasted growth. Even if China can import enough coal to meet growing demand, escalating Chinese need may strain the global coal market and increase prices beyond what the Chinese could pay. Chinese citizens are also demanding cleaner air—sometimes via mass protests that terrify Beijing—and burning more fossil fuels would add to their already severe pollution problems.
So from the Chinese leadership perspective, greening the economy is the only way forward. Chinese leaders set their national policy priorities in five-year plans, and for the past five years (the 11th Five-Year Plan period) they focused on two goals: making the economy run more efficiently and developing new forms of renewable energy.
Chinese leaders issued the country’s first legally binding energy-efficiency target in 2006: achieving a 20 percent energy intensity reduction (energy consumed per unit of gross domestic product) by 2010.
To meet the target Chinese leaders assigned efficiency quotas to their regional governments, and the regional governments used subsidies and other policy incentives to close down small and inefficient power plants in their jurisdictions and to encourage local enterprises to make energy-saving technology upgrades, retrofit buildings (or build new buildings to higher efficiency standards), and switch to more efficient transportation.
Between 2006 and 2010 the central government doled out 85.1 billion RMB (around $13 billion in U.S. dollars) on energy-saving financial incentives. Local governments spent another 41 billion RMB.
By 2010 China achieved a 19.1 percent overall energy-intensity reduction. That’s just shy of the 20 percent target, but it’s close enough to call the program a success.
Between 2006 and 2010 Chinese leaders also rolled out a host of renewable energy development policies—China’s first renewable energy law, renewable energy financial subsidies, market-share targets, and grid-purchase requirements—for hydropower, wind, solar, biomass, geothermal, and other renewables. Those policies sent a strong market signal that kickstarted China’s renewable energy market, particularly in solar and wind, which were basically nonexistent before 2006.
China now has four wind turbine manufacturers among the global top 10 (up from zero in 2005), and its installed wind capacity doubled every year between 2006 and 2009. China surpassed the United States in installed renewable energy capacity (including wind, solar, small-hydro, biomass, waste-to-energy, geothermal, and marine) with 103 gigawatts in 2010, which is almost double the U.S. total.
But China still faces major challenges ahead. Chinese energy consumption is still growing, and though renewable development is impressive, it still plays a very small role in China’s overall energy mix, which was around 70 percent coal in 2010.
Overall, however, the Chinese are serious about reducing fossil fuel consumption. The central government committed (in the 12th Five-Year Plan) to increase renewable energy consumption to 11.4 percent of the energy mix by 2015 and 15 percent by 2020. We should expect those positive trends to continue, and Chinese energy restructuring will play a big role in mitigating the country’s carbon footprint.
The next step: Taking on carbon emissions
For the next five years (2011-2015), Chinese leaders will be broadening their focus to include not only energy consumption but also carbon emissions. The 12th Five-Year Plan includes the country’s first binding carbon-intensity target—reducing the amount of carbon emitted per unit of gross domestic product by 17 percent by 2015. As the table below demonstrates, all of China’s key 12th Five-Year Plan energy and emission targets are relatively ambitious.
The 12th Five-Year Plan also calls for a new carbon emissions market mechanism to give Chinese enterprises an avenue for trading energy and emission credits. That means China’s more ambitious enterprises could profit from their energy-saving and emission-reduction efforts (by selling their unused credits), and the enterprises who lag behind can buy credits to offset excess emissions, thus buying extra time for technology improvements while also receiving a cost incentive to eventually make them. Carbon market pilot projects are already underway in seven locations (Beijing, Tianjin, Shanghai, Chongqing, Shenzhen, Hubei, and Guangdong).
Instead of imposing a one-size-fits-all market mechanism from the top down, China’s National Development and Reform Commission—the country’s national economic planner, which also manages the energy sector—has asked those seven regions to design their own models to fit local conditions. The local governments in those regions are currently working to develop systems for measurement, reporting, and verification of their emissions reductions. They can decide at the local level whether to start with an economywide trading mechanism or move forward sector by sector.
Most of the pilots are leaning toward the sector approach. They will likely start off with the low-hanging fruit by monitoring the more consolidated industries (such as the power industry) and the larger state-owned or listed private enterprises that already have at least some data-gathering and reporting systems in place.
Statistical reporting is always a problem in China, so the Chinese are following the European approach—calculating emissions based on energy consumption, which the Chinese are already measuring—instead of following the U.S. model and attempting to measure emissions directly. China will measure energy consumption for the regions and enterprises involved in the carbon trading scheme and use industry-specific emission factors (calculations based on specific industry or enterprise production processes) to estimate carbon emissions based on the amount of energy consumed.
China’s provincial-level governments are working in close cooperation with the European Union to develop those monitoring and calculation schemes, and China is basing their system on common guidelines from the Intergovernmental Panel on Climate Change, the international climate assessment organization established by the United Nations and the World Meteorological Organization.
China’s emissions trading pilot programs are receiving funding from the World Bank and from China’s Clean Development Mechanism fund—a fund to finance the country’s efforts to address climate change—and other government sources. Chinese leaders are aiming to get the pilots up and running by 2013 and to possibly link them together in some fashion by 2015. The National Development and Reform Commission will play a coordinating role, and it plans to use lessons learned from the initial pilots to design the more comprehensive nationwide system.
The “X-shaped” emissions pattern
China possesses the political will to improve energy efficiency, restructure its energy mix (replacing fossil fuels with renewables), and reduce the greenhouse gas emissions produced for each unit of GDP. Their progress thus far is impressive. But challenges remain.
Primarily, China’s energy demand is growing so fast that it is impossible for the country to avoid emission growth over the short to medium term no matter how impressive its reductions in energy and emission intensity.
Despite the efficiency improvements mentioned above, China’s energy-related carbon emissions—which do not include emissions from nonenergy economic sectors such as agriculture—grew 33.6 percent over the 11th Five-Year Plan period to reach 6,880 million tons in 2010, which is 23 percent higher than U.S. emissions that same year.
Due to their rapid growth, the Chinese are stuck in an “X-shaped” emissions pattern. They are working hard to reduce emission intensity, but overall carbon output keeps growing and likely will not peak until 2030 at the earliest.
China’s per capita emissions are also growing. Chinese leaders are working to rebalance their economy by shifting to a development model that depends more on domestic consumption (as opposed to exports) for economic growth. That requires raising domestic living standards and consumer buying power, and many of the things Chinese consumers want to buy (cars, bigger houses with better air conditioning) will drive up emissions even further.
As of 2010 the United States was still the largest per capita emitter with 16.9 tons per capita versus 6.8 tons in China. But some forecasts show China’s per capita emissions will surpass the United States by 2017. The Chinese are determined to keep that from happening, but it won’t be easy.
Either way, even under the best-case scenario, China’s energy-related carbon emissions will likely surpass U.S. emissions by around 49 percent in 2015. Which means China will maintain its status as the largest overall emitter, and it—and the developing world overall—will play an increasingly critical role in combating global warming.
We don’t have leverage over China without action at home
The United States should keep up the pressure on China to turn their domestic climate programs into international commitments. Under the United Nations Framework Convention on Climate Change, China already committed to reduce carbon emission intensity 40 percent to 45 percent (based on 2005 levels) and to increase non-fossil-fuel energy consumption to 15 percent by 2020. But those commitments are not binding.
China can certainly do more. For instance, if we can get the Chinese to agree to include hydrofluorocarbons in the Montreal Protocol, that could cut global warming in half even without a binding UNFCCC agreement. Hydrofluorocarbons are ozone-depleting refrigeration chemicals that contribute to global warming. The United States is pushing to reduce the use of those chemicals by adding them to the Montreal Protocol, an international treaty for phasing out ozone-depleting substances. As of the last meeting in Bali, China and India are the only objectors.
Our ability to pressure China, however, will depend on what we are doing at home. And as China gets greener, the United States will have to make energy and climate progress as well to maintain our negotiating leverage.
It is highly likely that starting around 2020—if China is still growing steadily and their energy efficiency and carbon emission reduction programs are successful—the Chinese will get serious about making an international climate commitment. At that point, China will already be reaching developed-country status, and if they are already meeting ambitious energy and greenhouse gas targets domestically, they will have little to lose and plenty to gain from making parallel commitments at the international level. Chinese energy officials and climate experts are already discussing this internally.
Here in the United States we should consider the implications of this possible future. Once the Chinese are ready to deal, and assuming other major carbon polluters in the developing world follow suit, the United States could be the only major emitter holding out.
That is not a position we want to be in.
Melanie Hart is a Policy Analyst on China Energy and Climate Policy at the Center for American Progress.
. Qi Ye (ed.), “Zhong guo di tan fa zhan bao gao 2011-2012” (Annual Review of Low-Carbon Development in China 2011-2012), Tsinghua University/Climate Policy Initiative, November 2011.
. Chang Hong, “Shi er wu qi jian wo guo tan jiao yi shi chang jian she yi jing jin ru zheng fu gong zuo cheng xu” (China’s Carbon Exchange Construction for 12th Five Year Plan Period Already Officially Underway), People’s Daily, November 15, 2011, available at: http://politics.people.com.cn/GB/1026/16256667.html.
. Qi Ye (ed.), “Zhong guo di tan fa zhan bao gao 2011-2012.”
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Senior Fellow; Director, China Policy