China Emissions Reduction Policy

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China: The 13th Five Year Plan (2016-2020)

China’s climate policies are defined by the central government, the most important of which are set in the Five Year Plans, a national economic statement that outlines the country’s growth path through wide-ranging targets. The 13th Five Year Plan (2016 – 2020) presents six targets relevant to emission reduction, including the promotion of clean production through low-carbon industries, as well as investment in a green development fund. More specifically, the targets are to reduce energy intensity by 15 percent and carbon intensity by 18 percent compared to 2015 levels. In addition, energy consumption will be capped at 5 billion tons of coal equivalent, and the share of primary energy consumption from non-renewable sources will increase to 15 percent.

These targets are implemented in a cascading responsibility system; the central government sets the overall targets that are then disaggregated by province, uniquely executed to reflect local resources and conditions. The central government keeps accountability through annual evaluations, rewarding provincial leaders that introduced creative and effective policy mechanisms that perform well in achieving the targets. As a result, China has seen an increasing participation of experts and consultants that help advise provinces in advancing the national goals.

Two of the most effective national policies currently in place include China’s economic restructuring as well as their commitment to invest in non-fossil fuel energy. These two policies have been primarily driven by domestic considerations rather than international image and accountability. In particular, China’s recent public outcries against air pollution and smog in cities has led to a greater urgency to transition away from high energy and carbon intensive industries, and to continue expanding its service sector and ‘clean’ energy production.

Although investment in non-fossil fuel energy serves to meet carbon mitigation targets, Chinese policy-makers have also cited the importance of expanding nuclear and renewables as a tool for developing a greater overall supply of energy. Recognizing that energy is a key input to economic growth, and that energy demand will most likely continue to grow along with the economy, the Chinese government sees any additional source of energy production as attractive. In addition, the concern with future energy security, particularly if imported from foreign countries, has meant that China’s energy policy has focused on stimulating investment in renewables. As of now, China is the world’s leading producer of renewable energy and also leads the world in clean energy investment with a record of $89.5 billion dollars invested in 2014.

Nonetheless, China is said to not fully see the extent of the benefits of renewables, as large State Owned Enterprises in coal are criticized for resisting much of the policies that would cut coal completely out of the energy picture, and continue to lengthen the policy implementation process in order to ensure time for businesses to adjust to these new energy sources.

The second national policy, economic restructuring is largely driven by China’s ambition to continue economic growth despite international agreements to cap and reduce emissions. Indeed, in the past five years China’s leadership has sought to focus on expanding its service sector rather than continuing investments into its manufacturing industries. Thus, the 13th Five Year Plan looks to boost innovation, abandoning old heavy industry and building up bases of modern information-intensive infrastructure. In particular, China continues to force closure or capping production of heavy industries, including cement and steel factories. An example of policy that serves to achieve this goal is China’s selection of seven new ‘strategic industries’, of which the central government has focused on providing financial and resource support to environmental technology, bio technology, next generation IT, etc. Overall, this ‘green growth’ path is seen as an opportunity for China to gain leadership in the global low carbon market.

Although this national policy for economic restructuring will surely lead China to effective carbon and greenhouse gas mitigation, it also has the potential of causing global transition of manufacturing and energy intensive industries to new ‘less economically developed countries’ such as Indonesia and Bangladesh. This means that the overall net effect on global greenhouse emissions has the potential of not being as significant.

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