China’s comet-like ascent to global economic powerhouse status over the past 30 years is based on its ability to manufacture everything and anything at reasonable labor and energy costs. Much of the West’s Foreign Direct Investment was spent on building factories to produce textiles, shoes, and other consumer products in the early years, then cars, chemicals, or IT devices in recent decades. In 2022, the industrial sector accounted for about 33% of value-added production in China’s economy, including 27.7% from the manufacturing sector. China became the world’s leading exporter of manufactured goods. For example, at one point, 80% of all iPhones were produced in China. And with growing affluence, Chinese consumers added to the need for China to produce more domestic consumables.
This energy-intensive “industrial revolution” of a kind, in combination with rapid urbanization, infrastructure construction, and transportation, came at a price: polluted water bodies, smog-clad skies over large stretches of the country, pollution-induced health issues, etc. And finally, this economic development model also turned China into the world’s largest net greenhouse gas emitter.
The problem was already recognized before President Xi’s ascent to the top of China’s government and his proclamation to establish an Ecological Civilization. Early policies targeted reducing air pollution and the infamous pm 2.5 rate in cities. Research into electric vehicles started in the first decade of the 2000s. The solar panel industry was heavily supported, and subsidies were introduced to address smog issues at home and build an export industry. In 2005, while still Party Secretary of Zhejiang Province, China’s President Xi started formulating his first thoughts around a different development model: Ecological Civilization. He furthermore stipulated that there would be no sustained economic development without respect for nature and the planet, formulating his “Two Mountain Theory”: “Green water and green mountains are also gold and silver mountains.” In his view, a healthy and clean environment was the base for healthy economic development, while wealth alone would not buy a healthy environment.
Yet, to date, China’s enormous energy needs to power its economic development continue to pose the biggest challenge to decarbonization.
Much has been done to address the output of greenhouse gas emissions, particularly CO2 in China, consistently bringing down energy-intensity and carbon-intensity levels. China has installed record capacities of renewable energy sources; it is consequently transforming its transportation sector to electrification; it has issued wave after wave of industrial policies to enhance energy efficiency in production and to move its industrial base away from low-cost manufacturing to high-quality production. At the same time, industrial production has continued to grow, and with the increasing affluence of its citizens, China’s household energy needs have grown. Renewable energy alone can not satisfy the enormous energy needs of industry and citizens, as seen during the ultimate energy crunch in the winter of 2021. The need for energy security has resulted in China falling back onto coal-fired power.
Speed in reduction and financing decarbonization remain the most significant challenges: China is predicted to peak emissions between 2021 and 2026. It has committed to achieving net-zero emissions by 2026. Thus, it has only a little more than three decades to reduce emissions, making rapid reduction imperative.
The innovation needed to transform the industry to a low-carbon model will need massive financing. A study predicts that China will need around US$ 25 trillion from 2020-2050 to transform its industry, transportation, and energy infrastructure. At the same time, China remains a mid-income country with a per capita income of US$14,000 per year, significantly below the average of developed countries. And the economy has been slowing over the past years. China must pour all available financial, technical, and innovation resources into shifting from high-speed to high-quality growth. In the words of the World Bank, “China needs to rebalance its growth model—from traditional infrastructure investment to innovation, from exports to domestic consumption, from industry to high-value services, from high to low carbon intensity, and from state-led to more market-driven allocation of resources.” Developing innovation and clean technology to address climate change holds the key to an industry transformation that costs money and may provide impetus for economic growth.
This Post was submitted by Climate Scorecard Country Manager Annette Wiedenbach
Sources:
https://unctad.org/system/files/official-document/gds2023d6_en.pdf