Editor's note: The following article is drawn from findings published in the Climate Group's July report, "China's Clean Revolution."
China is pursuing a green energy program for all the right reasons: It will offer the country a new source of domestically produced energy, provide an alternative to imported fuels, and help support Beijing's ongoing economic development. What's more, a renewable energy platform also lays the groundwork for developing new business sectors that could contribute to the economy through job creation and export potential. In short, China recognizes that energy efficiency addresses global warming, but also that the actions needed to tackle climate change also could contribute to economic development. In addition, by moving quickly to implement policies that address global warming, China is positioning itself to work more effectively with the international community to negotiate a successor agreement to the Kyoto Protocol.
That isn't to say any of this will be easy. China faces real challenges in balancing continued economic development against the need to safeguard the environment domestically and to play a responsible role in the international community as well.
Since Beijing launched its economic reforms in the early 1980s and opened the country to ever-increasing levels of foreign investment, China's economy has grown at a breakneck pace of 10-15 percent each year--with the exception of 1989 and 1990 when gross domestic product (GDP) growth cooled. Even as the global economy has vacillated since 2001, the Chinese economy has continued to grow at rates of 8-11 percent per year. An explosion in manufacturing has largely driven this rapid expansion. In the process, China has lifted hundreds of millions of people out of poverty and turned itself into an economic and industrial powerhouse.
Of course, the rapid growth and major shift to manufacturing has meant a corresponding rise in energy use. As a result, China has become the planet's largest emitter of greenhouse gases. China is also now the world's largest producer and consumer of coal at about 2.5 billion tons--or 40 percent of the global total. In fact, coal is the source of 80 percent of Chinese electricity, and is one of the few fuel resources China has in great abundance.
Yet, overall, energy intensity in China has improved steadily at a rate of around 3.9 percent per year from 1980 to 2005, resulting in impressive cumulative gains. For example, in 1980, China consumed 17 tons of coal for every $1,400 of GDP it produced, but that figure fell to 1.2 tons per $1,400 of GDP in 2006.
And despite the rapid rise in total energy use, per-capita energy consumption is still well below that of the West, as the average Chinese citizen consumes less than one-half the energy of the average person in the European Union (EU) and only one-fourth that of the average American. Again, the challenge becomes how China will deliver an improved standard of living for its populace while also protecting the environment and addressing global warming. It's an especially vexing proposition when Beijing's reliance on coal is considered.
Therefore, like most other countries, Beijing's current global position on climate action has evolved over the years. It's also worth noting that while China may not publicly commit to action, it often acts nonetheless. For instance, China signed the U.N. Framework Convention on Climate Change adopted at the 1992 Earth Summit as a "non-annex country," meaning it wasn't required to take any mandatory actions. And yet, following the summit, the Chinese State Council announced a plan to develop and promote solar, wind, and other clean sources of energy.
Officially, China's view is that global warming isn't a problem of its own making--a position backed by the facts. For the period before 2002, during which 90 percent of anthropogenic greenhouse gases now in the atmosphere were released, China contributed a mere 7 percent; conversely, the EU accounted for 26 percent and the United States 29 percent. That said, with China's share of current, ongoing greenhouse emissions reaching 24 percent and climbing, Beijing recognizes that it must act--especially following the International Panel on Climate Change's second assessment report in 1997 and the subsequent Kyoto Protocol.
Therefore, in 2000, Beijing unveiled its New Energy and Renewable Energy Industry Development Plan, which plotted the country's energy development through 2015. Two years later, the then State Commission of Economy and Trade issued its five-year plan for the development of new energy and renewable energy. In 2003, the National Development and Reform Commission (NDRC) began working with Tsinghua University to draft the Renewable Energy Law, setting ambitious targets to make China a world leader in photovoltaic and wind-turbine manufacturing. The next year, Beijing published the National Wind Resources Assessment Technical Regulations; in 2005, it published guidelines on the implementation of technical developments for environmental protection, and the NDRC published notices articulating its approach for accelerating the localization of wind-turbine manufacturing and how to support the development of solar power in the country.
These efforts have begun to payoff. To wit, China had 1 percent of global solar power capacity in 2003, but that number climbed to 35 percent in 2007, creating a $12.9 billion industry and helping China overtake Germany as the world's biggest producer of photovoltaic cells in early 2007. Subsequently, China now has more than 400 photovoltaic companies that employ more than 300,000 people. Similarly, the solar water heater market now employs more than 600,000 people in China and is valued at around $2 billion per year--with 20-percent annual growth.
China's wind-energy sector has also grown quickly, expanding by more than 134 percent in 2007 to a total of more than 6-gigawatt capacity, placing China fifth in the world for total installed capacity. And the Global Wind Energy Council predicts that China will become the world's top wind-turbine producer in 2009 with the capacity of 10,000 megawatts per year. There are now more than 50 domestic companies including 40 parts suppliers, four local manufacturers, and six joint ventures in the country's wind-turbine industry. China's leading wind-turbine manufacturer has a market value of more than $6 billion.
Similarly, biofuels have also boomed. China is now the third-largest ethanol producer in the world. As such, the country has begun converting an area of marginal land one-half the size of Britain into biofuel forests, hopefully easing the competition between biofuels and grain crops that has contributed to food-price increases globally.
All of this growth occurred once Beijing moved away from vaguely defined energy goals to much more specific objectives that were backed by a clear policy framework and a comprehensive set of supporting regulations. In addition, specific targets set with specific dates came with specific investment rules. And once the government produced a clear policy framework and put in place specific mechanisms to support market development, many companies became interested in investing in photovoltaics, wind, and biofuels.
The other important part of China's drive to improve energy use deals with efficiency. Despite tremendous upgrades in energy efficiency since the 1980s, China's energy use remains inefficient. Average carbon emissions are 1,200-1,300 grams per kilowatt hour, or 70 percent higher than what the best technology could offer. And industrial processes, which consume 70 percent of the country's total energy, are 20-60 percent more energy intensive than in developed countries--especially in the most energy-intensive areas such as steel, cement, and chemicals.
To address these challenges, Beijing has announced a plan to reduce its energy intensity by 20 percent--to under 0.9 tons of coal per $1,400 of GDP--by 2010. To help make this happen, Beijing has enacted an ambitious monitoring, benchmarking, and control system for its 1,000 largest energy-consuming companies, which are responsible for one-third of China's energy use. The program stipulates that these companies must reduce energy intensity to accomplish an overall energy savings of 100 million metric ton standard coal equivalent--approximately 833 million gigawatt hours. China is also taking steps to close inefficient power plants and has announced plans to shut 700 plants by 2010, specifically targeting smaller plants with capacity lower than 100 megawatts.
In addition to the overarching 20 percent energy-intensity reduction target and the 15 percent renewable energy target, a comprehensive set of complementary regulations have been developed covering almost every sector of China's economy.
To mitigate the impact of oil consumption from its fast-growing motor vehicle fleet, China has implemented fuel-efficiency standards for cars 40 percent higher than those in the United States and put in place a 20-percent tax on gas-guzzling sport utility vehicles in 2006, while compact cars are taxed at only 3 percent. The country has also unveiled a comprehensive mandatory energy-efficiency testing and labeling standards for home appliances and introduced strict building-efficiency design codes that aim to cut energy consumption of new buildings by 50 percent.
China is keenly aware of the environmental cost paid for economic development--evidenced by the problems that arose from rapid industrialization in neighboring countries such as South Korea and Japan. And as awareness of the problem of global warming has increased, the government has placed it higher on the policy agenda. Beijing also sees itself playing a role in the international community on the issue of climate change. And although the West is largely responsible for the anthropogenic greenhouse gases in the atmosphere today, Beijing isn't pointing figures as it sees no constructive purpose in doing so. Nonetheless, China believes that the United States and EU must demonstrate leadership, responsibility, and cooperation on the issue to properly address the current climate challenge.