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The future of Carbon Intensity in China’s Economy

February 22nd, 2010 by Maïté Jaureguy-Naudin, Institut Français des Relations Internationales

Being now the largest CO2 emitter in the world, China’s actions toward climate change are particularly important to reduce GHG emissions at the global level. The recent announced target to reduce the carbon intensity of its economy by 40 to 45% by 2020 seems rather more difficult to achieve than first calculations would suggest.

From 1990 to 2005, China already improved the carbon intensity of its economy by 36%, and China did that without any international commitments. However, the carbon intensity of the economy can be observed in two main relationships: energy intensity and carbon intensity of energy use. Observation of these factors shows that China’s good result was due to improvement in energy intensity, and not to improvement in carbon intensity of energy use: from 1990 to 2005, energy intensity decreased by 48% whereas carbon intensity of energy use increased by 16%. For a broader picture, in 2007, China’s carbon intensity compared to Poland’s, and its energy intensity was five times higher than European Union’s. It seems therefore legitimate to ask whether China’s pledge is only a continuation of current trends and to assess what this objective implies in terms of future CO2 emissions.

According to the World Energy Outlook scenarios, in 2020 China would still be emitting 4.5 Gt CO2 emissions from fuel use above 2005 levels (+88% compared to 2005). This is an impressive number but let’s keep in mind that what is expected from China is to mitigate its CO2 emissions, not to reduce them. At least not yet. Emerging countries are entitled to pursue their economic development but in the least damaging way for environment in balancing CO2 emissions with economic growth. The WEO reference scenario foresees annual values for energy intensity and carbon intensity from energy use respectively equal to 0.480 and 3.08 in 2020. This represents over 2005-2020, a decrease of 41% for energy intensity and requires maintaining carbon intensity at 2007 levels, which is in line with the Chinese objective. Values for these same factors were -38% and + 16% over the 1990-2005 period. As in the case of the European Union and of the United States, maintaining the trend of improving energy intensity is quite achievable due to a mix of structural effects and improvement of energy efficiency. Improvements in carbon intensity of energy use are far more difficult to accomplish. They require huge investments in low carbon technologies and structural changes of the energy mix.

It would be unfair and inaccurate to say that China is doing nothing in terms of climate change policies. China has implemented different complimentary actions that could provide significant emissions reductions compared to a business as usual scenario. Among them, energy efficiency is a top priority on the energy agenda. China pursues also an aggressive development of renewable energy and will have as a consequence to modernize its electricity network to be able to integrate these intermittent energy sources. China has encouraged the closure of less efficient and smaller power plants to promote larger ones and to improve overall energy efficiency of the power sector. However, in 2020, China is still expected to rely on coal for 85% of its electricity production .

The question remains whether China will be able to implement effectively climate policies that are decided at the central government level and must be implemented at a regional level sometimes to the detriment of local development. A close examination of energy intensity over 1990-2005 shows that the energy intensity drop has not been linear: energy intensity turned upward in 2001 and kept rising until 2006, this is because emissions coming from the heavy industry sector increased much faster than their share of GDP output. Since 2007, energy intensity is on a downward trajectory again. But for China to reach an energy intensity decrease of 41% over the 2005-2020 period, it will need to intensify efforts to induce structural changes in its economy and increase the share of its service sector which would moderate the growth of industrial CO2 emissions.

In light of European and American results, let’s assume now that China’s energy intensity improves over 2005-2020 at the same rate observed over 1990-2005 and that carbon intensity from energy use increases at a rate of 1% per year over the same period. This is the average annual growth rate observed between 1990 and 2005. This estimation doesn’t take into account the acceleration observed since 2000 (indeed, annual average growth of carbon intensity equals 1.4% from 2000 to 2007) and therefore can be seen as including already climate policy actions. We then consider two different GDP growth rates.

If China were to sustain an annual average growth rate of its GDP of 8% to 2020, then CO2 emissions will amount in 2020 to 10400 MtCO2, 1 BtCO2 more than what the WEO 2009 reference scenario projects. To the contrary, if China’s annual average GDP growth rate was 6% until 2020, then CO2 emissions will amount in 2020 to 8177 MtCO2, which is inferior to what WEO suggests to meet 450 ppm scenario. However, while slower economic growth might translate into less industrial CO2 emissions, it might also slow structural changes toward more efficient infrastructure.

It is worth noting that even though all these scenarios are in line with China’s pledge of reducing the carbon intensity of its economy by 40-45%, implications in terms of CO2 emissions – and for global warming – are significantly different.

China’s objective seems rather more difficult to achieve than first calculations would suggest. Moreover, China’s intentions remain difficult to assess. China refused for example to inscribe the 80% emission reduction objective in the Copenhagen agreement even though the US was ready to do so. It remains to be seen how much more there is to China’s target than a political stand.

Maïté Jauréguy-Naudin, Institut Français des Relations Internationales

P.S. A larger paper assessing EU, US and China Pledges is available here

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2 Responses to “The future of Carbon Intensity in China’s Economy”

  1. Steven Stoft Says:

    Interesting and helpful perspective. There may be a simple answer to why China made this commitment. (1) As you say, they didn’t. The fine print says “the above-mentioned autonomous domestic mitigation actions are voluntary in nature.” (2) They probably just turned to DOE’s May 2009 IEO and looked up what DOE predicted they would do — a 45% reduction — and said, we will do that or maybe 5% less. (3) according to DOE they cut intensity 44% from 1990–2005, and during the last five years of that they were going crazy with CO2, so that made them feel confident.

    see calculations: http://www.global-energy.org/lib/2009/09-08

    But mainly, theyk new that even “legally binding” caps are just silly. Canada announced in the middle of the Copenhagen summit that it thought its Kyoto commitment just didn’t make sense any more so forget it. China figured it was better to play this silly game than to fight it.

    Internationally, committing to caps makes no sense — everyone who studies negotiations and the game theory of public goods agrees (at least all I can find agree). There is an alternative, just published in the Economists’ Voice. http://www.global-energy.org/lib/2010/10-01

  2. Diana Garibian Says:

    This article raises the issue of the role that China – and, more generally speaking, developing countries – should endorse in the worldwide environmental and energy policies. It clearly points out the crucial part that China could have to play in this matter. Indeed, China has recently become the first CO2 emitter in the world, and its growth rate forecasts allow us to believe that this trend should be even clearer in the years to come, as most of China’s electricity and energy is produced in coal power plants. In addition, a new coal power plant is built every week in China. But in spite of the fact that China’s energy policy will have tremendous consequences in the future, we may wonder whether it is fair for Western developed countries to ask of emerging countries to reduce, or at least mitigate, their carbon emissions. In my opinion, there are three key-points that may legitimate such a demand. First of all, environment is a global issue, and as any public good, it needs to be protected by a public authority in order to preserve its benefits for the whole community. This public authority is not clearly defined yet in the case of environment, as there is no supranational entity entirely committed to its protection. However, protocols and consultative agencies exist and countries that adhere to them may consider they have some sort of legitimacy in warning others of the situations, and pushing them towards more environment-friendly policies. Another point is that, as energy use and economic growth are related, it would be absolutely illogic and even absurd not to take into account the major influence of China on environmental issues. Last but not least, the Chinese growth rate will naturally encourage China on a path of structural changes of its energy use (e.g., improving its electricity network). Therefore, it seems all the more important that China be an active member of any energy-related policy, as it will have the means and possibility to make a substantial change in the WEO forecasts.
    Another point that can be raised when reading this article is the ambiguity of the Chinese goals regarding climate-change. Indeed, during the Copenhagen summit, the Chinese delegation assured it would reduce its carbon intensity by 40 to 45% by 2020, and by 80% by 2050, from 2005 levels. But considering the Chinese growth rate figures, this means that these commitments will lead in no way to an emissions cut, it is even expected that CO2 emissions could be doubled by 2030. It is obviously impossible to ask of China to reduce its carbon emissions, it would be unrealistic considering its fast developing economy. This creates another difficulty which is to find the most efficient way to control whether countries respect their commitment in terms of CO2 emissions or not.
    Therefore, not only is there a problem of legitimacy in trying to push China on the path to environment-friendly policies, there is also a bone of contention when it comes to measuring and assessing the efforts made by this carbon-consuming giant.

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