China’s carbon emissions: a global dilemma
The CarbonNeutral Company examines who’s fuelling China’s carbon emissions, and why Western businesses
are supporting emission reductions and renewable energy projects in China in order to facilitate a low carbon
global economy.
Rapidly industrialising China is the world’s most populous
country, and now its second largest economy. It also has the
world’s highest carbon footprint, having overtaken the USA.
According to a 2011 poll by The Economist,
64% of people in Western nations think
that China should be achieving its growth
and industrialisation in a cleaner way
than its Western counterparts.
Clean growth is moving up China’s agenda. Outgoing
Communist Party leader Hu Jintao called for “scientific
development”, meaning eco-friendly and balanced, in a rare
public address occasioned by 2012’s once a decade change
of leadership. China’s single party system means the contents
of this speech would have been carefully selected to reflect
the intentions of its officials.
Agreeing green growth is desirable is simple. Deciding who’s
responsible for China achieving it is not.
The issue comes down to who should carry the cost of
decarbonising Chinese industry: should China, with its economy
still growing despite global recession, take responsibility for
its own future; or should the developed economies who have
outsourced their own manufacturing – and associated emissions
– play a part in reducing them?
China’s emissions are getting
high off the West’s supply chain
It’s not domestic demand that’s fuelling China’s growth. China
is the largest exporting nation on the planet: office machinery,
telecommunications equipment, electrical goods, and clothing
exports are consumed by countries keen to take advantage of
China’s low cost base.
By 2008, estimates attributed 33% of China’s emissions to
goods it manufactured for export. Since then, international
governments and business have begun to accept that, while
China is a monster polluter, the wider world is feeding the beast.
In 2012 the UK’s Energy and Climate Change Committee said:
Successive governments have claimed
to be cutting climate change emissions,
but in fact a lot of pollution has simply
been outsourced. We get through more
consumer goods than ever before in the
UK and this is pushing up emissions in
manufacturing countries like China.
Global corporates are looking beyond their own boundaries
as they seek to reduce exposure to risks caused by climate
change and resource availability, and to deliver wide reaching
CSR programmes that deliver sustainable benefits to all of the
communities in a supply chain. China is high on the priority list.
In October 2012 global discount retailer Walmart announced
– from a launch in Beijing – that it is placing China at the centre
of its plans to fund research focused on sustainable business
and supply chains.
China’s main export destinations
EU27...................................................................20%
USA....................................................................18%
Hong Kong ........................................................14%
Japan ..................................................................8%
South Korea.........................................................4%
China’s GDP has grown tenfold since its communist government
adopted a more market-orientated approach to the economy
in the 1970s. It’s now the world’s second largest economy, with
only the USA having a higher GDP. Industry, including mining
and manufacturing, accounts for 47% of China’s GDP, and that
rate is predicted to continue growing at almost 14% per annum.
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London T: +44 20 7833 6000 E: [email protected]
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33% of China’s emissions are attributed to manufacturing goods for export
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China’s emissions
In 2011 China’s carbon emissions overtook the United States’ for the first time. Each of these nations is responsible for around 20% of
the world’s emissions, making them critical to any global effort to reduce emissions.
China both produces and uses more coal than any other nation. China was a net exporter of oil until the early 1990s, but by 2009 was
the second largest importer.
CO2 in million metric tonnes
Tonnes of carbon dioxide emissions per year to 2030
25,000
20,000
Overall
From petroleum
From coal
15,000
10,000
5,000
0
1980 1990
20002010
Large economy, large population,
lagging development?
20202030
a per capita basis the nation’s demand for energy is still only
about a third of the Organization for Economic Co-operation
and Development (OECD) average – so the potential for more
demand remains very high.
A major reason for China’s low cost base is its large population of
1,354 million. It’s home to a vast pool of blue collar workers who are
productive, efficient, hard-working, and aspirant – all finding their way
in an emerging market-based economy in which labour costs are
amongst the lowest in the developing world.
But the country’s economic growth, and reports of its new urban
middle classes (and the issues of meeting their growing demand for
Western diet and lifestyles) masks a lesser reported story of a still
developing nation.
13% of China’s population (130 million
people) fall below the poverty line.
Standards of living are lower in rural areas - and 40% of the
population still work in agriculture, despite the industrial base being
the economic powerhouse of the country. The GDP per capita in
China’s Western provinces is just over $5,000 - equivalent to that
of Guatemala.
Many areas remain poorly served by infrastructure, and China’s
power grid in particular has suffered from insufficient investment.
In such an enormous country, the edicts of Beijing are not always
equally applied: in many Western provinces, renewable energy
projects have higher capital costs because of the issues involved
in connecting renewables to the grid.
Raising the standard of living for China’s rural population will require
investment in electrification, and this signals the potential for further
emissions. Since 2000, China’s energy demand has doubled, but on
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London T: +44 20 7833 6000 E: [email protected]
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Factories in China, where coal is the main energy source and a major
source of pollution
The role of carbon finance is
environmental and social
As a non-Annex 1 country, China is able to receive carbon
finance for projects eligible for the Clean Development
Mechanism and for the voluntary carbon markets. China became
a major figure in the now beleaguered CDM, and questions have
been raised over whether some of the projects – for example,
those destroying industrial gases with high global warming
potential such as Nitrous oxide (N2O) and Hydrofluorocarbons
(HFCs) – really supported the scheme’s originally stated aims of
emission reductions and sustainable development.
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However, China has successfully used carbon finance from
Kyoto and voluntary carbon markets to spur investment in
renewables, and improved grid capacity so that these projects
can be brought online.
In the country’s lesser developed Western provinces, carbon
finance in renewable energy projects has also played a
development role. Cameron Hepburn of project developers
Climate Bridge explains: “There is a double dividend from
projects in rural areas. As well as emissions reductions there
are significant benefits in transport, healthcare, employment and
increased income for communities. Poverty in rural China is also
closely correlated with low levels of education. The simple
opportunity to turn on a light bulb can be life changing: it can
mean a child can do schoolwork in the evening, for example.”
second. But China has made a pledge to the 2010 Copenhagen
Accord to lower its carbon dioxide emissions per unit of GDP
by 40-45% by 2020 compared to the 2005 level, increase the
share of non-fossil fuels in primary energy consumption to
around 15% by 2020, and increase forest coverage by 40
million hectares and forest stock volume by 1.3 billion cubic
metres by 2020 from the 2005 levels.
China’s central communist administration is adopting market
based approaches in its drive to reach its emissions reductions
targets. Mandatory cap-and-trade schemes will be rolled out
in six of China’s more advanced regions by 2013, with the
government planning to expand this to a national level by 2015.
The government has continued to revise its renewable energy
targets upwards. In October 2012 the government lifted a
moratorium on nuclear power and set a target of 30% of power
to be delivered by renewables and nuclear by 2015, up from
an earlier target of 15% from renewables and 5% from nuclear
by 2020.
According to China’s 12th Five-Year Plan for Economic and
Social Development (2011-2015), the country will spend $473.1
billion on clean energy investments over the next five years. It
spent $52bn in 2011, one-fifth of the world’s spend on
renewables. Yet, with an electricity grid that isn’t currently fit
for purpose, the task is immense.
Conclusion
China has set an ambitious renewables and nuclear target of 30% by
2015, but energy demand is likely to increase
China is investing in reducing
emissions – but the task is immense
China’s government is aware of the environmental and social
cost of its reliance on fossil fuels.
China assesses the cost of its
environmental damage as the
equivalent of about 9% of national
income per year.
Concerns over pollution have led to unrest, such as the protest
that prevented expansion on a petrochemical plant in Ningbo in
October 2012.
China plays a crucial role in the global economy, and in the
global race to reduce emissions. Businesses such as Walmart
and Microsoft have already acknowledged that having driven the
expansion of China’s manufacturing sector, the West can now
help the country to decarbonise, delivering global benefits that
outweigh concerns over competition.
The West’s support for China’s low-carbon energy
development has benefits for both parties. It plays to the
competitive instincts of Western and Chinese corporations
seeking to optimise the intellectual property and innovation
strengths of the West, and the manufacturing capability and
ingenuity of the Chinese. It’s a combination that has the potential
to deliver a step change in global emission reductions, as
emissions from anywhere in the world affect climate globally
– meaning the benefits of the West helping China to decarbonise
are greater than the sum of its parts.
The CarbonNeutral Company works with over 400 clients to help
reduce emissions by investing in renewable energy and forestry
projects in China and other locations.
China, unlike the USA, both signed and ratified the Kyoto
Protocol. However, as it is classified as a developing economy
it does not currently have a GHG emission reduction target. That
has contributed to an international perception that growth is the
mantra of the Chinese authorities and environment comes a poor
Reference sources: The following sources were used when compiling this document.
CIA World Factbook, The Economist, Ft.com, Guardian.co.uk, McKinsey,
The CarbonNeutral Company - a world-leading provider of carbon reduction solutions
New Scientist, U.S. Energy Information Administration (www.eia.gov)
London T: +44 20 7833 6000 E: [email protected]
New York T: 1-646-367-5800 E: [email protected]
www.carbonneutral.com