Will climate commitments constrain China's growth?
Updated: 2015-02-09 07:36
By Qi Ye(HK Edition)
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On Nov 12 2014, President Xi Jinping held formal talks with visiting United States President Barack Obama. They later signed a surprising and inspiring China-US joint statement on climate response and clean energy cooperation. According to this statement, it is expected that by around 2030 China's carbon dioxide emissions will have peaked and the proportion of clean energy in its primary energy consumption will have increased by 20 percent. Although this is not yet a formal commitment, it should be regarded as a major step toward that goal and an ambitious plan.
But some may ask whether this goal is realistic and whether the commitment will constrain China's economic growth.
Such concerns are justified, as this is a fairly aggressive objective which moves the peak time from 5 to 10 years. And the likelihood of a climate response affecting economic growth is not a new issue. Former US president George W. Bush pulled the US out of the Kyoto Protocol after he took office over his concerns about the economic implications of a climate response.
There are indeed close links between carbon emissions, energy consumption and economic growth. In this industrial age, carbon emissions are the sum of carbon dioxide emissions mainly caused by use of fossil fuels. Generally speaking, an economy's carbon emissions are proportionate to its level of development, hence the higher per capita carbon emissions of developed countries than developing ones. Take China for example. In 1980 when its program of reform and liberalization was launched, its per capita carbon emissions were 1.47 tons. These had more than quadrupled 32 years later- reaching 5.52 tons in 2012. In the same period, China's GDP almost registered a 20-fold growth, increasing by about 10 percent annually. This shows a close correlation between China's rapid economic growth and the rise of its carbon emissions. If China's carbon emissions are to peak in 2030, its economic growth will have to slow down.
The relationship between economic growth and carbon emissions often relies on two factors. One is energy intensity, or energy consumption per unit of GDP growth; the other is carbon density, or carbon dioxide emissions per unit of energy consumption. The carbon emissions of a country are, therefore, determined by its GDP, energy intensity and carbon density. Changes in any of these factors will affect carbon emissions. For instance, the sharp drop in China's energy intensity in recent years has slowed the increase of its carbon emissions. The US shale gas revolution which uses natural gas to replace coal for electricity generation has significantly reduced the US carbon density and greenhouse gas emissions. In a sense, the changing rate of carbon emissions can be roughly counted as the sum of the changing rates of GDP aggregate, energy intensity and carbon density.
If China's carbon emissions are to peak in 2030 as indicated in the Sino-American joint statement, its GDP growth rate must somehow match the combined reduction rate of its energy intensity and carbon density.
In other words, carbon emission increases generated by its economic growth must be offset by the benefit of higher energy efficiency and the use of low-carbon energy.
Faster growth of energy efficiency and low-carbon energy use will open up a greater prospect for China's GDP growth. In this sense, the carbon emission peak in 2030 will act as a constraint on the speed and quality of China's economic development.
To what extent will this new climate commitment affect China's growth?
The experience of other countries shows that the combined reduction rate of a country's energy intensity and carbon density is usually less than 5 percent.
Since the Chinese government is firmly committed to meeting its carbon emission target for 2030, it should be already anticipated that China's growth rate will not exceed five percent in 15 years.
In 2012, the World Bank and the Development Research Center of the State Council of China released China 2030, a report on China's economic outlook, following a two-year-long joint study and research of the Chinese economy. The report predicted that the mainland's economic growth will drop from its current seven percent to around five percent in 2030. This rate coincides with what is required if China's carbon emissions are to peak in 2030. Some economists estimate that the growth of the mainland economy will maintain its rate of 7 to 8 percent over the next two decades. This might be pertinent economically, but if we factor in China's climate commitment, such a rapid growth rate would be almost impossible.
Now we have a clear answer to the question raised earlier. Will China's carbon emissions peak in 2030? The answer is yes, but with conditions. An important prerequisite is that its economic growth must not exceed five percent. In short, for China as a whole, climate commitment may constrain its economic growth rate, but not necessarily growth itself. And the impact of energy conservation and reduction of carbon emissions in regions and provinces in China will probably be determined by their own specific conditions, especially their levels of economic development.
The author is professor of Tsinghua University's School of Public Policy Management, senior fellow at Brookings Institution and director of Brookings Tsinghua Center for Public Policy. This article is provided by China US Focus.
(HK?Edition?02/09/2015 page10)