China could outperform its carbon pledge

Author: Frank Jotzo, ANU

China has submitted its formal pledge to the UN climate negotiations. China’s target is a 60–65 per cent reduction in the emissions intensity of its economy compared to 2005 levels by 2030, with carbon dioxide emissions peaking around 2030, and ‘best efforts’ made to peak earlier. China’s pledge will require a sustained policy effort, and it tallies with underlying trends in the economy and with overarching national policy priorities.

China has also pledged to increase the share of non-fossil fuels to 20 per cent of total energy use and an increase in forest carbon stocks. A raft of existing and planned policies and measures is listed, including: higher efficiency in coal fired electricity; fast development of solar, wind, hydro, nuclear and gas for power generation; energy efficient and low-carbon industrial systems; and cutting emissions from buildings and transport. There is also a commitment to national emissions trading and support for research and development.

The pledge means that China aims to reduce the ratio of carbon dioxide emissions to GDP by around 4 per cent annually, from 2005 all the way to 2030. By comparison, the United States has decreased its economy-wide emissions intensity by about 3 per cent annually since its emissions peak in 2007, with the help of an unprecedented boom in cheap gas. European Union carbon dioxide emissions peaked in 2002, and its collective emissions intensity has declined by about 2 per cent per year since then.

Yet China could do better still. China is set to outperform its existing 2020 target of a 40–45 per cent improvement in emissions intensity compared to 2005. Average annual reductions from 2005 to 2014 were 4.5 per cent as reported by Beijing, while only 3.9 per cent per year is required on average to meet the ambitious end of the target range. If the 2020 target is outperformed, as now seems entirely possible, then the 2030 target becomes commensurately easier and could equally be outperformed.

China’s energy productivity lags that of advanced economies. Enormous gains can be made by further improving technical efficiency and by accelerating the shift in economic structure from energy-intensive industries to light manufacturing and services. These improvements in energy intensity are likely to remain the largest contribution to lower emissions intensity for some time to come. In addition, reductions in the amount of emissions per unit of energy are being achieved through a gradual shift in the energy mix away from coal and towards nuclear, gas and renewables. This could dominate in the long term.

Improvements have been happening and can continue for a long time to come, at significant rates. Industrial output such as steel has levelled off, heralding a ‘new normal’ of Chinese economic growth. The era of extremely rapid expansion of infrastructure is coming to an end and the sources of economic growth are shifting to less resource-intensive activities. As Ross Garnaut explained, the shift in China’s growth model still has quite a way to go.

Annual carbon dioxide emissions grew by an average 7 per cent per year from 2006 to 2011, but by only around 2 per cent per year from 2012 to 2014. Total coal use in China is reported to have fallen in 2014 compared to 2013, although this is against the backdrop of statistics for China’s overall coal use in all years being revised upwards. When reliable data for carbon dioxide emissions in 2014 become available, they might show close to zero growth compared to 2013, or even a small fall.

Where does this leave the 2030 peaking pledge? China’s emissions could peak well before the target date of 2030, as argued recently by Nick Stern as well as Ross Garnaut. At a recent climate change conference in Paris, Jiang Kejun of China’s Energy Research Institute argued that China could see peak energy-related emissions during 2020–22 if a strong policy effort is sustained.

But the precise time of the peak may not matter too much. The experience in developed countries is that emissions trajectories flatten out, forming a plateau rather than a sharp peak. Emissions stop growing when annual rate of reduction in carbon intensity of GDP is equal to the GDP growth rate. If decarbonisation rates of 4–5 per cent per year are maintained in a slowing Chinese economy then emissions levels will grow only slowly.

That means China’s highest future emissions levels may not be dramatically higher than today’s. If so then this would be a much better outcome than in many of the projections that are produced of China’s emissions, which are typically predicated on future economic growth rates of around 7 per cent.

Yet a low emissions scenario presumes that decarbonisation policies are pursued just as vigorously while the economy slows. With confidence in Chinese share markets dented in recent weeks, financing for many low-emissions investments such as renewable power plants could become harder to secure. If China’s government were to once again use large fiscal stimulus measures, it would need to avoid over-investment in infrastructure and thereby heavy industries.

A lower carbon trajectory has tangible benefits for China, including less air pollution, greater energy security and the chance of a competitive edge in growth industries, as explained in a recent paper with my colleague Teng Fei from Tsinghua University. These benefits are attractive no matter how fast the economy grows. In fact, these benefits are probably the main proximate drivers of policies to curb the use of coal. National self-interest underpins China’s climate policy.

If China persists and succeeds in its stated ambition to changing its development path, innovation and a sustainable, low-carbon pathway then that will be good news for the planet.

Frank Jotzo is deputy director of the Crawford School of Public Policy and director of the Centre for Climate Economics and Policy, The Australian National University.

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