The “how much” and “how to” of China’s goal to reduce carbon intensity
In September, President Hu Jintao announced that China will seek to reduce its carbon emissions per unit of GDP, or carbon intensity, by a “noticeable margin” (see previous post “China’s Carbon Intensity Plans and its Impacts on Climate Progress“). The world has been waiting with bated breath to learn just how noticeable this margin will be. The China Council of International Cooperation on Environment and Development, or CCICED, an advisory body of 200 international experts formed in 1992 that provides environmental policy advice to the Chinese central government, are the first to formerly propose some numbers.
According to China Daily, CCICED recommends in a report that China should aim to reduce its carbon intensity by 4 to 5 percent per year, year-on-year, until 2050. There is no mention in the China Daily article about when CCICED thinks these reductions should commence, what the assumptions to GDP growth are till 2050, nor what levels of carbon emissions will result by 2050 if such measures were taken. What is known is if such measures are taken, presumably deduced from modeling performed by CCICED, is that:
- Carbon intensity will fall by 85 to 90 percent by 2050 compared to a 2005 baseline
- Energy intensity, or amount of energy consumed per unit of GDP, will need to be reduced between 75 and 85 percent by 2050
- The manufacturing sector in proportion to the national economy will shrink from 50 percent to 30 percent by 2050
- More than half of new energy demand should be met by low-carbon energy by 2030, and all new energy should be low-carbon by 2050
- Carbon capture and storage, or CCS, will need to be an important technology promoted by 2030. [This last point on CCS is consistent with the scenarios study conducted by the Tyndall Center (see previous post "Tyndall Centre Climate Report: High Hopes for Low Carbon"), and we'll have more on CCS in a later post]
How much will all this cost? Probably far less than the cost of inaction. A recent report by WWF, for instance, describes the devastating climate impacts to China’s Yangtze River, the lifeblood of Southern China’s economy and food supplies.
What kinds of policies are necessary to meet this 2050 goal? A carbon tax is CCICED’s answer. Apart from reaching low-carbon goals, the Chinese government is motivated to consider carbon taxes due to carbon tariffs, or so called border-tax adjustments, that the likes of the United States and others threaten to impose.
How do such carbon tariffs work? In essence, the carbon tariff, if enacted, would assess a levy on goods being imported into the Unites States from countries that do not enact controls on carbon emissions based on the carbon content of the good. These tariffs would probably be passed down to the consumer. An alternative scenario would be for China to act first by enacting a carbon tax within its borders. The benefit of this would not only be to pre-empt any such externally imposed carbon tariff on China’s exports (under international trade rules, a carbon tariff on goods from a country with a carbon tax would probably be illegal), but it would also allow the Chinese government to collect revenue of such a tax rather than to see it go to a foreign government.
But a carbon tax is going to come later rather than sooner. We discussed in this in a previous post (”Carbon trading, taxes and putting the cart before the horse“)–Jiang Kejun of the Energy Resources Institute, a government think tank for the National Development and Reform Commission, says that China would first seek to gain the experience of taxing other resources before taxing carbon emissions, and thus does not think a carbon tax would be implemented for another 4 to 5 years. This would seemingly be an acceptable timeframe for CCICED, which said in their report that “China needs to introduce a carbon tax by 2020, otherwise it will be too late for the country to fulfill its goals in coping with climate change.” It would also give the Ministry of Environment time to implement a carbon-labeling scheme, as it has recently indicated it is planning to do for manufactured products.
There may be another reason for the delay-an interagency tussle between the Ministry of Finance, Ministry of Commerce and Ministry of Environmental Protection, NDRC, and perhaps even big state-owned energy companies, on just how such a tax should be implemented. According to Reuters, for instance:
While the Ministry of Finance is expected to support the 10 yuan per tonne scheme, others — including policy makers in the Ministry of Commerce — still worry about the impact a carbon tax will have on Chinese economic growth.
Such inter-agency squabbling is typical, especially in energy policy where there isn’t a single energy ministry, but instead a dozen or so different agencies engaged in different aspects of energy policy. [On the level of the carbon tax, Jiang Kejun of the ERI has suggested a tax of 10 to 20 yuan (about US$1.50 to 3) per metric ton of carbon dioxide that gradually rises to 300 to 400 yuan per metric ton.]
In the mean time, there are measures on energy pricing that the government can move on. Fuel price reform and fuel taxes, and electricity price reform are key examples (see previous posts “China Announces Dramatic Energy Price Reforms” and “More Petroleum Price Reforms: Move towards the Market and Higher Fuel Tax“). The NDRC just announced that tomorrow (today China time!), November 20, electricity prices will be increased by 0.028 yuan per kilowatt-hour.
Photo credit: Xinhua, via People’s Daily
November 20th, 2009 at 4:57 pm
I very much agree with Julian’s main points concerning the necessity of China to begin putting a price on its carbon emissions by 2020, especially given how vulnerable China is to increasing concentrations of GHG, etc. However, it is also important for international policy-makers to understand how differences of opinion within the Chinese government (MoF, MoEP, NDRC, MoC, and of course big state-owned companies) could ultimately undermine the ability of the government to carry out any agreed-to policy in 3-5 years time. Government unity has been one key strengths that has helped the CCP stay in power. Non-coordinated policies, which we take for granted in the US with both Democrats and Republicans vying for political points, make carrying out difficult policies extremely difficult. Just imagine how this policy would sound to a local official dependent upon profits from a heavy industry within his or her district in Shaanxi Province? They would not enforce it, unless the scales were tipped to make it in his or her interest.
The bottom line is that emissions reporting, verifying, and certification, followed by tax collection, is not going to be easy, especially in China, where rule by law is still only developing. To quote Elizabeth Economy from last August, “Whether we’re talking about food and product safety, or environmental implementation of anything China might agree to when it comes to global climate change, or trade and investment barriers and intellectual property rights protection, all of them hinge on China having an effective rule of law. Without that, the relationship will continue to founder, because even though we have high-level agreement that we want to work on these issues, if China can’t ensure that it will live up to its obligations, then we’re going to continue to have serious conflict.”
In order to step up the rule of law, not only must the United States and other countries continue to engage China, but it would be to our advantage to expand our diplomatic missions within China as to be able to engage and talk to local officials as well as fight for the rights of American companies looking to do business there. This is something endorsed by the authors of China’s Rise (published by Peterson), and also something the President and Ambassador Huntsman should pay attention to.
November 26th, 2009 at 1:56 pm
[...] The target also falls short of the recommendations by the China Council of International Cooperation on Environment and Development, or CCICED, of 4 to 5 percent per year (see previous post “The “how much” and “how to” of China’s goal to reduce carbon intensity“). [...]