Haven’t done a Green Hops for a long time, so there are lots of developments over the past weeks to catch up on!
Ten-Year New Energy Development Plan Closed to being Unveiled
State media is reporting that the National Energy Administration has finalized a 10-year new energy development plan that will require a cumulative investment of 5 trillion yuan ($740 billion) to realize. The plan, which is a strategy to help China realize its goals to achieve 15 percent of its primary energy mix from non-fossil sources and also to reduce its carbon intensity by 40 to 45 percent by 2020, will be sent to the State Council for approval.
This plan seems to be the long-awaited new energy stimulus plan that GLF blogged about more than a year ago with baited breath, and in fact seems to provide almost double the investment dollars. I would, however, strongly caution against assuming that this investment estimate will translate to direct funding by the central government. Most likely, just like the economic stimulus package of 2008, this amount represents a total investment amount that will be provided by a combination of central, provincial and local governments in addition to the private sector (see my presentation at CSIS earlier this year).
That said, the details released so far are still impressive. Important to note is the comprehensive breadth of sectors that fall under the “new energy” concept-its not just renewables such as wind, solar and biomass, but also energy efficiency, nuclear, smart (and strong) grid, transportation, unconventional natural gas, and more efficient use of fossil fuels.
A notable winner of this plan is natural gas, a hitherto minor energy resource for China (see picture). The NEA estimates that natural gas will account for 8 percent of China’s energy needs by 2015 at 260 billion cubic meters, compared to just 4 percent of a smaller energy supply base today at around 100 bcm. As the Financial Times blog recognizes, this strategic push for natural gas represents an economic opportunity for foreign firms with the right expertise.
New Energy Car Subsidies
In June, new subsidies for the private purchase of “new energy cars” came into effect ona pilot basis in five cities-Shanghai, Changchun, Shenzhen, Hangzhou and Hefei. The scheme provides up 3,000 yuan ($440) for fuel-efficient cars below 1.6 liters in engine capacity, and up to 50,000 yuan ($7,400) for plug-in hybrids and 60,000 yuan ($8,900) for pure electric vehicles for private consumers. This new program is different from the 13-city new energy vehicle subsidy a few years ago which targeted public fleets (this will be expanded to 20 cities).
Beijing was a notable omission from this new 5-city pilot program, and according to my conversations Read the full story
In it to Win: How China is developing its Clean Energy Economy through Markets, Finance and Infrastrucuture
Yesterday on March 4, my colleagues and I finally released this long-awaited report “Out of the Running? How Germany, Spain, and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind” (picture of the report cover, pictured right). As the title implies, it is a survey of how three countries with very different political economies are each adopting comprehensive policies to develop their clean energy sector in a way that the United States isn’t. The table of page 5 of the report really sums it all up. Germany, Spain and China have comprehensive and coherent and long-term approaches to developing their clean energy industries, while all the United States has for the most part are state-by-state and temporary policies. The result? The United States ranks only 19th in the world in clean energy product sales as a proportion of GDP compared to Germany at third, Spain at fourth, and China at sixth.
The report was launched at a major event co-sponsored by the Center for American Progress and Apollo Alliance on March 4th (conference agenda here) in which I spoke on a panel, walking through the main elements of the report. The report was picked up by the New York Times.com, which featured a few nice quotes from me.
I re-post the chapter on China below (look at the full report for an equally thorough examination of Germany’s and Spain’s policies). The first part of the chapter looks at China’s accomplishments thus far across the clean energy value chain of innovation, manufacturing, deployment, exports and job creation. The second part takes a closer look at the policy tools, using the three-pillar framework of market creation, financing and infrastructure that I have previously articulated in a conference at RETECH 2010 last month (but also take note in that lecture that I point out that the fourth and fifth pillars of information transparency and international collaboration will be important for China’s future development of its clean energy economy). Here’s the China section: Read the full story
I had the opportunity to answer this question as a member of a panel discussion at the Center for Strategic & International Studies, a Washington DC foreign policy think tank, two weeks ago. The event was held on February 17 to mark the one year anniversary of the American Recovery and Reinvestment Act, and sought to explore the effectiveness economic stimulus packages in the US and globally in catalyzing green investments. My remarks begin at about 24’21 into the video below:
My simple answer? There is no simple answer. The lack of transparency of what exactly is being allocated, how those allocations are being spent, and how the uncertainty around the lesser known story of bank lending (or monetary policy), that is separate from the fiscal stimulus figures into clean energy investments makes it nearly impossible to know just how much money is hitting the clean energy road in China.
The following is the prepared outline on which I based my remarks on, in case you find it onerous to sit through the video presentation:
I. Basic Facts – first thing to highlight is the opacity of it all.
a. Central vs provincial contributions: Of 4 trillion yuan ($586 bill) total, 1.18 is from central government while the rest is from sub-national govt and private sector. OECD says 600 bn yuan is from sub-national govt while rest is from private sector (and most of this is from bank loans to private sector). This is last bit is significant as we shall discuss in a bit.
b. Change in allocations: from Nov ’08 to March ’09 – not clear what implications are for “green”
i. Sustainable development share decreases from 350 bn yuan (9%) to 210 bn yuan (5%)
ii. Infrastructure decreases from 1.8 tr yuan (45%) to 1.5 tr yuan (38%)
iii. Technology advances and industry restructuring increases from 160 bn yuan (4%) to 370 bn yuan (9%).
c. How much new versus repackaged is also a source of uncertainty.
II. There have been bullish estimates of the “greenness” of China’s stimulus package.
a. What do we know? Read the full story
Update: Dec 27, 2009: The beauty of being learning creatures is that with new information and knowledge I can refine and revise my assessment. New issue #8 is introduced below, breaks the tie, and tips the outcome of the negotiations in favor of China.
There’s been a bit of bickering between the Brits and Beijing (how’s that for alliteration!) following the finalization of the Copenhagen Accord and conclusion of COP15. I’m not interested in discussing that today. Instead, I’m more interested in how the details of the accord measures up to China negotiating stance going into COP15 and as they evolved as the proceedings unfolded. In other words, how did China fare?
No, I was not in the negotiating room, nor do I have any inside track to the minds of the Chinese government, but I have been following the public documents and statements pretty closely. We’ve discussed some of the details of the Copenhagen Accord in my previous post “Good Cop, Bad Cop.” As a reference of China’s negotiating stance, I use a collection of three posts: “Green Hops: BASIC Instinct…“; “Copenhagen Kickoff” and “China in Copenhagen Day 4: Back to BASICS!“. Additionally, a comprehensive set of positions articulated by Premier Wen Jiabao on December 17, the penultimate day of teh summit, serve as a useful marker of where China stood going into the final 36 hours of negotiations (see summary in People’s Daily, Chinese only, rough Google translation here). All quoted Chinese text below comes from this set of articulated positions which I will attribute to Premier Wen himself. Premier Wen’s speech on the morning of December 18 is also instructive.
Let’s take the issues in rough order as they appear in the text of the Copenhagen Accord, and just for fun, I will keep a score card, allocating points between China and the rest of the world, awarding a point for a “win” and a half point for a “draw’. I want to acknowledge at the outset that this assessment is made based on a limited number of public sources and may be prone to a bit of guess work, so I welcome hearing from those who might have different or additional perspectives in the comments section below.
1. Fate of the AWG-LTC. In the preamble of the Accord, the ongoing work of both the Ad hoc working group on Long-term Cooperative Action (AWG-LCA), and the Ad hoc working group on Further Commitments of Annex I Parties under the Kyoto Protocol (AWG-KP) are recognized. In the BASIC text previously dicussed, China (and the other BASIC countries of Brazil, South Africa and India) sought to see an end to conclusion of AWG-LCA by mid-2010 so as to protect the integrity of the Kyoto Protocol. We know by now why China is so clingy to the Kyoto Protocol – its very architecture, i.e. categorizing the world in terms of Annex I and non-Annex I countries, embodies the “common but differentiated responsibilities” (CBDR) principle that it is intent on preserving. At the end of the day, it is hard to think that China seriously believed it could get its way in plotting a quick end to the AWG-LTC. The United States has made crystal clear that it will not sign on to the Kyoto Protocol, thus necessitating the survival of the AWG-LTC. The AWG-LTC will be the pathway to reframe the worlds countries in terms of major emitters vs. rest of the world, or take a more differentiated approach to CBDR as I’ve argued for before (see previous post “Thinking Out of the Climate Box: Re-Examining Monolithic Approaches to the “Common But Differentiated Responsibilities” Impasse“), against China’s wishes. World 1 China 0.
2. 2 degrees Celsius (and 1.5 too). The inclusion of the goal to limit global temperature rise to 2 degrees Celsius above pre-industrial levels is seen as a win by the international community. It marks the first time the UNFCCC has adopted this shared goal, and builds on prior political commitments this year at the G8, Major Economies Forum and G20 to this very target. On the other hand, Read the full story
This is a re-post of my recent contribution to Climate Progress.
The media headlines are screaming “U.S. Won’t Pay China to Cut Emissions” and “US Rules Out Climate Aid to China.” Todd Stern, the U.S. Special Envoy for Climate Change (pictured right), made clear in a press conference yesterday (Day 3 if you are counting!) in Copenhagen that the war chest for the initial fast track funds being considered now for climate change adaptation for developing countries would not be unlimited:
China, with a $2 trillion reserve and a revved-up economy, won’t be a recipient. “I don’t envision public funds, certainly not from the United States, going to China,” Stern said. “There’s inevitably a limited amount of money. The amount ought to be as high as it possibly can be, but it’s necessarily going to be limited. That’s just life in the real world.
Financing would instead be prioritized for the most vulnerable and least developed countries. While a price tag in the neighborhood of $100 billion per year is what the likes of British PM Gordon Brown and UNFCCC General Secretary Yves de Boer are proposing for the long term (some developing countries are seeking as much as $300 to 400 million a year), there is also an emerging consensus to reach agreement in Copenhagen for fast-start financing of $10 billion for the near term, i.e. 2010 to 2012. U.S. President Obama has already indicated that he is on board with this idea, agreeing to “mobilize $10 billion a year by 2012 to support adaptation and mitigation in developing countries.”
There have been mixed messages lately about whether China will soon adopt a carbon emissions trading scheme. On the eve of President Hu Jintao’s speech at the UN Climate Summit in New York last month, Times Online ran a sensationally misleading story suggesting that China would adopt a carbon emissions trading scheme that would “for the first time, place limits on the amount of greenhouse gases Chinese industries are allowed to emit.” The article went on to say:
A delegation from the China Beijing Environmental Exchange (CBEEX), a government-backed platform for trading environmental equity, will outline the details in New York this week at a UN conference on climate change.
Obviously, this turned out to be a complete non-event. CBEEX is just one of a handful of private entities (see previous post “Tianjin to Win the Environmental Exchange Race?“) seeking to be launch pilot pollution credit trading platforms. The truth is that they are no where near to launching the kind of economy-wide carbon emissions trading scheme that Times Online suggests. China does not even have a mandatory cap on emissions, without which a “cap-and-trade” system would be meaningless.
Yes, CBEEX and their new French partner, Blue Next, did make a showing at the UN climate summit, but only at the sidelines, and merely to promote their own efforts to develop their own standard for voluntary carbon offsets, kitschily called the “Panda Standard“. Nothing about a mandatory trading scheme, and certainly nothing even in the nature of a liquid secondary market of emissions trading–the fact that the Panda Standard speaks to voluntary carbon offsets indicate they are only considering the primary market. (For a distinction between primary and secondary carbon markets, see previous post “China Carbon Forum 2008 Review.”)
CBEEX made the news in August when it announced that it had Read the full story
This edition of Green Hops is dedicated to Andrew Symon, a Singapore-based journalist specializing in energy and whom I have had the pleasure and honor of making an acquaintance of as a result of his writings at Asia Times Online. He passed away unexpectedly on February 24, 2009. Andrew’s generosity, sense of mission and powerful intellect will be sorely missed.
Energy intensity (energy consumption per unit of GDP) last year was reduced by a further 4.59%, bringing the three year total in energy efficiency gains in 2006 through 2008 to 10.08%. This means that to reach its 20% energy intensity reduction target over the five year period for 2006 through 2010, it will have to reduce almost another 10% in energy intensity over 2005 levels. Even if it seems difficult to achieve, such efforts much press on. To sobering reality is that China’s annual greenhouse gas emissions surged 45% from 2002 to 2005 alone due to a combination of structural changes in industrial activities and increased consumption. Half of that increase, apparently, was driven by manufactured exports. But the Chinese authorities say that exports in general are declining (25% year on year) and that the amount of “high-energy-consuming products” exported in 2008 declined 16.2% from the previous year. Read the full story
Somehow, we missed a November 2008 report by Friends of the Earth and BankTrack called The Green Evolution: Environmental Policies and Practice in China’s Banking Sector (click here for Chinese version) (henceforth the “Report”) which provides an excellent overview of the green finance activities, including China’s nascent Green Credit program (one of the Green Whirlwind policies we gave an overview of previously), and a bank-by-bank assessment of China’s green finance practices. In this post, I’d like to (i) describe the significance of using the financial industry as a lever point for environmental change, (ii) summarize the different ways in which the concept of “green finance” plays out with Chinese banks, (iii) discuss some of the more interesting observations by the Report, and (iv) conclude with the Report’s recommendations. Read the full story
Energy Price Reforms
NDRC announced that it would be removing price caps on coal from next year in a move towards a more market-driven price mechanism. This move comes at an opportune time when coal prices have dropped by 30 to 40% since the summer, but GLF points out an earlier post (see finding #4) on a recent MIT coal report that suggests the upstream coal industry has already moved towards a de facto market price system. Although the NDRC move “is a step in the right direction,” Huang Shengchu, president of Beijing-based China Coal Information Institute says in this interview that government macro-control is still needed to protect the rights of various coal stakeholdres in their contractual dealings with each other, accerlarate industry consolidation of the many small and inefficient mines and to set up a coal price index.
Separately, the proposed auto fuel price reform kicked in earlier than expected. So it turns out that the answer to our confusion (see earlier post) of how the government proposed to hike up taxes and keep fuel prices even was that they would adjust the base fuel price downward, predicated on Read the full story
GLF has been traveling and getting a little caught up on side projects, but let’s play some catchup. Let’s pick things up with two specific appointments by President-elect Obama which have implications for U.S.-China energy relations–one being the 1997 Nobel Prize Laureate Dr. Steve Chu of Lawrence Berkeley Labs (LBL) as the new Secretary of Energy, and the other being Dr. John Holdren, physicist and energy technology policy professor at Harvard and Director of the Woods Hole Research Center (whom yours truly had the pleasure of meeting in the copy room as a policy intern there way back in 2003) as the White House science & technology adviser.
Besides being a director of LBL, Dr. Chu (pictured right) is also a professor of physics and molecular and cell biology at Read the full story