The Need to Mobilize Farmers to Fight Climate Change
This guest post is by Michael Davidson, a Fulbright Fellow with the BP-Tsinghua Clean Energy Research and Education Centre in Beijing in 2008-2009. His research interests took him from the very big (renewable energy policy) to the very small (household biogas systems) in the quest to understand China’s sustainable development. Michael majored in physics and Japanese at Case Western Reserve in Cleveland, Ohio, USA.
Pictured right: The next climate defender standing over his biogas digester in rural Yunnan.
The agricultural powerhouse of China try as it might cannot escape its past: with 60% of its population living in rural areas and maintaining food self-sufficiency a well-established national directive, the “sea” of farming and pastoral land will not be overshadowed by the rapidly industrializing urban “islands” it surrounds in the foreseeable future. Indeed, given China’s majority rural demographics, it is no wonder the Central Government is taking land and water resource access in the impoverished West seriously – lest there be rioting farmers on top of everything else for the CCP to worry about. Because the coming climate crisis will disproportionately affect the rural economy, namely through its impact on land and water,
It is important to remind ourselves of the rural dimension of what is going on at Copenhagen.
Traditionally, arable land has been threatened by over-grazing, excessive fertilizer use and encroaching urban centers. Water resources have been polluted with industrial and agricultural run-off, diverted to cities and threatened by non-existent waste management services in villages. Add to this mix desertification, drought and unseasonable flooding due to climate changes, and the backbone of a robust farming state seems less able to withstand the stresses.
In response to this, China’s environmental protection has been beefed up by the addition of a new ministry and pro-active measures towards emissions intensity targets and handling conventional pollutants. These have not been followed, however, by an increase in funding and manpower for solving rural environmental issues – in a system not designed for distributed, low-level populations and pollution sources deficiencies abound (see this outline of rural pollution factors – Chinese only). A report earlier this year then made the important link between rural poverty and deteriorating environment in China. Read the full story
Let’s take a break from the heavy reading and enjoy some great video clips. The first two are first and third place winners of the UNFCCC/CDM International Video Contest 2009 (the theme was “How the Clean Development Mechanism Changes Lives”), the prizes for which will be awarded in Copenhagen during the ongoing climate summit. The third is first in an upcoming series by ClimateWorks.
Natural Gas Power Plant in Inner Mongolia Changes Nasong’s Lives, by Yang Li & Xiaochen Zhan
Waste Heat and Methane Capture Project at a Steel Plant in Hunan Province, by Van Yang
China Takes the Lead in Wind Energy Development, by ClimateWorks
The China Carbon Forum 2008 was held at the Renaissance Capital Hotel in Beijing on October 15 and 16. The Green Leap Forward was on site to measure the pulse of China’s carbon markets, but did not leave terribly optimistic. In truth, the speakers at the forum did a good job of highlighting a lot of the problems facing carbon markets, but offered little in the way of solutions. We start first, though, with a primer on carbon markets, but if you are already a pro, skip ahead over this introductory section.
Carbon Markets 101
It is useful to think of the carbon markets as being divided into the primary markets and secondary markets. In the primary markets, carbon credits are generated through the development of energy, forestry, agricultural or other related projects that reduce greenhouse gas (GHG) emissions compared to a baseline. The most common way such credits are generated is through the Clean Development Mechanism (CDM), a project development framework governed by the Kyoto Protocol which was crafted to allow developed countries to meet part of their emission reduction obligations by purchasing carbon credits called “Certified Emissions Reductions”(CERs) generated by CDM projects in developing countries that have no such obligations, while at the same time providing a carrot for such developing countries to participate in sustinable development activities. Read the full story
Peggy Liu, founder and Chairperson of Joint US-China Cooperation on Clean Energy (JUCCCE) , an innovative bilateral public-private partnership based in Shanghai, speaks to The Green Leap Forward.
Energy cooperation was one of the key issues that underpinned the fourth US-China Strategic Economic Dialogue held last week. Vice-Premier Wang Qishan, the head of the Chinese delegation released a statement calling for increased cooperation between the two sides on several fronts, including R&D, coordinated energy policies and increased bilateral dialogue. The energy discussions culminated in a commitment to negotiate a ten year energy and environment agreement.
Encouragingly, however, a handful of individuals and organizations have not waited for any ink to be spilled in the diplomatic arena before jumping into action. One such individual is Peggy Liu and her organization called Joint-US Cooperation on Clean Energy (JUCCCE).
The Juice on JUCCCE
JUCCCE was founded in April 2007 by Peggy Liu, a former McKinsey management consultant and COO of Mustang Ventures, a Shanghai-based venture capital firm. The organization was launched out of the MIT Forum on the Future of Energy in China held last year in Shanghai, where JUCCCE is also now based.
JUCCCE is a non-profit incubator of cleantech and energy efficiency capacity building institution initiatives seeking to serve, as Liu describes it in the video below, “a single bilingual and bicultural organization that will act as a hub of information exchange and cooperation” on clean energy in China. Based on the observation that China’s rapid development has it compressing 30 years of industrialization in the space of ten, JUCCCE has set itself a ten year mandate to create a legacy of self-sustaining, local capabilities. Tapping into Liu’s vast network of top minds whom she has become acquainted with as a result of her stints at consulting and venture work, JUCCCE conducted a comprehensive study of the Chinese energy industry and identified a dozen key projects designed to create the greatest impact in the shortest amount of time. What I love is the Chinese name for the organization, which is 聚思 (jǘ sì), which is not only a phonetic translation of the acronym, but by itself literally, and appropriately, translates in English to “collective thought” or “coalition of thinkers.”
Underpinning JUCCCE’s philosophy are three fundamental observations (the need to accelerate information flow, need for integrated urban planning and need to strengthen supply chains) which Liu describes in the following video:
Based on these observations, JUCCCE has formulated a three-pronged approach of education (skills building and leadership development at every level through effective channels), collaboration (with international and local institutions, taking advantage of web-based communications) and deployment (of customized green strategies for specific industrial sectors).
On education, Liu elaborated in an exclusive interview with The Green Leap Forward:
China doesn’t have an energy policy problem [GLF note: see, e.g. the various progressive policies that this blog has highlighted in its maiden post], rather, it has an energy workforce problem. We can have all the solar panels we need free of charge and that will not be enough if we don’t have the necessary skilled people to install these systems and maintain them. So, we believe that people matter…Education and skills building are very important.
Liu continued to explain that the ability to implement these progressive energy and environmental policies or programs is most effectively achieved through the strategic targeting of “channels of decision makers” rather than individual decision makers. Because Liu wants to teach the Chinese how to fish rather than catch the fish for them, JUCCCE’s programs are designed to be replicable and scalable. Let’s take a look at two of JUCCCE’s programs that Liu described for The Green Leap Forward, and that targets the decision-making channels of mayors and schools, respectively.
Mayoral Training on Energy Efficiency
One program is the Mayoral Training for City-level Energy Efficiency Programs, which was announced as a one of the commitments under the Clinton Global Initiative in 2007. As the name of the program implies, JUCCE is planning workshops to equip mayors of cities nationwide with energy efficiency solutions to deploy in their home jurisdictions. JUCCCE will partner with international experts and energy efficiency solution providers (many of which are multinational corporations) in order to build a web-based database of best practices and products, sector-by-sector, that can be presented to, and easily deployed by, the workshop participants.
The importance of focusing on cities is obvious. I have previously highlighted a McKinsey report on China’s rapid urbanization to facilitate the largest scale of rural-to-urban migration in history—approximately 350 million by 2025. “In China, city mayors are the kings of their fiefdoms, so it is really important to target them,” explains Liu, referring to the broad authority of city mayors in determining economic and development policy. This acceleration of information flow of best practices/products targeting mayors as key channels of decision making becomes even more effective when coupled with the State Council’s new policy to include environmental and energy efficiency criteria in the promotion evaluation of local and provincial bureaucrats, as well as the national goal of increasing energy consumption per unit of GDP by 20% by 2010 (see here).
Shanghai Lighting Program
Another noteworthy JUCCCE program involves the replacement of 10 million conventional incandescent light bulbs with energy efficient compact fluorescent light (CFL) bulbs in Shanghai. The brilliance of this lighting program is two-fold. First, it targets youth by directly enlisting the help of Shanghai school children for distribution. Each student will receive up to 18 CFL bulbs and will be asked to bring back an incandescent bulb for every CFL bulb they replace it with. Liu conservatively estimates that the program will reduce approximately 2.2 million tons of carbon dioxide emissions over the lifespan of the CFL bulbs. This is environmental education at its best— empowering the young to recognize that little actions can make a difference by coordinating and aggregating individually small efforts into part of a large-scale city wide program with substantive results.
Second, the method of financing the program is highly innovative. The purchase of the CFL bulbs will be made by proceeds from advertising on the packaging of the CFL bulbs and by the clean development mechanism (CDM) under the Kyoto Protocol. JUCCCE and its partners are exploring the possibility of structuring the project as a programmatic CDM, which I have previously described in the context of Xiamen’s ecocity efforts. Although Liu recognizes the legal and technical complexities involved in structuring such a CDM project, she is hopeful that such a program would be approved by the CDM authorities as it would represent of the first energy efficiency lighting programs to ever use the CDM.
Liu expects the program to launch in the next six to seven months, but JUCCCE has in the meantime partnered with Citi and GE to hold a pilot program distributing 10,000 CFL bulbs last November (pictured). The hope is that the success of this larger CFL lighting program can be adopted and replicated in cities across the country.
Why JUCCCE Matters
What makes organizations like JUCCCE so important in tackling the energy and climate challenges of our day is that it effectively bridges the gaps between the public and private realm. In the vocabulary of an economist, it helps correct market failures such as free rider problems and information asymmetry and creates incentives or platforms for businesses and policy makers to undertake clean energy initiatives that they would not normally undertake. This is demonstrated well in the two projects described above. In the case of the mayoral training program, information asymmetry is overcomed by the creation of a web-based database. In the case of the Shanghai lighting program, financial barriers are overcome through the use of innovative financing techniques.
China, and the rest of the world, needs institutions like JUCCCE to “fill in the gaps” because of the limitations to motivations/incentives inherent in political and commercial institutions to take action. The Green Leap Forward looks forward to profiling more innovative organizations like JUCCCE that are breaking silos to redefining how all stakeholders can think about tackling our energy and climate crisis.
If China’s Green Leap Forward fails for whatever reason, it won’t be because of the lack of cash. Generally speaking, it has never been better to be a clean tech entrepreneur or project developer. Investment dollars are pouring in globally from hedge funds, private equity and venture capital funds, multinational corporations and development banks. Take these recent developments, for example:
- The clean development mechanism (CDM) under the Kyoto Protocol, for example, provides the much needed financial lifeblood to take IRRs of wind farm projects over the “hurdle rate.” There has been some criticism about the use and abuse of CDM by some camps, such as a front page article by The Guardian, but I thought China Environmental Law’s response was spot on. China is by far the world’s biggest market for CDM projects, accounting for a whopping 73% of transactions in 2007. Hong Kong joins the CDM fray as well.
- Sycamore Ventures and the China Association of Resources Comprehensive Utilization (CARCU), which operates under the State-owned Assets Supervision and Administration Commission, are to launch a US$ 1 billion dollar Greenstar fund to invest largely in China’s environmental sector.
- The World Bank will provide additional $440 million in loans for three energy efficiency projects. This will constitute one-third of the bank’s loan portfolio in 2008 to China. The three projects consist of energy efficiency financing, desulfurization in Shandong and infrastructure in medium-sized cities in Liaoning.
All this is not to say that China is reliant on external sources of funding. In fact, according to a Reuters report, Gao Guangsheng of the National Development and Reform Commission expects China to fund 90% of its renewable energy development by domestic sources of funding. Separately, Don Ye, founding partner of Tsing Capital’s China Environment Fund, for seven years, and still, China’s only fund 100% dedicated to clean tech investments told The Green Leap Forward, “There’s a trend to self sufficiency both in terms of talent as well as investments. By the end of this year, we expect to see quite a few RMB-denominated investment funds come to the market.”
Provincial and municipal governments are also investing big in renewable energy. The northeastern municipality of Tianjin has committed to invest RMB 200 million a year into mergers and pre-IPO deals in solar, wind and energy storage businesses. The southwestern province of Sichuan is pushing solar development in a big way, as evidenced by last weekend’s Western China PV Conference held in the province’s biggest city, Chengdu (成都). The governments of Chengdu and adjacent Shuang Liu (双流) county, together constituting the aviation hub of China, have now have established the Chengdu (Shuang Liu) Photovoltaic Industrial Park with the goal of becoming China’s “solar PV valley.” I’ll write more about the Western PV Conference in my next post.
There will be occasional bottlenecks to capital availability. Last month, the central government raised bank reserve ratios yet again to reduce liquidity in the market so as to combat inflation. The series of bank reserve ratio increases has resulted in a tightening in the availability of bank loans for renewable energy projects (although these have tend to affect foreign project developers, which are typically last in line, more than the major state-owned enterprise developers, which get priority access to capital) . But such a phenomenon does not detract from the favorable patchwork of investment policies enacted by the central, provincial and municipal governments for clean energy. If I were a betting man, my money would be on the red (the color of RMB 100 notes) to continue chasing the green (energy).
I am really excited.
On May 10 (incidentally, but fittingly, Pangea Day) at the Xiamen Climate Change Symposium held at Xiamen University in Xiamen City, Fujian, I was introduced to an exciting opportunity for Xiamen City to undertake what has potential to be a truly groundbreaking project.
A consortium comprised by CHORA (an urban planning, architectural and research organization based in London), Atelier Liu Yuyang Architects (a Shanghai-based architectural firm), Caspervandertak (a Beijing-based CDM consulting firm) and Xiamen University, each joint-hosts of the symposium, are pitching the idea of establishing Xiamen as an “climate change incubator”—i.e. the creation of an institutional structure for the promotion and development of a series of climate change mitigation projects that will the take the form of renewable energy (RE) and energy efficiency (EE) installations. A key feature of the proposal is the use of financing from the clean development mechanism (CDM) under the Kyoto Protocol.
Architects Raoul Bunschoten of CHORA (right) and Liu Yuyang of Atelier making the pitch in Xiamen.
In basic terms, the CDM is a program in which developing countries, like China, who are not bound by carbon emission reduction obligations, are encouraged to undertake projects in their jurisdiction that result in carbon emission reductions through financing provided by developed countries, who are themselves bound by such obligations and can credit such emission reductions to their obligations, even though those reductions have taken place in the developing country.
Up to now, CDM projects, shaped by the complicated rules that govern them, have almost always taken the form of single large installations, e.g. a biogas plant or a wind farm. However, two alternative forms of CDM exist—“bundling” and “programme of activities” (POA)—which may be better suited for the urban environment. Bundling, as the name implies, consist of a series of small-scale installations can be bundled together under a single umbrella CDM structure. POA is similar, with an emphasis that a private or public body coordinates the implementation of a series of policies or measures that result in emissions reductions. The rules for POA were only recently promulgated at the end of last year.
Bundling and POA allow, for the first time, RE/EE projects that traditionally would not have qualified for the CDM due to not meeting the required threshold size to obtain CDM funding. Examples of bundling projects include the Kuyasa EE projects in South Africa and the distribution of photovoltaic kits in Morocco, while examples of POA projects that are now in the pipeline as a result of these new rules include solar home system installations in rural India through the organization, Grameen Shakti, and biogas projects in Brazil by the meat company, Sadia.
And soon, it is hoped that Xiamen can use CDM as the springboard for a green leap forward. Said Joost van Acht of Caspervandertak:
Coordination between all stakeholders and the engagement of specialized expertise will be crucial to cut through the complexities of the rules governing CDM. This is where the City of Xiamen can play a leading role as an incubator that brings together developers and specialized knowledge on RE/EE technologies and the carbon market which will be the key to successfully take advantage of the opportunities offered by CDM.
Raoul Bunschoten, director of CHORA and the brainchild of this vision for Xiamen, further observes that the use of POA and bundling is perhaps better suited than the vanilla CDM structure for urban greening initiatives:
[U]rban planning is complex by nature, has to address many stakeholders and touches economy, culture, politics and society in many ways, so is closer to a population in a way, but also is inherently complex in terms of management, or should be. This complexity seems to match or map the complexity of POA and bundling [under the] CDM, or at least they can be tuned to each other. New urban planning methods can be a vehicle for POA and bundling applications and processes, and these may need the urban environment to be effective, to get a critical mass of projects and to become visible.
Xiamen, formerly Amoy, is a port city in the southeastern province of Fujian. Metropolitan Xiamen covers an area of 1565 square kilometers and is home to just under 3 million residents. One of the earliest designated special economic zones (SEZs) in China and one of the top ten busiest ports, Xiamen is very visibly not only one of the more prosperous cities I have visited, but also one of the most thoughtfully landscaped, with tree-lined boulevards that remind me a lot about my hometown, Singapore. It is clear that the people of Xiamen place value quality of life, and derive a great sense of pride of the city that they have built.**
[**It was noted by a participant of the symposium that the people of Xiamen have a great sense of pride about their city. It was later explained to me by Dahpon Ho, a Fulbright Scholar doing historical research in Xiamen that a large part of that pride stems from the fact that for several decades after the founding of modern China until only the early/mid 1990s, Fujian and the rest of southeast China did not figure in the economic development plans of the central government and were considered the backwaters of China. As a result of this historical political neglect, there is a feeling among Xiamen residents that the prosperity they enjoy today was accomplished largely on their own.]
Over the past decade, Xiamen has garnered numerous awards for being a green and healthy city. Hitherto, however, none of these awards have likely included the city’s carbon profile into their evaluation criteria. The consortium’s proposal thus represents an excellent opportunity for Xiamen to redefine what it means to be a green, sustainable city, using carbon as a key metric.
As Bunschoten puts it, given the complexities of the CDM, especially bundling or PoA structures, “talking about environmental pilot projects made sense in a city with a desire to be the cleanest city in China.” A recent incident in mid-2007 also underscores the probable acceptance of the people of Xiamen to such a project—a proposal to build a chemical plant was scrapped after significant public outcry over its environmental ramifications.
Not Just Any Other Eco-City Project
The Xiamen proposal is unique because unlike some other China eco-city projects such as Dongtan-Shanghai and Singapore-Tianjin (see previous post), it does not aim to build an sustainable city on a bare piece of land from scratch, but to retrofit an already existing medium sized metropolitan area, a much more complicated endeavor given the need for re-engineering not only incumbent urban infrastructure, but also social and political mindsets of the city’s stakeholders. After all, the implementation of the project will have to be undertaken by these very stakeholders, all of whom have already established a pattern of living, behavior and beliefs.
Furthermore, the consortium seeks not only merely to turn Xiamen into an “eco-city” (a buzzword that is being thrown around a lot lately but is in sore need of a precise definition), but to also consciously redefine how urban planning and governance is carried out. According to Raoul, the Xiamen proposal is driven by the “Urban Gallery” concept—an urban planning methodology developed by Chora. Under this methodology, the relationship of an urban planner to a city is analogized to that of a curator to a gallery. Says Bunschoten, it is a relationship
that links an interactive management of knowledge with negotiation methods for prototypical urban projects. The Urban Gallery is managed by “Urban Curators”…The Urban Curator designs the linking of processes, or in other words designs the organisational form of the dynamics or behaviour of an urban environment, in essence a cybernetic practice…the programmatic CDM process proscribes clusters of projects rather than one large one needing a Curator.
This emphasis on process and social/political dynamics in a context of urban development is profound in that it recognizes a concept of innovation that I have been harping on previously, i.e. the need for social innovation in addition to technological innovation, and the need for disruptive systems over disruptive technologies. Indeed, during the half day symposium, there was scant notion of specific energy technologies that should be considered for the project.
The real challenge at hand, especially given the complexities of a bundling or POA project, is creating the vision, organizational structure and administrative processes to execute a long-term low carbon strategy through the full engagement and coordination of the strengths and interests of all stakeholders. These stakeholders include, but are not limited to, property developers, renewable energy technology developers, R&D institutions, businesses that want to be perceived as green, media, and general public (including minority and underprivileged groups).
Although a full explanation of the parenthetical in the preceding sentence is beyond the scope of this article, it is worth acknowledging that there is an emerging recognition that an eco-city is not self-sustaining if it is built merely with eco-hardware. Eco-software, i.e. values and beliefs systems and practices consistent with sustainability, equity, and public participation, must also be installed. Indeed, this recent comment by a reader of this blog makes exactly this point.
Architects and Urban Planners as Climate Initiators
It is significant that it is architects such as Bunschoten and Liu Yuyang of Atelier that are leading this initiative as it. Said Liu:
This project is exciting and significant because architects and urbanists are playing a much more proactive role as “initiators” or “enablers” of a larger development mechanism as opposed to just being hired as consultants or service providers. So what architects do well: realization of a built structure and environment by integrating different needs, desires, and constrains, can now be quantifiable into not just how many more apartment units they help to sell, but how many tons of carbon emission they help to reduce and how that brings in certain financial return.
In the same vain, Bunschoten believes that, the practice of urban design and planning will change radically in due course because climate change is a problem that all learning and professional institutions have will have to address with growing awareness or the problem globally.
Why Xiamen Should Say Yes
The consortium’s proposal is ambitious and complex and will require much effort, dedication and resources. Yet, if it is executed well, it has the power to energize and increase wealth, both psychic and economic. The direct benefits are obvious—CDM revenues; a lower carbon profile that imply greater natural resource utilization efficiency that can, especially in these times of spiraling commodity prices, translate into tangible costs savings; and the environmental and health benefits that comes with an economy that relies on cleaner and more efficient uses of energy. But this is just the beginning. There are also tremendous spin-off effects. Aside from the psychological benefits to the people of Xiamen that come with a sense of pride in living in China’s greenest city, and the increased quality of life and general “happiness” that comes with living in a cleaner environment, there are very real economic multiplier effects that the government of Xiamen should appreciate:
- RE/EE projects will create jobs. Not just any jobs, but green jobs—jobs that labor that is highly skilled and technical in nature, which will also enhance educational and training standards in Xiamen in order to meet the job supply.
- Green businesses, and newly formed institutions that are created as a result of implementing the RE/EE projects will have to set up offices in Xiamen, creating an influx of potential tax revenue and desirable brain power.
- The reputation and branding of Xiamen as a RE/EE hub and low-carbon city will attract other green and cleantech businesses to locate offices or operations in Xiamen as these businesses like to be established in a geographical context that is consistent with their business mission.
- Xiamen can be an eco-tourisim destination, providing a showcase to eco-tourists on how to successfully retrofit (and integrate into) a small to medium sized Chinese city with low carbon hardware and software.
- A cleaner environment results in healthier residents, resulting in reduces health care costs and lower rates of absenteeism (and hence increased productivity).
What is not to like?
From Excitement to Action
If you have read everything up to this point, I hope that my enthusiasm for this project has infected you. The task ahead for the consortium is to build on the momentum generated by the symposium to get buy-in from the key decision makers in the Xiamen government, and move forward with developing a detailed time table and action plan. There would be a lot of work ahead—lots of brainstorming and discussions; technical assessments of Xiamen’s baseline carbon profile and forecasting under different scenarios; perhaps the administration of a tendering system to RE/EE project developers; figuring out how to allocate the revenues generated from the project, project monitoring, supervision and consultation, but just to mention a few aspects.
But the end result may be something that is not only economically and socially self-sustaining, but can serve as a prototype for urban development across China and beyond.