Can China build a green economy?

14th January 2013


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Catherine Wilson examines China's progress in becoming a more sustainable economy

China is the world’s largest emitter of carbon. It is home to five of the 10 most polluted cities on the planet, and more than three-quarters of the world’s rivers that suffer from severe water pollution.

These are just three of the many eye-watering statistics that illustrate the significant environmental challenges facing the country after three decades of double-digit growth, which have turned it into an economic powerhouse.

But change is coming. In August 2012, the Chinese government said it would spend 815 billion yuan (£80 billion) on cleaning up its rivers and tackling air pollution from industries like steel-making, cement manufacture and electricity generation.

And, in December 2012, the ministry of environmental protection pledged to invest 350 billion yuan (£34 billion) in measures to reduce harmful particles in the air over 117 cities by at least 5% by 2015.

So, what is driving this change of strategy and what progress is the Chinese government making on setting the world’s second largest economy on a sustainable development path?

Unsustainable growth

Despite an economic slowdown since the global crash, China continues to be one of the world’s fastest-growing economies. The pro-growth economic policy reforms of the late 1970s, coupled with having one of the cheapest and largest labour forces in the world, have transformed China’s ability to rapidly manufacture products relatively cheaply for western export markets.

High resource dependency and lax environmental oversight have, however, brought increasingly unwelcome social, environmental and political difficulties.

Take carbon emissions. CO2 output has increased from around 10% of global emissions in 1990 (3.8 billion tonnes) to 20% in 2011 (9 billion tonnes). China’s growing carbon footprint is not only the result of its manufacturing and energy industries; it is also fuelled by rising prosperity among its population, which is boosting consumption within its borders.

Car ownership, for instance, is expanding considerably. A report from IHS Automotive forecasts that annual car sales in China will grow by 74% by 2020, equivalent to more than 30 million new vehicles every year.

According to the International Energy Agency (IEA), on current trends, China could account for 50% of global CO2 emissions by 2030. The potential impact of climate change on China’s coastal cities, agriculture, forestry and water systems could have severe consequences for its people and the rest of the planet. It, therefore, pays for China to take its climate risks seriously.

Cause for concern

China’s growing carbon emissions are not the only issue to have caused concern beyond its borders. Acid rainclouds, saturated with particulate pollution, drift regularly across Asia and towards the US. China’s environmental challenges, consequently, are global. However, it is within its borders that the visible damage is occurring.

Chinese citizens are also finding the country’s environmental destruction hard to ignore. Some are reacting with protests, which, according to one estimate, have grown by 29% each year since 2002. Examples of violent protests in 2012 include those at Shifang, Qidong and, more recently, Ningbo.

Residents of Shifang, driven by a fear of toxic air pollution and arsenic leaching from slag heaps into local drinking water supplies, defied police orders and marched in protest against the construction of a $1.6 billion copper-molybdenum processing plant. The protests led to city authorities abandoning plans to build the plant.

Yet, as early as the 1980s, when environmental goals were included in the country’s sixth five-year plan, China has increasingly bowed to such pressures.

China’s five-year plans are blueprint documents that set out the national strategy and vision on economic development for the five subsequent years. Despite these containing environmental aspirations, many early initiatives were outbalanced by industry’s ever-increasing consumption of land and resources. Economic growth remained the country’s priority.

China’s 12th five-year plan (now called a “guidance strategy”), which started in 2011 and includes investments totalling around 3 trillion yuan, points to a possible watershed for the environment. From a previous national strategy that focused primarily on maximising growth, the 12th plan presents a programme of growth balanced with social harmony and environmental sustainability.

As Dr Li Lin, deputy country representative at WWF China, points out: “The 12th plan is regarded as the ‘greenest ever’. The strategy shows a clear national willingness for green development.” Li further explains the step change: “Of the mandatory targets set up in the 12th plan, about half are environmental targets.”

These include a reduction in both the energy and carbon intensity of the economy, and an increase in non-fossil fuel energy sources.

“Once set within the plan, these targets are then allocated to local governments for implementation,” says Li. Herein lies the challenge: the documents are only guidance.

“Whether such national willingness can be translated into action at local level will largely determine the success of the plan,” she concludes.

One step forward, two back?

The challenge for China, which is large and geographically diverse, is in finding solutions to interpret, implement, enforce and monitor, not just its latest five-year plan, but also policies and legislation at local level. Progress is moving in the right direction, but it is slow and bumpy.

Take environmental law. The Chinese government has made positive steps over the past decade by developing hundreds of EU-standard environmental laws. However, barriers to their compliance remain, explains Dr Yang Fuqiang, senior advisor on energy, environment and climate change at the Beijing-based natural resources defence council (NRDC).

“Unfortunately, local-level implementation remains a key barrier,” he says. “The key law for protecting the environment, the environmental protection law [EPL], needs changing. It lacks compliance detail. This makes implementation and enforcement at local level difficult. It needs to be made more durable and forward-thinking.”

Although the government proposed amending the EPL in August 2012, the plans fall short of what non-government organisations, like the NRDC, say is required. The changes put forward aim to reinforce the responsibility of local authorities and enterprises and close implementation gaps, but in light of the positive steps forward that the 12th plan represents, the proposed amendments are seen by many as step backwards.

“It certainly feels that way,” says Yang. “It’s very disappointing. We have, however, fed back our comments during the ‘first review’ consultation stage, which ended on 30 September 2012. It is now a waiting game to see whether the government has taken our views on board.”

The Global Times, a Chinese newspaper, went as far to say that the amendment had again prioritised development over environment. It also came as new data revealed that the environmental situation in China was worsening, with nitrogen oxide emissions in 2011, for example, 5.7% above their 2010 levels.

Yang says that, to address the environmental challenges that China faces, the legal system must support public interest environmental litigation, establish stronger enforcement and more robust pollution-permitting processes, and punish polluters with stiffer penalties.

Clean-tech ambitions

Where China is making great strides is in capitalising on turning its environmental risks into opportunities for further growth through competitive advantage.

This is illustrated by the growing commitment to developing its clean-tech sector. With dedicated investment and favourable policies, China is racing ahead as a leader in solar photovoltaics, for example.

In five years, this sector has developed from scratch into a dynamic, globally-competitive industry. China is also making great advances in other clean-tech industries and is now the world’s largest producer of energy-efficient lightbulbs and solar water heaters.

The growth of such industries in China also provides opportunities for UK businesses. A report in 2012 from the UK’s parliamentary committee on energy and climate change, highlighted the £430 billion-worth of opportunities in China’s growing markets for low-carbon technologies.

It concluded that UK businesses have an opportunity to provide innovative technologies, skills, training and know-how in areas such as carbon capture and storage. Stephen Phillips, chief executive of the China-Britain business council, agrees. “UK businesses should take full advantage. If they don’t, others will,” he says.

Jaguar Land Rover (JLR) is one UK-based firm seeking to take advantage of China’s growing focus on low-carbon technologies. It announced in November 2012 a joint partnership with Chery Automobile Company, under which a new factory will open in China producing JLR vehicles. The UK carmaker says the joint venture will focus on developing advanced technology and low-carbon automotive solutions.

China’s 12th five-year plan can be used by UK businesses as a starting point in understanding the country’s strategic emerging industries. Sectors, such as energy-efficiency, environmental protection, clean energy and alternatively-fuelled vehicles, are being nurtured with favourable tax breaks, policies and investment between 2011 and 2015.

The future’s bright

Although China’s progress in becoming a more sustainable economy has been slow, uneven and sometimes contradictory, the size and diversity of the country are what make the challenges, such as regulatory implementation at the local level, significant and complex.

At the end of 2012, China’s went through its once-in-a-decade leadership transition. Out went president Hu Jintao and premier Wen Jiabao, and in came president Xi Jinping and premier Li Keqiang. The new leadership is not expected to make significant changes to the environmental commitments set out in the 12th five-year plan.

“We believe the new leaders will continue and indeed strengthen environmental protection efforts and, hopefully, begin to turn around the environmental degradation that accompanied China’s rapid development,” says Yang.

The government’s increasing commitment to reducing environmental impacts is expected to continue in the country’s 13th five-year plan, particularly as China pledged at the 2009 Copenhagen accord to reduce its carbon intensity by 40–50% by 2020 against 2005 levels.

“The next 10 years should be a real turning point for China,” says Yang.

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