Opinion

Impact of the massive carbon intensity cut

By Yang Hongliang
Updated: 2009-12-17 08:01

China announced on Nov 26 that it was going to reduce its carbon intensity by 40-45 percent by 2020 compared with the 2005 level. This announcement has been widely welcomed by the international community and shows that, above all, although current international treaties within the United Nations mechanism do not require developing countries to accept binding targets, China is willing to carve a new development path that can make its economic growth less carbon intensive. The new reduction target would be a binding indicator to be incorporated into China's medium- and long-term national social and economic development plans.

Appropriate handling of climate change is of vital importance to all countries. As one of the largest greenhouse gas emitters, China's ambitious voluntary action will make an important contribution to global efforts in tackling climate change.

In 2005, China's total CO2 emissions were estimated at 5,101 million tons of CO2 equivalent. The carbon intensity of the Chinese economy has been going down in the last two decades. According to the International Energy Agency (IEA), it had been reduced 55.6 percent from 5.47 kg CO2/$ to 2.43 kg CO2/$ (year 2000 US dollar) between 1990 and 2005. Although substantial progress has been made, there is still room for China to improve its carbon intensity. In 2005, carbon intensity of the US and Japan was 0.53 and 0.24 kg CO2/$ (year 2000 US dollar).

China's per capita CO2 emission is still very low. In 2005, it was 3.80 tons of CO2, equivalent to 92 percent of the world average, 35 percent of the OECD average, and less than 20 percent of the US level. Also, in terms of per capita cumulative CO2 emissions over the period 1950-2002, China ranked the 92nd in the world. Therefore, it is expected that China's overall CO2 emissions will continue to increase even with decreases in carbon intensity as the economy grows and living standards improve.

Projection of carbon emissions is highly sensitive to underlying assumptions about GDP growth, the future structure of the economy and even the foreign exchange rate. Based on its economic performance in the past three decades and also the current global financial crisis, China is expected to grow rapidly in the foreseeable future. Its GDP growth rate is assumed to be 8 percent from 2006 to 2020.

Our research results show that in 2020, annual carbon emissions reduced under scenarios of "40 percent reduction" and "45 percent reduction" will be about 6.5 billion tons and 7.3 billion tons compared with the business-as-2005 scenario. Cumulative carbon emissions reduction over the period 2006-2020 will be about 37.5 billion tons and 42.2 billion tons under the "40 percent reduction" and "45 percent reduction" scenarios.

The challenge for China is to put into motion a transition to a more secure, lower-carbon energy system without undermining economic and social development. Policy options include energy efficiency improvement, economic structure adjustment, promotion of non-fossil energy supply (renewable and nuclear), and afforestation to enlarge carbon sink. Measures to improve energy efficiency stand out as the cheapest and fastest way to curb carbon emission growth in the near term.

Long held up as a high priority by policymakers, energy efficiency has attained even greater prominence in China over the past few years. Broad measures have been aggressively taken to improve energy efficiency and correspondingly reduce GHG emissions. For example, from 2006 to June 2009, China closed down 54GW of small and inefficient coal-fired power plants and achieved its target of closing down 50GW during the period 2006-2010.

In order to achieve the 2020 target, more efforts must be made by strictly binding corresponding efficiency and emission indicators on local governments. It is expected that this 40 percent-45 percent target will be set for all provinces/municipalities soon.

In order to optimize its economic structure, the Chinese government needs to take more action to accelerate the development of the tertiary industry and curb the quick expansion of energy-intensive industries.

China has been striving to diversify its energy supply mix along with better ways of using coal. By 2008, non-fossil energy supply was estimated at 250 million tons of coal equivalent, about 8.9 percent of total primary energy consumption. The 2020 policy target is to increase the share of non-fossil energy in the energy mix to 15 percent.

Policies to promote afforestation have helped increase forest coverage from 13.9 percent in the early 1990s to 18.2 percent in 2005. By 2020, China intends to increase 40 million hectares of forest and 1.3 billion cu m of forest volume through reforestation and strengthening management of existing forests, compared with the 2005 level.

To realize this 40-45 percent carbon reduction policy target, China needs to upgrade existing inefficient energy facilities and build more non-fossil energy projects. This means a huge amount of investment will be required to underpin this policy change. The IEA estimated in its 2007 World Energy Outlook that China's required annual investment will be $150 billion in the Reference Scenario and $200 billion in the High Growth Scenario, and this corresponds to about $2.25 trillion and $3 trillion in total respectively over the period 2006-2020.

What is worthy of mention here is that China is in the process of developing world-class manufacturing industries for non-fossil technologies, such as nuclear turbines, wind turbines, solar PV modules and biomass equipment. It is likely to have a strong impact on the domestic power market. Therefore, current target capacity addition and unit costs for different technologies might be changed from time to time.

The author is an energy researcher with the Asian Development Bank.

(China Daily 12/17/2009 page8)