What Action Is China Taking on Climate Change?

The Environmental and Energy Study Institute (EESI) and the ChinaFAQs Project of the World Resources Institute (WRI) held a briefing on China’s actions on climate change and clean energy and U.S.-China cooperation. Now the largest greenhouse gas emitter, and with a fast-growing economy and the world's largest population, China will play a unique and vital role in the effort to keep the global warming temperature increase below 3.6 degrees Fahrenheit. What is China doing? University, government, and business experts discussed the results of the recent U.S.-China Strategic and Economic Dialogue, as well as current actions and future prospects for China’s shift to low-carbon energy—including China’s recently announced contribution (“INDC”) to the international climate agreement in Paris this December.

China’s contribution for the international climate agreement formalizes the pledges made in the joint announcement with the United States last November. The INDC states that China will peak its carbon dioxide emissions around 2030 and make best efforts to peak early, and increase the share of non-fossil fuels in its primary energy mix to around 20 percent by that date. China's INDC also announces targets to reduce carbon emissions per unit of GDP and increase the country’s forest stock.

Until recently, climate action was stalled, because each country was waiting for others to act. The situation changes when each country understands that others are also taking action. China will look to fulfill its commitments by building on its policies limiting and reducing coal use, pricing carbon, improving energy efficiency, and scaling up non-fossil energy, while seeking to rebalance its economy away from energy-intensive industry and toward services. China’s efforts on clean energy represent a huge opportunity for U.S. business. Last year, China ($89.5 billion) and the United States ($51.8 billion) led the world in clean energy investment. Government and business collaboration between the United States and China has played an important role in the shift of both countries toward low-carbon energy. These developments were discussed by the panel.

 

HIGHLIGHTS

Paul Joffe: Senior Foreign Policy Counsel for World Resources Institute

• China and the United States are the largest emitters of greenhouse gases, but both countries are doing their parts to reduce their emissions. Although today’s event is focused on China, World Resource Institute (WRI) recently released a report stating how the United States can meet 2025 climate goals using existing federal laws and state action.
• China has broken records with economic growth and lifting billions from poverty, but now the country is at a “turning point.” The desire for clean air, energy security, to avoid impacts of pollution on agriculture, and the economic benefits of a low carbon economy (among other incentives) are all driving China to take action.
• In its November 2014 joint announcement with the United States, China made its first pledge to peak emissions. When China recently released its contribution to an international deal on climate change, the so-called Intended Nationally Determined Contribution (INDC), it further elaborated on this pledge.
• In the past, it has commonly been said that China hasn’t doing anything on low carbon energy. This panel will comment on what is being done and what challenges still remain.

David Vance Wagner: China Counsellor, Office of the Special Envoy for Climate Change, U.S. Department of State

• China and the United States together emit over 1/3 of net greenhouse gas emissions so any global solution will depend in large part on what our two countries do.
• Thankfully, dialogue about climate change between the two countries is stronger than ever (the November 2014 joint US-China announcement on climate are as example of this), and is a high priority in both countries.
• The November 2014 announcement was a particular success, with several key releases:

1. US and China both individually announced post-2020 climate targets.
2. US committed to reduce emissions 26-28 percent below 2005 levels by 2025.
3. China’s two targets were 1) to peak emissions at 2030, if not earlier, and 2) to increase shares of non-fossil fuel consumption to around 20 percent by 2030. 

• Both targets are ambitious and achievable. These targets were formally submitted to the UNFCCC as INDCs.
• China’s INDC has four targets: in addition to the 2030 peak goal and the 20 percent non-fossil fuel goal, there are goals for carbon intensity reduction and deforestation. The country’s INDC also includes ways to achieve these targets, everything from cap-and- trade programs to increasing public transit. Achieving these targets will require substantial action from China, representing a transition from business-as-usual growth.
• US-China climate cooperation is “diverse and comprehensive.” The premier form of climate cooperation is through the U.S. China Climate Change Working Group (CCWG), which covers eight action plans: motor vehicles, smart grids, carbon capture, energy efficiency, GHG data, forests, cities, and boilers, with additional ancillary climate work.
• Other mechanisms of climate cooperation include the Ten-Year Framework for Cooperation on Energy and Environment, and the U.S. China Clean Energy Research Center. Each initiative is structured differently, as some of them focus on national policy experience sharing, others focus on hands-on demonstration programs, and a few focus on private sector engagement.
• US-China cooperation is stronger than ever, but that doesn’t mean that we don’t have a huge amount of work to do. President Obama has said that our two countries have a special responsibility to lead the global effort on climate change. From what the U.S. and China have been doing and have plans to do, it looks like we are on track to becoming these leaders.

Dr. Joanna Lewis: Associate Professor of Science, Technology and International Affairs, Edmund A. Walsh School of Foreign Service, Georgetown University

• The four targets in China’s INDC include 1) peaking CO2 emissions around 2030, 2) lowering carbon dioxide emissions per unit GDP by 60-65 percent from 2005 levels by 2030, 3) increasing the share of non-fossil fuels to 20 percent by 2030, and 4) increasing forest stock level.
• This is the first time China has pledged an emissions “peak.”
• A 2030 peak will require a deviation from business-as-usual growth, which most projections indicate would peak 2040 or later. The 2030 peak will require aggressive actions. However, we don’t know what the level of the peak will be – could range from 10-12 gigatons of carbon dioxide (CO2).
• For the emissions peak, a study released by Tsinghua University and MIT provided the most aggressive scenario, demonstrating that China could get to a CO2 2030 peak if coal peaked in 2020. This may be difficult as coal use is still growing (even though it is growing less rapidly).  
• For the carbon intensity target, the Department of Energy (DOE) suggests that China’s economy would only reduce 58 percent of CO2 emissions naturally through restructuring, so China will have to do more to reach its 60-65 percent target.
• For the non-fossil fuel target, a study by the Renewable Energy and Energy Efficiency Partnership demonstrated that a 20 percent target was possible, and that China could potentially reach 26-27 percent.
• It’s in China’s best interest to reach these targets; domestic drivers include the need to address air pollution, the desire to transform their economy from heavy-industry dominated economy, and the desire to become more innovative and less reliant on foreign technology.  
• Achieving these targets will require a deviation from business-as-usual scenarios. A lot is happening at the local level and now that these targets have been put into place, a lot is starting to happen nationally as well (i.e. measuring CO2 levels). However, achieving these targets will still be very difficult.

Dr. Wang Tao: Resident Scholar, Carnegie-Tsinghua Center for Global Policy

• China’s economic growth has slowed down dramatically, from 10 percent growth annually to seven percent annually.
• Energy indicators show coal consumption decreased three percent in 2014, for the first time in two decades. This could be from Chinese government policies to decrease air pollution, but also from competition due to over-capacity in heavy industries.
• Crude oil tells a similar story, with growth rate down last year, even though China is the largest importer of crude oil. Consumer demand for diesel, a product of crude oil, has decreased for the past two years, indicating that demand from construction machines, agricultural sector machines, and road freight is slowing.
• Electricity growth rate has also decreased. Average working hours of most coal-fired power plants in China have decreased, and many of them are running at deficits, although China continues to build more.
• As a result, the share of non-fossil fuels has increased. Currently, over a quarter of China’s electricity is generated by non-fossil fuels, such as wind, solar PV and nuclear.
• Liquid natural gas (LNG) is seen as a “bridge fuel” and preferred over coal, especially for use near and in cities. The government subsidies the use of LNG in trucks, because natural gas is cheaper than diesel in China. However, there has been far lower demand growth rate than expected.
• The Chinese government is committed to shift to renewables for many reasons. Reducing air pollution in cities is certainly one reason, but China also still sees itself as a “rising power.” China wants to be a responsible world power, and there is international pressure to become so. China also wishes to be globally competitive, and become a world leader in new technologies and build-up its industrial capacity, in what it is calling the “fourth industrial revolution.”
• There are risks that come with this rapid transition to a “new normal,” especially in regard to the rapid transition from polluting power generation to renewables. One risk comes from the government acting too strongly and without room for flexibility. For example, a city in China’s province with the largest energy demand was cutting corners with environmental regulations. When a television network broadcast a video showing the pollution, the mayor was so embarrassed that he commanded the power generation be shut down immediately. The rapid power shutdown had repercussions, stopping 400 different heavy industries in the city and costing 60,000 people their jobs. There is also a huge debt owed to the industries, and the city is hurting from lack of tax revenue.
• Petroleum coke (petcoke), an end product of petroleum refinery, is primarily carbon and is used in many countries, including China, as an alternative to coal. If the crude oil that is being refined is heavy and has a high sulfur content, you will have a great deal of petcoke after the refining process finishes.  
• The world’s largest oil refinery capacity is in the US, and when the US began to import a great deal of Canadian tar sands oil, it wound up with a large amount of petcoke which it could not use. The US has been exporting this petcoke to developing countries, including China. China receives 1/3 of its petcoke from the US, and produces the remainder in its own refineries.
• The sulfur content of petcoke is much higher than normal coal (three to seven times more), but has not been addressed by the Chinese government because it is unknown to them. This is concerning because petcoke could offset all of China’s efforts to clean up the environment by reducing coal use. US and China should work together to address this issue.

Clay Nesler: Vice President, Global Energy and Sustainability, Johnson Controls

• 40 percent of greenhouse gas emissions are from buildings and they are our biggest and lowest cost opportunity to mitigate the damaging impacts of global climate change.
• In the US, the problem is with existing buildings as we only build new buildings or renovate old buildings at a rate of one to two percent. However, in China, the problem is new buildings as the country builds roughly 20 million square feet per year.
• Some of the specifics in China’s INDC include: improving energy efficiency of buildings, intensifying energy conservation transformation for existing buildings, promoting the construction of green buildings and the application of renewable energy in buildings, promoting the share of green buildings in newly built buildings and cities and towns to reach 50 percent by 2020, and strengthening R&D commercialization and demonstration for low-carbon technologies such as energy conservation.
• An example of US-China climate cooperation is the Clean Energy Research Center (CERC).  There are 1,100 researchers in the US and China working on projects related to CERC. There is very active representation of the private sector in CERC, focusing on innovation, commercialization, and intellectual property. Government agencies and institutes are focused on coal carbon capture, utilization and storage, as well as clean vehicles and buildings, and the energy-water nexus.  Johnson Controls, is involved in the buildings aspect of CERC.
• Johnson Controls is building a new Asia-Pacific headquarters in Shanghai that will use 50 percent less energy than a typical building built to Western standards, as well as advanced air filtration, battery storage, solar PV, etc., They have invited CERC to come view the project. May be more sustainable than LEED-Platinum.
• The Energy Performance Contracting Working Group, a part of the US China Climate Change Working Group (another mechanism of climate cooperation), leverages a contracting mechanism called performance contracting for energy efficiency.
• In the United States, 85 percent of projects are in the public sector. However, in China, 85 percent of the projects are in the industrial and private sector. The energy service company market is bigger in China, but we deal with totally different sectors.
• There is a real opportunity to take third-party financing models and find innovative models that apply in both the United States and China. Once we find these models, we can apply them to markets in the other country, and potentially double the size of the market in the US and more than double the size of the market in China. In addition, innovative models can bring in third party financing. There isn’t enough public money in the world to address these challenges, so we need to bring in the financial institutions.