The Great Transformation with Decarbonization

China‘s Formidable Ambition to Become an Environmental Powerhouse at Breakneck Speed

By Kazuaki Sato

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China Decarbonates at Double Speed of U.S., Tackling Both Renewable Energy and Forest Development

The world has entered the phase of decarbonization race. In 1997, the Kyoto Protocol was adopted, in which the international framework for reducing greenhouse gas emissions was established. But its effectiveness was insufficient, with the U.S. and other countries withdrawing and no obligations for developing countries. The global CO2 emission was 22.7 billion tons in 1997. In 2019, it was 34.2 billion tons, increasing 50% in roughly 20 years. China played the key role in the CO2 emission increase since 2000, tripling its emission from 3.3 billion tons to 9.8 billion tons during this period, accounting for 57% of the global increase.

However, China is now rapidly shifting towards decarbonization. Although China has not yet caught up with the developed nations, it shows a drastic improvement in the carbon emission intensity, the quantity of CO2 emitted per unit of GDP, which shows the economy’s level of decarbonization. In 2019, China reached the level of the U.S. in 1999.  

In 2025,China will reach the level of the US in 2009 and European countries in 1995 with a simulation of the carbon emission intensity target in China’s 14th Five-Year Plan (2021-2025) reveals that in 2025. This shows China is improving its CO2 emission efficiency at double the speed of the U.S., which means no CO2 emission increase at all from the 2019 level.

Since its peak in 2005, China has been decoupling its economic growth from CO2 emissions, and in the 2010s, managed to stop the increase in coal consumption. But the target in the 14th Five-Year Plan shows a complete decoupling in which no CO2 emission increase will accompany economic growth. The target is certainly ambitious, but considering its performance so far, China is likely to achieve this goal.

Aim to Narrow Disparities

Even if China did achieve such ambitious targets, its decarbonization level is still way behind the developed countries. Yet it would be misleading to judge there is no progress in Chinese economy’s environmental efforts. China has held the country together with high economic growth and fair distribution of its fruits. Therefore, its economic policy prioritizes redistribution among regions in particular. China’s goal is a triple success—achieve high environmental targets, realize economic growth, and improve inequality.

It was after the 2008 financial crisis that China began a full-fledged effort on promoting renewable energy. The country adopted Green New Deal to realize economic growth and job creation through environmental policies, and worked on spreading renewable energy, pollution prevention, afforestation, and ecological recovery by setting numerical targets. China’s renewable energy consumption exceeded Japan’s one in 2008, and the U.S. in 2016. In 2019, China consumed over one quarter of the world’s renewable energy, and it is just a matter of time before Chinese usage outstrips the one in Europe.  

So how did China spread renewable energy? Just like Europe and Japan that proceeded, China’ renewable energy policies centered on the feed-in tariff (FIT) system that purchased renewable energy at fixed rates. But China’s FIT is quite unique. In Japan, a nationwide surcharge paid by electricity users becomes the source of fund for purchasing each source of renewable energy such as solar or wind.

In contrast, the renewable energy surcharge in China is kept extremely low. Power companies pay the cost for fixed-rate energy purchase according to the equivalent coal-fueled generation amount in each region, while they receive subsidies funded with the surcharge.

The power companies set electricity rates by each region, and users in economically developed provinces pay higher rates. In effect, the expensive electricity bills paid by economically developed provinces become the financial source for purchasing renewable power in less economically developed provinces. So China’s Green New Deal promotes wide use of renewable energy while narrowing economic disparities among regions.

China’s decarbonization strategy goes beyond promoting renewable energy, because the country is abundant with forests. When a country plans to improve its carbon balance, it is vital to suppress CO2 emission by promoting decarbonization and renewable energy, and increase CO2 absorption by forest development. Such carbon absorption is called a carbon sink.

To achieve a zero-carbon society, it is necessary to promote renewable energy to the limit, and offset the remaining CO2 emissions with carbon sinks. That is why forest policies are considered becoming increasingly important in the future.

Global Impact of Power Generators

Already, China’s forest areas have expanded from 160 million hectares in 1990 to 220 million hectors in 2020 in 30 years. The total area of increased forests is well over the size of Japan’s land area (37.8 million hectors). During this period, China’s share of global forest area rose from 3.7% to 5.4%. The annual amount of CO2 absorbed by Chinese forests is estimated to be 1.11 billion tons (2017), over 10 times absorbed by Japan’s carbon sinks (80 million tons).

When we discuss decarbonization in Japan, the cost of the measures often becomes an issue. In Green New Deal, the cost for the measures is considered entirely as economic measures.
But in the future, the global competitive power for going green may become an issue, since people are now demanding carbon neutral as a standard for internationally traded goods.

In an environment where products made only by renewable energy have international competitiveness, the Chinese economy has advantages in two ways. First, China has abundant renewable energy within the country, which is cheaply available in underdeveloped provinces. Second, renewable energy generated in other countries must rely on power generators manufactured in China.

About 70% of solar panels are produced in China, and the country is now showing presence in wind power generators that used to far way behind. There may come a day when both developing and developed countries cannot do manufacturing unless they use Chinese power generators or parts.

(Kazuaki Sato, Associate Professor of Economics, Tokyo Keizai University)

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