Energy Policy and Climate Mitigation in China: The Ideas Motivating Change more

Energy Reform and Climate Change Mitigation in China: The Ideas Motivating Change Olivia Treloar Boyd Sub-Thesis submitted in partial fulfillment of the requirements of a Master of Arts (Asia-Pacific Studies) from the College of Asia and the Pacific at the Australian National University, Canberra 21st October, 2011 i Declaration: I, Olivia Boyd, hereby declare that, except where acknowledged, this work is my own and has not been submitted for a higher degree at any other institution or university. Olivia Boyd 21st October, 2011 ii Acknowledgements: I am very grateful for the kind support, dedication and insight of my supervisor, Dr. Katherine Morton. Also to Wang Da, Louise Zhao, Melissa Conley-Tyler, Dr. Stephen Howes, Christopher White, Dr. Sarah Milne, Dr. Nan Zhou, Kirstie Barry, Assistant Professor Joanna I. Lewis, Bijun Wang, and last but certainly not least, to Paul Wyrwoll, and my father, Andrew Boyd, thank you for being so generous with your time and your intellect. iii Abstract: Since the 11th Five Year Plan of 2006-2010 China has pursued a number of ambitious climate-related energy reforms. While a consensus is now emerging over the importance of these reforms, the motivations behind China’s recent shift towards reducing carbon emissions and increasing energy efficiency remain unclear. To date most analyses of China’s motivations for emissions reductions have primarily sought to analyse the costs and benefits of emissions reductions, the bureaucratic politics driving climate-related policy-making, and the incentives shaping China’s engagement with international climate negotiations. Largely absent from existing literature is an emphasis on the role of ideas in redefining the main concerns and policy priorities that have led to climate-related energy reform. The central research question of this thesis addresses this issue: What are the key domestic ideas that have motivated China’s recent climate-related energy reforms, and how are these ideas likely to shape China’s engagement with international climate governance? From a survey of key government energy documents and the writings of China’s leading energy academics, this thesis finds that three new ideas have been particularly influential. One idea is new energy security that stresses domestic, rather than international, sources of energy insecurity. A second influential idea is green development and growing concern over the environmental and resource constraints on economic growth. A third important new idea is low-carbon leadership, which posits a vision of China’s international political and economic influence based on climate leadership and low-carbon markets. The influence that these three ideas have had on China’s domestic reforms have important implications for the wider debate over international climate governance. This analysis of China’s motivations for emissions reductions suggests that a combination of ‘top-down’ and ‘bottom-up’ approaches may offer the best means of deepening China’s engagement with climate governance at the international level. iv List of Acronyms: BASIC - Brazil, South Africa, India and China - a negotiating bloc of emerging economies in UNFCCC climate change negotiations CDM - Clean Development Mechanism CO₂ - carbon dioxide, a greenhouse gas COP - Conference of the Parties, the governing body of the United Nations Framework Convention on Climate Change ESPD - energy saving power dispatch principle EU - European Union FYP - Five Year Plan GDP - gross domestic product GHG - greenhouse gas IEA - International Energy Agency IPCC - Inter-Governmental Panel on Climate Change NDRC - National Development and Reform Commission NGO - non-government organisation OECD - Organisation for Economic Cooperation and Development SEPA - State Environmental Protection Agency (now Ministry of Environmental Protection) SO₂ - sulphur dioxide, an air pollutant which causes acid rain SOE - state-owned enterprise UN - United Nations UNFCCC - United Nations Framework Convention on Climate Change US - United States of America WTO - World Trade Organisation v Table of Contents: Title Page Declaration Acknowledgements Abstract List of Acronyms Contents Chapter 1: Introduction 1.1 1.2 1.3 1.4 1.5 1.6 The Transformation of China’s Energy Policy Accounting for China’s Motivations for Climate Change Mitigation Research Question Methodology Main Argument Organisation of the Thesis i ii iii iv v vi 1 1 3 10 11 19 20 23 23 23 28 33 41 42 42 42 48 55 62 64 64 64 69 78 83 Chapter 2: New Energy Security 2.1 2.2 2.3 2.4 2.5 Introduction China’s New Energy Security Controlling Energy Demand Through Energy Efficiency Policies Difficult Compromises Between Administrative Controls and Market Reform Conclusion Chapter 3: Green Development 3.1 3.2 3.3 3.4 3.5 Introduction The Deep Costs of Environmental Degradation Government Efforts to Create ‘Win-Win’ Energy Policies Difficult Trade-Offs and Social Stability Conclusion Chapter 4: Low-Carbon Leadership 4.1 4.2 4.3 4.4 4.5 Introduction Why China Must Become a Global ‘Low-Carbon Leader‘ Leadership in the Renewables Market and the UNFCCC Mistrust and Miscommunication Conclusion vi Chapter 5: Implications for International Climate Change Governance 5.1 5.2 5.3 5.4 5.5 Introduction Bottom-Up Approaches and Engagement with China Limitations of Climate Mitigation from Below The Continuing Relevance of the UNFCCC Conclusion Chapter 6: Conclusion Bibliography 85 85 87 94 96 101 103 106 vii viii Introduction 1.1 The Transformation of China’s Energy Policy At the beginning of the last decade, the prospects for climate change mitigation in China seemed bad, turning worse. Strong economic growth and a boom in energy-intensive heavy industry saw China’s greenhouse gas (GHG) emissions rise rapidly. China had sustained a trend of declining energy intensity (i.e. amount of energy used per unit of gross domestic product [GDP] output) from the beginning of the reform era in the late-1970s to the end of the last century. In this period China maintained a 5% average annual reduction in energy consumption per unit of GDP. 1 However, from 2002 China’s energy consumption grew faster than its GDP, and its economy expanded rapidly, with annual GDP growth rates rising from 8.4% in 2000 to 14.2% in 2007.2 As a result, China overtook the US as the largest emitter of greenhouse gasses in 2007, with the period 2002 to 2005 seeing a greater expansion in energy demand than any other nation at any other time in history.3 In response, when China’s top policy-makers met for the Central Economic Work Conference in 2004 they decided to make energy and resource saving targets a key component of economic restructuring.4 Coinciding with 11th Five Year Plan (2006-2010), China released strong new energy and environmental policies that aimed to control China’s 1 L. Price, M. D. Levine, N. Zhou, D. Fridley, N. Aden, H. Lu, M. McNeil, N. Zheng, Y. Qin, P. Yowwargana, “Assessment of China’s Energy-Saving and Emissions-Reduction Accomplishments and Opportunities During the 11th Five Year Plan”, Energy Policy, Vol. 39, Issue 4 (April, 2010), p. 2165 2 World Bank, World Bank National Accounts Data: GDP Growth (Annual %), (2011), available online: http:// data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG (accessed: 20 October, 2011) 3 K. Morton, China and the Global Environment: Learning from the Past, Anticipating the Future, Lowy Institute Paper 26 (Sydney: Lowy Institute for International Policy: 2009), p. 3; D. Levine cited in H. Xin, “In Quest to Save Energy, China Ignores Simple Answer”, Science, Vol. 328, No. 5983 (2010), p. 1216 K. Halding, G. Han, M. Olsson, “China’s Climate- and Energy-Security Dilemma: Shaping a New Path of Economic Growth”, Journal of Current Chinese Affairs, Vol. 38, No. 3 (2009), p. 125 4 1 huge and growing energy consumption. Energy efficiency, renewable energy, and pollution control targets and policies were important features of China’s new energy policy. Although previous Five Year Plans (FYP) from 1996-2005 set numerous environmental targets, in practice China failed to meet most of them. Energy saving was generally encouraged in these plans, but not given the force of any particular target.5 By contrast, in the 11th FYP China stopped just shy of achieving its ambitious target of a 20% decrease in national emissions intensity between 2006 and 2010. It also witnessed an expansion of its renewable energy market, driving down the cost of expensive technologies. More recently, China has set a target for a 17% reduction in CO₂ intensity between 2011 and 2015, and has established a number of low-carbon ‘model cities’ and ‘model provinces’.6 At the international level, China has altered its past insistence that developing countries should not take action until developed countries have met their emissions reductions commitments, although its objection to legally binding commitments for developing countries remains unchanged.7 In 2009 China pledged to reduce its carbon intensity (i.e. the volume of 5 Government of the People’s Republic of China, “The 10th Five-Year Plan (2001-2005)”, L. Pan (ed.) Chinese Government’s Official Web Portal (5 April, 2006), available online: http://www.gov.cn/english/2006-04/05/ content_245624.htm (accessed: 20 October, 2011); Jiahua Pan cited in J. Liu, “Reigning in China’s Energy Targets”, in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/reports (accessed: 20 October, 2011), p. 24; K. Halding et al., op. cit. (2009), p. 125 6 R. Garnaut, “Update Paper 2: Progress Towards Effective Global Action on Climate Change”, in R. Garnaut The Garnaut Climate Change Review Update 2011, (2011), available online: http://www.garnautreview.org.au/ update-2011/update-papers/up2-progress-towards-effective-global-action-climate-change.pdf (accessed: 20 October, 2011), p. 26; NDRC, Medium to Long Term Renewable Energy Development Plan [可再生能源中长期 发展规 ], (September, 2007), available online: http://www.ndrc.gov.cn/fzgh/ghwb/115zxgh/ P020070930491947302047.pdf (accessed: 20 October, 2011), p. 18; Government of the People’s Republic of China, China’s 12th Year Plan on National and Economic Social Development [中华人民共和国国民经济和社 会发展第十二个五年规 纲要], (4 March, 2011), available online: http://www.chinacleanenergydb.com/ general-strategic-plans/Five-Year-Plans/3-2011China12thFiveYearPlanonNationalEconomicandSocialDevelopment-Chinese.pdf?attredirects=0&d=1 (accessed: 20 October, 2011), p. 5; L. Price et al., op. cit. (April, 2010), p. 2174; Jiahua Pan, cited in J. Liu, op. cit. (27 April, 2011), p. 24 7 Z. Zhang, “The Forces Behind China’s Climate Change Policy: Interests, Sovereignty and Prestige” in P. G. Harris (ed.) Global Warming in East Asia: The Domestic and International Politics of Climate Change (London: Routledge, 2003), p. 67 2 carbon dioxide released into the atmosphere per unit of GDP output) 40-45% by 2020 at the Copenhagen Climate Summit.8 In the words of Ross Garnaut, author of the Garnaut Review: ... what once seemed unattainable targets to Chinese economic authorities are now viewed with confidence. Officials ... are beginning to talk of reaching the high point of the emissions intensity reduction and then possibly going further.9 The overall effect of China’s new energy policy could be transformative. According to OECD projections, greenhouse gas emissions from China’s energy sector alone will exceed those of the entire OECD by 2035.10 Thus the success and deepening of energy reforms that give rise to GHG emissions reductions (hereafter referred to as ‘climate-related energy reforms’) in China will have a direct impact on the entire world in the not-too-distant future. 1.2 Accounting for China’s Motivations for Climate Change Mitigation What accounts for this dramatic change in China’s approach to energy and climate change? Why has China implemented such strong domestic policies to reduce emissions through energy reforms, when only a decade ago it seemed headed towards a path of unmitigated growth in energy consumption and GHG emissions? And how does this all relate to the international effort to engage China and prevent dangerous climate change? There is a 8 Department of Climate Change, NDRC, Appendix II - Nationally Appropriate Mitigation Actions of Developing Country Parties: China, Letter Including Autonomous Domestic Mitigation Actions, United Nations Framework Convention on Climate Change (28 January, 2010), available online: http://unfccc.int/files/meetings/cop_15/ copenhagen_accord/application/pdf/chinacphaccord_app2.pdf (accessed: 20 October, 2011) 9 Ibid, p. 26 IEA/OECD, World Energy Outlook 2010, (OECD Publishing, 9 November, 2010), p. 77 3 10 wealth of literature that has sought to analyse China’s participation in international climate change cooperation, from which it is possible to discern three dominant approaches towards explaining China’s motivations. One approach seeks to understand the costs and benefits of climate change mitigation, and how this impacts upon China’s participation in international climate governance. A second approach examines how China’s domestic politics influences China’s behaviour in international climate change cooperation, chiefly by analysing the interaction between different ministries and government agencies and their different vested interests. A third approach looks at how international politics have shaped China’s response to climate change, especially in the context of the United Nations Framework Convention on Climate Change (UNFCCC) negotiations. Absent from the current literature is a focus upon the role of ideas that animate China’s internal policy debates and influence change in China’s energy policy. This thesis will attempt to fill this gap in the literature. The Cost-Benefit Approach This approach to determining China’s motivations for emissions reductions seeks to weigh the costs of action to mitigate climate change against the benefits of making no such commitment. Specifically, this scholarship analyses: (1) China’s interest in continued strong economic growth; (2) China’s own perception of the likely damages it may suffer as a result of climate change; (3) the different costs that China is likely to incur from different levels of commitment to emissions reductions, and; (4) how the actions of other major emitters might influence China’s perception of the costs and benefits of international mitigation commitments. Some analyses conclude that a rational calculation of the benefits and costs involved in climate change mitigation would support only limited self-interest in climate 4 change mitigation measures.11 However, a greater proportion of the literature argues that weighing up the current costs against the future benefits of mitigation means China’s national interest would be better served by mitigation action now.12 These scholars also suggest that it would be cheaper and more efficient for China to engage in mitigation efforts through formal international agreements on technology cooperation and emissions reduction targets, and through internationally regulated climate-related market competition both in the form of formal carbon markets and green technology markets. 13 Despite this, many authors argue that it is currently not in China’s interest to commit to legally binding emissions reduction targets under the UNFCCC process because the Chinese government perceives economic growth to be more important than climate change mitigation in all cases where these two concerns are seen to collide.14 The Importance of Domestic Bureaucracy A second approach stresses the importance of understanding how domestic interest groups shape China’s position on climate change mitigation. The impact of civil society actors on China’s domestic climate politics has been little analysed. This is because analyses of 11 C. R. Sunstein, “The World vs. The United States and China - The Complex Climate Change Incentives of the Leading Greenhouse Gas Emitters”, UCLA Law Review, Vol. 55, Issue 6 (2007-2008), pp. 1675-1700; W. D. Nordhaus, “Economic Aspects of Global Warming in a Post-Copenhagen Environment” Proceedings of the National Academy of Sciences, Vol. 107, No. 26 (29 June, 2010), pp. 11725-11726 12 M. P. Vanderbergh, “Climate Change: The China Problem”, Southern California Law Review, Vol. 81, Issue 5 (July, 2008) pp. 917-923, pp. 929-958; M. Schroeder, “The Construction of China’s Climate Politics: Transnational NGOs and the Spiral Model of International Relations,” Cambridge Review of International Affairs, Vol. 21, Issue 4 (2008), p. 522; J. B. Wiener, “Climate Change Policy and Policy Change in China”, UCLA Law Review, Vol. 55, Issue 6 (2007-2008) pp. 1805-1826; V. Bosetti, C. Carraro, M. Tavoni, “Climate Change Mitigation Strategies in Fast-Growing Countries: The Benefits of Early Action” Energy Economics, Vol. 31, Supplement 2 (December 2009), pp. 149-150; C. Hepburn, J. Ward, “Should Emerging Market Economies Act on Climate Change, Or Wait?”, (Emerging Markets Forum: October, 2010), available online: http:// www.vivideconomics.com/docs/Vivid%20Econ%20Emerging%20Markets.pdf (accessed: 20 October, 2011), pp. 2-3 H. Zhang, K. Morton “International Climate Change Negotiations: A Chinese Perspective”, Unpublished Manuscript (2011), pp. 13-15; G. Heggelund, “China’s Climate Change Policy: Domestic and International Developments”, Asian Perspective, Vol. 31, No. 2 (2007), p. 177, pp. 158-162; J. I. Lewis, “China’s Strategic Priorities in International Climate Change Negotiations”, The Washington Quarterly, Vol. 31, Issue 1 (2008), p. 156, pp. 165-169 13 14 C. Hepburn and J. Ward, op. cit. (October, 2010) pp. 1-19; V. Bosetti et al., op. cit. (December, 2009) p. 150 G. Heggelund, op. cit. (2007), p. 158; M. P. Vanderbergh, op. cit. (July, 2008), pp. 908-909 5 Chinese civil society generally find that groups such as non-governmental organisations (NGOs) and private and state owned companies have little impact on policy making in Beijing .15 Most scholars seeking to understand how domestic politics influence China’s international climate change policy have chosen to use what Michael Hatch refers to as the ‘bureaucratic model’ - a method of analysis that views policy as the outcome of interagency competition within the bureaucratic structure of the government.16 Hatch and others justify this approach by first pointing out that climate change is not an important issue in China’s domestic politics, meaning that there is little pressure on policy formation from domestic interest groups. As a result, the power of bureaucrats to independently form climate policy is fairly strong. 17 This sort of analysis highlights the leading position of the National Development and Reform Commission (NDRC) and the Ministry of Foreign Affairs (MOFA) in forming China’s climate change policy, maintaining that these ministries generally prioritise protecting China’s economic growth and international sovereignty above the imperatives of emissions reductions, and so are reluctant to take on international commitments.18 Set against this, some authors have also pointed out that the deep involvement of the NDRC offers the opportunity for climate relevant policies to be more 15 C. Richerzhagen, I. Scholtz, “China’s Capacities for Mitigating Climate Change”, World Development, Vol. 36, No. 2 (2008), p. 319; D. Marks, “China’s Climate Change Policy Process: Improved But Still Weak and Fragmented”, Journal of Contemporary China, Vol. 19, Issue 67, (2010), p. 983; The few articles that make NGOs and public participation the focus of their study include: A. Y. Lo, “Active Conflict or Passive Coherence? The Political Economy of Climate Change in China”, Environmental Politics, Vol. 19, No. 6, (2010), pp. 1012-1017; M. Schroeder, op. cit. (2008), pp. 505-525 16 M. T. Hatch, “Chinese Politics, Energy Policy and the International Climate Change Negotiations” in Paul Harris (ed.) Global Warming and East Asia: The Domestic and International Politics of Climate Change (London: Routledge, 2003), p. 44 17 H. Jeon, S. Yoon, “From International Linkages to Internal Divisions in China: The Political Response to Climate Change Negotiations”, Asian Survey, Vol. 46, Issue 6 (2006), p. 849; M. T. Hatch, op. cit. (2003), p. 44; G. Heggelund, op. cit. (2007) p. 168; D. Marks, op. cit. (2010) pp. 976-978; C. Richerzhagen and I. Scholz, op. cit. (2008), pp. 317-318 18 G. Heggelund, op; cit. (2007), p. 158, p. 174; H. Jeon, S. Yoon, op. cit. (2006), p. 861, pp. 864-865; C. Richerzhagen and I. Scholtz, op. cit. (2008), pp. 316-318. p. 322; D. Marks, op. cit. (2010), p. 976, M. T. Hatch, op. cit. (2003), p. 49 6 effectively integrated into China’s overall development plans, because of the central role the NDRC plays in directing the entire Chinese economy.19 The ‘bureaucratic model’ approach also examines the relationship between the central government and local government, with the literature generally finding that the central government faces great difficulties implementing its policies at the local level.20 This is a major problem in relation to international monitoring and reporting of emissions. China faces genuine constraints in collecting reliable data from some areas of its economy.21 International Climate Politics and China’s National Interest The third approach to analysing China’s motivations for climate change mitigation examines how China’s interaction with the international community affects its perception of its national interest. On the one hand, these analyses emphasise how climate change policy is deeply affected by China’s broader foreign policy concerns.22 The imperative not to take on responsibilities that might impede economic development, impact upon China’s energy security, or threaten China’s sovereign control of its own territory, means it has been reluctant to take on legally binding emissions cuts or accept intrusive international monitoring and reporting of its emissions levels under the UNFCCC process. 23 On the other hand, many academics have analysed the impact of international climate change politics on China’s own perception of its national interest. Some scholarship has 19 20 C. Richerzhagen, I. Scholtz, op. cit. (2008), p. 322 K. Morton, op. cit. (2009), p.51-52; C. Richerzhagen, I. Scholtz, op. cit. (2008), p. 315; J. I. Lewis, op. cit. (2008) p. 160; G. Heggelund, op. cit. (2007) p.179, p. 185; D. Marks, op. cit. (2010), p. 975 21 S. Howes, “Can China Rescue the Global Climate Change Negotiations?” in Ross Garnaut et al. (eds.) China’s New Place in a World In Crisis: Economic, Geopolitical and Environmental Dimensions, (Canberra: ANU E-Press, July, 2009), available online: http://epress.anu.edu.au/china_new_place/pdf/ch18.pdf (accessed: 20 October, 2011), p. 423; J. I. Lewis, op. cit. (2008), pp. 165-169 22 23 H. Jeon, S. Yoon, op. cit. (2006), pp. 851; G. Heggelund, op. cit. (2007), p. 168 M. T. Hatch, op. cit. (2003), p. 51; G. Heggelund, op. cit. (2007), p. 157; C. Richerzhagen, I. Scholtz, op. cit. (2008), pp. 318 7 analysed the way in which participation in carbon offset markets, such as the CDM, and other forms of technology and funding transfers have affected a shift in China’s own perception of its self-interest from opposition to acceptance of these aspects of the international climate change regime.24 Many academics also concentrate on how the way in which UN negotiations are framed narrows the opportunity for flexible international solutions to climate change. For example, UNFCCC definitions of various countries as ‘developing’, ‘developed’ and ‘transitional’ (this category refers to countries of the former Eastern bloc and Soviet Union) has embedded China’s traditional role as a defender of developing country interests. Some argue that this is partly because China gains greater international legitimacy by casting itself as a leading representative of developing countries, and so it is unlikely to act in a way contrary to the position of the G-77.25 Moreover, China’s identity as a developing country and solidarity with the UN has provided an important moral basis for much of China’s core UNFCCC negotiating platform, which generally highlights the responsibility of developed countries to make emissions cuts and the right of developing countries to continue unhindered development.26 The Limitations of these Approaches The three approaches outlined above do much to improve our understanding of China’s motivations to mitigate climate change. However, they suffer from a number of limitations. The ‘cost-benefit approach’, while providing important analysis of the material bases of China’s interests, often presents China’s national interest as a fairly static balance of different benefits and costs at any given point in time. This approach can sometimes struggle to 24 25 Z. Zhang, op. cit. (2003), pp. 73-74; G. Heggelund, op. cit. (2007) p. 179 S. Kasa, A. T. Gullberg, G. Heggelund, “The Group of 77 in the International Climate Negotiations: Developments and Future Directions”, International Environmental Agreements, Vol. 8 (2008), p. 121, p. 125; J. I. Lewis, op. cit. (2008), p. 162; Z. Zhang, op. cit. (2003), pp. 78-80 26 Z. Zhang, op. cit. (2003), pp. 67-68; S. Howes, op. cit. (July, 2009) pp. 410-411; K. Morton, op. cit. (2009) p. 74, p. 78 8 account for change in Chinese government policy. Sources of change generally arise only when one part of this balance of interests changes (for example, a revision of projected damages from climate change for China), affecting a shift in elite understanding. Similarly, the ‘bureaucratic approach’ often presents the motivations and interests of China’s different bureaucratic bodies as static and unchanging. This is because this approach seeks to define the individual vested interests of different ministries, bureaus, and agencies, and analyse their relative power within the Chinese government in order to explain China’s climate change mitigation policy. While these analyses of China’s diverse interests offer important insights, they often give little consideration to how these interests have been formed in the first place. This is where ideas are important. As Max Weber pointed out over 60 years ago, ideas can have a profound effect on the course of events, acting like switchmen who direct interestbased actions down one track or another. 27 Scholarly works that focus on international climate politics focus more on the role of ideas. However, ideas tend to be strongly associated with UNFCCC negotiations, and are therefore confined to themes such as the developed North vs. developing South or equity and historical responsibility. While this school of though does seek to include China’s domestic interests within the analysis, the role of China’s domestic debates and ideas are little discussed. The Role of Domestic Ideas In the effort to understand China’s motivations to take on emissions reductions and participate in different forms of international climate change governance, the influence of changing domestic ideas has been largely neglected in the literature. Some analyses have noted the involvement of Chinese academics (mostly scientists) in the early stages of China’s 27 Max Weber cited in J. L. Campbell, “Ideas, Politics and Public Policy”, Annual Review of Sociology, Vol. 28 (2002), p. 21 9 international engagement in the IPCC and UNFCCC in the late-80s and early-90s.28 Other studies have reviewed Chinese academic proposals for post-Kyoto climate change governance architecture and future domestic energy policy.29 However, none of these approaches have sought to identify the key domestic ideas and intellectual debates that have affected the way China views its priorities in relation to climate change. Now would seem a particularly crucial time to develop a greater understanding of China’s motivations for emissions reductions. One reason for this is that China surprised the world with the ambition and success of its recent climate-related energy policies. As a result many have been slow to understand the motivations for and future potential of this latest policy shift. Moreover, as the first Kyoto commitment period comes to an end in 2012, the world faces the challenge of negotiating a new type of international climate governance regime that can overcome the impasses of the Kyoto process. In designing a climate change regime that is acceptable to the largest current and future emitter, it will be vital to understand the way in which China conceptualises the problem of climate change, as well as the ideas that frame and motivate its actions. 1.3 Research Question Having reviewed the current understanding of China’s motivations for emissions reductions and participation in international efforts to address climate change, and having found this gap in the literature, this thesis asks the following question: What are the key domestic ideas that have motivated China’s recent climate-related energy reforms, and how are these ideas likely to shape China’s engagement with international climate governance? 28 29 H. Jeon, S. Yoon, op. cit. (2006), pp. 854-587; M. Schroeder, op. cit. (2008), pp. 512-513 S. Howes, op. cit. (July, 2009), pp. 409-430 10 1.4 Methodology Conceptual Framework: How Ideas Matter for Policy and Policy Change Ideas can both constrain and stimulate policy change. They play a vital role in agendasetting: the process by which a set of subjects and potential priorities are narrowed down to those that are seen to be most important and most pressing.30 Sometimes the appearance of a new idea by itself can affect a change in what is considered to be pressing and important.31 However, often it is the perceived failure of a paradigm and the policies that flow from that paradigm that sparks the search for a new idea, making different ideas seem newly important and relevant.32 As will become clear in this thesis, the failure of previous aspects of China’s model of economic development that were in the past generally accepted and little questioned, have now opened the way for different ways of thinking about energy policy. According to David Béland, the perceived failure of past paradigms and the search for new ideas can take place because of statistical indicators, ‘focusing events’, or ‘feedback effects’.33 In China’s case, statistical indicators such as China’s large GHG emissions and world energy consumption, focusing events such as widespread and damaging power blackouts, and feedback effects such as growing awareness of the economic costs of domestic environmental pollution, have all coalesced to prompt a perceived failure of old ideas and old policies, and a need for new ideas to solve these problems. 30 D. Béland, “Ideas and Social Policy: An Institutionalist Perspective”, Social Policy and Administration, Vol. 39, No. 1 (February, 2005), p. 6 31 P. Andrews-Speed, The Institutions of Energy Governance in China, (Institut Francais des Relations Internationales: January 2010), available online: www.ifri.org/downloads/noteandrewsspeedenergychina_1.pdf (accessed: 20 October, 2011), p. 8 32 33 P. Andrews-Speed, op. cit. (January, 2010), p. 8 D. Béland, op. cit. (February, 2005), p. 7 11 The failure of old ideas by itself is not enough to raise any particular new idea above all the others to become an important part of agenda-setting. Framing new ideas so that they fit into pre-existing and prevailing systems of discourse becomes important if the new idea is to be acceptable to crucial groups such as important leaders and the general public.34 However, while balancing some sense of continuity with the established way of doing things, those who champion new ideas also need to “shake up the existing policy monopoly” that lends strength to institutional inertia and old idealogical justifications, so that these crucial groups also find change desirable. 35 In more pluralistic polities this is a complicated process that often involves wide-ranging social debate and the deep involvement of the public and mass media.36 By contrast, in societies where power is concentrated in the hands of an elite, the scope of discourse over new ideas is more easily limited to a smaller group of people. 37 On top of framing the idea so that it is acceptable and desirable, new ideas also need champions. These could be people who are viewed to be authoritative or knowledgeable, or people who have power and influence within the system, and can push a new idea into the limelight when the failure of old policies and paradigms makes the new idea seem attractive.38 China presents an interesting conundrum for identifying important actors that effect the relationship between new ideas and policy-making. While China is still ‘authoritarian’, increasing political pluralism over the past few decades has allowed the public and mass media to influence public policy at times.39 This occasionally comes in the form of outright protests, through the 34 R. C. Lieberman, “Ideas, Institutions and Political Order: Explaining Political Change”, American Political Science Review, Vol. 96, Issue 4 (December 2002), pp. 700-701; D. Béland, op. cit. (February, 2005), pp. 11-12; P. Andrews-Speed, op. cit. (January, 2010), pp. 8-9 35 36 D. Béland, op. cit. (February, 2005), pp. 11-12 P. A. Hall, “Policy Paradigms, Social Learning and the State: The Case of Economic Policymaking in Britain”, Comparative Politics, Vol. 25, No. 3 (April, 1993), pp. 187-188; P. Andrews-Speed, op. cit. (January, 2010), p. 9 37 38 39 P. Andrews-Speed, op. cit. (January, 2010), p. 9 P. A. Hall, op. cit. (April, 1993), p. 280; D. Béland, op. cit. (February, 2005), pp. M. Pei, China’s Trapped Transition: The Limits of Developmental Autocracy, (Cambridge: Harvard University Press, 2006), pp. 45-47 12 online public opinion of ‘netizens’, through mass media coverage and campaigns, and through formal communication between the government and the general public online, complaints and local elections.40 This participation is often very issue-specific. For example, issues related to Sino-Japanese relations often inspire greater popular political pressure because larger sections of the public harbour strong anti-Japanese nationalist sentiments.41 Often, however, China’s policy-making process is fairly opaque and is largely dominated by the ruling elite. Conventional wisdom on China and climate change seems to agree that government elites are the main domestic actors that define the policy-making process in this area.42 The way in which policies associated with a particular idea are implemented can in turn effect the nature and long-term durability of the idea itself. In other words, policies are not only ‘outputs’ but also important ‘inputs’ into the political process and political debate - a process that political scientist Paul Pierson refers to as ‘policy feedback’.43 This can happen in a number of ways. Just as interest groups shape policies, policies can also change the distribution of power and resources, which in turn can alter the political aims and methods of different interest groups.44 For example, some public policies often create ‘spoils’ that motivate the beneficiaries to press for continued expansion of those policies, whilst others can lose previous benefits from policy change, prompting new forms of political mobilisation.45 40 K. S. Tsai, Capitalism Without Democracy: The Private Sector in Contemporary China, (Ithica: Cornell University Press, 2007), pp. 36-42; M. Wan, Sino-Japanese Relations: Interaction, Logic and Transformation, (Washington: Woodrow Wilson Centre Press, 2006), pp.146-147, p. 165; Andrew J. Nathan, “Authoritarian Resilience”, Journal of Democracy, Vol. 14, No. 1 (January, 2003), pp. 13-14; Y. Zheng, Technological Empowerment: The Internet, State and Society in China, (Stanford: Stanford University Press, 2008), pp. 10-11; D. L. Yang, Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China, (Stanford: Stanford University Press, 2004), p. 167; M. Pei, op. cit. (2006), pp. 72-80 41 P. H. Gries, “China’s ‘New Thinking’ on Japan”, The China Quarterly, Vol.184 (2005), pp. 844; M. Wan, op. cit. (2006), pp.146-147 42 C. Richerzhagen, I. Scholtz, op. cit. (2008), p. 319; D. Marks, op. cit. (2010), p. 983; A. Y. Lo, op. cit. (2010), pp. 1012-1017; M. Schroeder, op. cit. (2008), pp. 505-525 43 P. Pierson, “Review: When Effect Becomes Cause: Policy Feedback and Political Change”, World Politics, Vol. 45, No. 4 (July, 1993), p. 595 44 45 Ibid, pp. 598-601 Ibid, pp. 599-601 13 Furthermore, the degree to which new policy instruments mesh with pre-existing policies, institutions, and social norms can make a large difference as to how difficult, disruptive, and divisive the implementation of a new idea becomes.46 Thus the implementation of policies can also affect ideas because (depending on how successful they are) new policies can eventually produce their own ‘lock-in’, which mainstreams the ideas associated with it and discourages further change or regression.47 Finally, while ideas and debates that circulate within China domestically are the focus of this study, this does not mean that domestic ideas develop in isolation from the wider world. As the final chapter in this thesis demonstrates, domestic ideas are influenced by international debates, and especially by ‘international norms’. This refers to a process by which ideas are generated within international society that are generally accepted to be morally right (such as human rights), after which national and sub-national actors either accept such a norm and put it into practice, or come under varying degrees of pressure to live up to international standards of a ‘civilised state’.48 This analysis of how ideas affect policy does not deny that there are multiple interests, events and motivations that may influence a particular policy. Rather it seeks to demonstrate the role that ideas play in framing and defining those interests, events and motivations, as one important component of explaining policy change. Research Methods and Sources This thesis will seek to identify the most important changes in domestic ideas that have motivated China’s climate-related energy reforms in recent years by taking an explicitly elite46 47 48 P. Andrews-Speed, op. cit. (January, 2010), p. 9 P. Pierson, op. cit. (July, 1993), pp. 605-610 T. Risse, “International Norms and Domestic Change: Arguing and Communicative Behavior in the Human Rights Area”, Politics Society, Vol. 27, No. 4 (December, 1999), pp. 529-530 14 based approach to primary sources. Specifically, this thesis surveys the writings of six leading Chinese energy academics (namely: Hu Angang, Pan Jiahua, Zhou Dadi, Zhu Chengzhang, Zha Daojiong and Jiang Kejun) and key energy documents issued by the central government since 2004. Despite China’s increasing political pluralism in recent decades, this thesis accepts conventional wisdom that public opinion has a limited effect on national climate change and energy policy.49 Scholarship on China and climate change generally maintains that academics had greater direct influence over the national climate change agenda in the very early stages of international engagement in the late 1980s and early 1990s. After this, their influence faded as government ministries such as MOFA and the NDRC realised the deep implications that an international climate change regime would have for China’s economic development and international relations.50 Despite this, in recent decades the policy-making process in general has been marked by an increasing reliance on expert opinions.51 This is particularly so for the Hu-Wen ‘Fourth Generation’ of Chinese leadership, for whom the creation of study groups and seeking informed advice has become a trademark of it’s ‘scientific development’ approach to policy-making.52 According to Meidan et al., respected academics play a role in identifying the problems and issues that currently beset the energy sector, helping to define what the motivation or aim of reform should be.53 While proving a direct causal link between 49 C. Richerzhagen, I. Scholtz, op. cit. (2008), p. 319; D. Marks, op. cit. (2010), p. 983; A. Y. Lo, op. cit. (2010), pp. 1012-1017; M. Schroeder, op. cit. (2008), pp. 505-525 50 H. Jeon, S. Yoon, op. cit. (2006), pp. 849-857; M. T. Hatch, op. cit. (2003), pp. 48-49; M. Schroeder, op. cit. (2008), pp. 511-512 51 B. S. Glaser and P. C. Saunders, “Chinese Civilian Foreign Policy Research Institutes: Evolving Roles and Increasing Influence” The China Quarterly, Vol. 171, (2002), p. 598; D. Shambaugh, “China’s International Relations Think Tanks: Evolving Structure and Process,” The China Quarterly, Vol. 171, (2002), pp. 575-576; C. Li, “Shaping China’s Foreign Policy: The Paradoxical Role of Foreign-Educated Returnees”, Asia Policy, No. 10, (July, 2010), pp. 67-71; G. Heggelund, op. cit. (2007), p. 170 52 M. Meidan, P. Andrews-Speed, M. Xin, “Shaping China’s Energy Policy: Actors and Processes”, Journal of Contemporary China, Vol. 18, No. 61 (2009), p. 592 53 Ibid, pp. 595-596 15 a certain group of academics and a certain policy is difficult, academics nonetheless play a role in the broad process of ‘agenda-setting.’ This is because they identify how and why old policies have failed and offer new ideas to address this failure. Because of the sheer volume of academic writing on climate change and energy policy in China, and with an aim to focus in on the most respected and prominent voices within that literature, I used a number of different methods to identify the most prominent, prolific and publicly respected energy academics in China: (1) being new to this field, I relied heavily on the subjective advice of other respected academics from around the world both through personal communication and through their published works;54 (2) based on those recommendations, I sought to identify particularly prolific and well-cited authors by doing author searches of the China Academic Journals Full-Test Database, and; (3) I sought to survey a range of academics from different academic disciplines and from different kinds of institutions. As a result of this process I chose 6 academics to include in my survey: Hu Angang, an internationally recognised Chinese economist and scholar of public policy from Tsinghua University, director and founder of the Centre for China Studies, who has in the past advised the government on energy policy;55 Pan Jiahua, an internationally recognised environmental economist at the Chinese Academy of Social Sciences, who has served as a lead author on the third Intergovernmental 54 E. S. Downs, “The Chinese Energy Security Debate”, The China Quarterly, Vol. 177 (2004), p. 28; A. B. Kennedy, “China’s New Energy Security Debate”, Survival, Vol. 52, No. 3 (2010), pp. 143-145; P. AndrewsSpeed, Personal Communication, (1 May, 2011); L. Price, Personal Communication, (1 June, 2011), K. Morton, Personal Communication, (20 April, 2011); T. Houser, Personal Communication, (12 July, 2011); A. B. Kennedy, Personal Communication, (27 April, 2011 and 28 April, 2011); N. Zhou, Personal Communication, (1 June, 2011); J. I. Lewis, Personal Communication, (22 June, 2011) 55 School of Public Policy and Management, Hu Angang, (Tsinghua University, 17 February, 2009), available online: http://www.sppm.tsinghua.edu.cn/english/faculty/fulltime/26efe4891f7db39c011f8226f12c0005.html (accessed: 20 October, 2011); E. S. Downs, op. cit. (2004), p. 28 16 Panel on Climate Change (IPCC) and sits on a number of Chinese government advisory panels for climate change, foreign policy, and environmental protection;56 Zhou Dadi, Emeritus Professor and Vice President of the Energy Research Institute, an institute of the National Development and Reform Commission, and lead author on the third IPCC report, who publishes prolifically on China’s national energy strategy and security;57 Zhu Chengzhang, an electricity engineer, who retired from the former Ministry of Energy, is currently serving on a number of energy research councils and is advising the state grid. He is a very prolific academic writer on China’s electricity sector;58 Zha Daojiong, an internationally recognised scholar of international relations at Peking University specialising in non-traditional security and energy security,59 and; Jiang Kejun, an internationally recognised energy and climate policy analyst and director at the Energy Research Institute, and a lead author on the third and fourth IPCC report.60 Key government energy documents are a second primary source from which this thesis seeks to identify important new ‘agenda-setting’ ideas and outline related government policies. Whilst government documents stick to the ‘official line’, they are nonetheless a good indication of official concerns and priorities. Some documents such as English-language White Papers, may be in part aimed at an international audience. However, many central 56 Centre for Climate Economics and Policy, Research Associates: Pan Jiahua, (The Australian National University, 4 March, 2011), available online: http://ccep.anu.edu.au/people/index.php?surname=pan (accessed: 20 October, 2011) 57 Energy Research Institute, Zhou Dadi, (Energy Research Institute, National Development and Reform Commission), available online: http://www.eri.org.cn/zjxz_zj.php?cid=11&aid=339 (accessed: 20 October, 2011) 58 Zhu Chengzhang, (Allnet), available online: http://www.allnet.cn/1107/nyhg/nyzj/g_02.htm (accessed: 20 October, 2011) 59 School of International Studies, Zha Daojiong Introduction, (Peking University, 6 September, 2007), available online: http://www.sis.pku.edu.cn/web/Teacher_Browse.aspx?ID=100 (accessed: 20 October, 2011) 60 Energy Research Institute, Jiang Kejun, (Energy Research Institute, National Development and Report Commission), available online: http://www.eri.org.cn/zjxz_zj.php?cid=11&aid=346 (accessed: 20 October, 2011) 17 government documents are also an important form of communication between the central and local government. In particular, the spread of freely available government documents on the internet as part of China’s ‘e-government’ reforms has been implemented partly to overcome the bottlenecks that occur as information passes down the chain of command from the centre to the periphery. Previously the often arbitrary proliferation of ‘classified information’ inhibited local governments from being made fully aware of central government policy, as well as hampering the flow of information from the periphery to the centre.61 Thus the online publication of key government documents is partly to tell local government what the central government thinks is important and what the central government wants to get done. In practice, key policy documents such as Five Year Plans retain considerable power in directing China’s large public sector and in providing overall direction to the market, although the power of the government to directly and consistently intervene in private sector activities to achieve FYP targets has lessened considerably.62 Thus key government documents are not just empty or self-serving propaganda. Publicly available government policy documents are also an attempt to improve the flow of information between the central and local governments and these documents have important impacts on the direction of the Chinese economy. They are therefore fruitful sources of information on what concerns and issues are high on the government agenda Having identified three major new ideas from a survey of key government documents and prominent Chinese energy academics, this thesis draws on the theoretical literature above 61 J. Zhang, “Will the Government ‘Serve the People?’: The Development of Chinese E-Goverment”, New Media, Vol. 4, No. 2 (June, 2002), pp. 166-167; R. Kluver, “The Architecture of Control: A Chinese Strategy for e-Governance”, Journal of Public Policy, Vo. 25, No. 1 (2005), pp. 76-81; J. W. Seifert and J. Chung, “Using EGovernment to Reinforce Government-Citizen Relations: Comparing Government Reform in the United States and China”, Social Science Computer Review, Vol. 27, No. 3 (2009), pp. 4-16 62 A. Hu, Y. Yan and S. Liu, “市场经济条件下的‘计 之手’ − 基于能源强度的检验” [The ‘Planning Hand’ Under the Market Economy - Evidence from Energy Intensity], China Industrial Economics, No. 7 (July 2010), pp. 26-35 18 to examine how these new ideas have been implemented and what impact they have had. First, each chapter describes the ‘agenda-setting process’ by looking at elite academic and government debates that have framed a new idea and raised the importance of this idea as a policy priority. Second, each chapter draws heavily on government sources to suggest how the idea has influenced China’s new climate-related energy policies, by focusing in on one or two prominent policy areas. Third, each chapter examines one prominent implementation challenge that may generate ‘policy feedback’, which in turn affects the original idea. Unfortunately there is limited scope within this thesis to suggest the complex ways that policy feedback may strengthen, weaken, or change the original idea. The point is merely to highlight the fact that these new ideas clash with some elements of the embedded norms, policies, and institutions that have come before. These impediments to implementation will affect the extent to which these new ideas in turn become the accepted norm in the long-term, and the extent to which these new ideas continue to act as an impetus towards strengthened climate-related energy policy into the future. Finally, this thesis will reflect upon ongoing debate over ‘bottom-up’ and ‘top-down’ international climate governance, by examining what implications the ideas motivating China’s climate-related energy policy have for this wider debate. 1.5 Main Argument This thesis argues that three new ideas have changed the way Chinese elites view the domestic energy sector, the environment, and China’s foreign relations in relation to energy and climate change. First, the discourse on ‘new energy security’ has shifted the previous sole focus on international oil security to greater concern over China’s domestic patterns of energy consumption, inadequate systems of domestic energy supply, and high energy demand. 19 Second, green development has prompted a growing awareness of the environmental and resource constraints on China’s economic growth and the need for energy exploitation and use to be balanced against domestic and global environmental protection. Finally, the idea of lowcarbon leadership has redefined China’s international economic and political rise to promote a new image of China as a ‘green’ great power that is competitive in international low-carbon markets. A cross-cutting theme is the idea that China’s past model of economic development is deeply flawed, and that a new, different kind of economic development will need to be developed if China is to remain stable and prosperous into the future. These findings have profound implications for international climate governance as the world contemplates how to address climate change in the post-Kyoto era. In terms of the ongoing debate between ‘bottom-up’ and ‘top-down’ approaches to climate governance, this thesis finds that a combination of the two would provide the best opportunities to deepen China’s international engagement. A ‘bottom-up’, diverse and decentralised form of climate governance that emphasises co-benefits between climate mitigation and other policy priorities could capitalise on China’s varied motivations for emissions reductions. However, the UNFCCC process continues to be a vital pillar of international climate governance because it plays a central role in defining the ‘international norm of climate protection’, which in turn affects the domestic debates and ideas that frame China’s interests. 1.6 Organisation of the Thesis This thesis is organised into four chapters, which examine three influential new ideas that have motivated change in China’s recent climate-related energy policy, then examine the implications of this analysis of broader debates over international climate governance and China’s international engagement. 20 Chapter 2, on new energy security, examines a recent shift in thinking on energy security away from a sole focus on international oil security to concepts that lay more emphasis on how inefficient patterns of high domestic energy consumption and weak systems of domestic supply constitute the greatest threat to China’s energy security, which in turn negatively affect economic development. The Chinese government’s intense efforts to improve China’s energy efficiency since the 11th FYP demonstrate how these same concerns have influenced the government’s climate-related energy policy. However, reconciling strong administrative measures from the top with the need for market reform in the energy sector demonstrate that formidable implementation challenges are still to be overcome, if new energy security and the policies that flow from it are to remain durable in the long-term. Chapter 3 examines the way in which the idea of green development has fostered a growing sense of the environmental and resource constraints on China’s economic development. Government policies related to the concept of a ‘circular economy’ and climate change suggest that concepts related to green development have had an important impact on climaterelated energy reform. However, negotiating the complex relationship between the political legitimacy of the ruling Party-state and the potential for destabilising popular unrest could prove a difficult challenge to effectively and meaningfully implementing some of the policies that flow from the idea of green development in the energy sector. Chapter 4 examines the way in which the emerging idea of China as a ‘low-carbon leader’ has put forward a new vision of China’s political and economic rise based on ‘green’ international market competitiveness and environmental political leadership. The concepts that animate this idea have also impacted upon Chinese government policies related to international renewable 21 energy markets and China’s position in the UNFCCC. However, international mistrust and misunderstanding related to China’s rise could negatively influence this progressive vision of China’s place in the world. The final chapter on global climate governance seeks to assess how the ideas motivating the Chinese approach towards climate change mitigation might interact with broader debates relating to international climate governance. ‘Bottom-up’ approaches involving governance methods that are able to tap into China’s different motivations for emissions reductions by maximising the co-benefits between climate change and other policy areas may be effective in deepening China’s international engagement on climate change. However this does not mean that the ‘top-down’ UNFCCC approach has no value. The UNFCCC remains vitally important in defining an international norm of climate protection because it remains the most politically legitimate international institution through which to address climate change. This international norm is important because of the influence it has on debates and ideas at the national level in China, which define the scope for co-benefits between climate change mitigation and other policy priorities. As the world moves towards the post-Kyoto era, this thesis argues that a form of international climate governance that combines ‘top-down’ and ‘bottom-up’ approaches may best resonate with domestic Chinese motivations for GHG emissions reductions. 22 New Energy Security 2.1 Introduction In recent years, academic debate and government understanding of China’s energy security has moved away from a sole focus on international oil security, to concepts that stress how high levels of domestic energy consumption as well as flaws and failures in China’s domestic energy system constitute a threat to China’s energy security. This redefinition of China’s most threatening energy priorities has influenced strong energy efficiency policies from the central government. However, finding a way to reconcile administrative controls with the need for market reform in the energy sector poses a formidable challenge to deepening China’s energy efficiency gains, which could in turn affect the long-term durability of ‘new energy security.’ 2.2 China’s New Energy Security High Energy Consumption and China’s Developmental Model In the 1990s China’s increasing oil imports spurred the growth of Chinese scholarship examining energy security through the lens of international energy markets and oil import dependence. Recently another wave of academic debate in China has redefined energy security to encompass domestic threats as a result of uncontrolled growth in demand and poor systems of supply.63 Periodic large-scale blackouts and power shortages that re-emerged in 2002, and have continued to dog China throughout the past decade, were the spark that set off 63 C. Zhu, “Coal is the Lifeblood of China’s Electricity Security” [煤炭是我国电力安全的命脉], Sino-Global Energy, Vol. 14, No. 7 (2009), p. 15; C. Zhu, “Electricity Security Is The Most Importance Energy Security Problem” [电力能源是最重要的能源安全问题], Sino-Global Energy, Vol. 13, No. 5 (October, 2008), p. 1; D. Zha, “Expanding the Basic Issues of China’s Energy Security Scholarship” [拓展中国能源安全研究的课题基 础], World Economics and Politics, No. 7 (2008a), pp. 79-80; A. B. Kennedy, op. cit. (2010), pp. 137-158 23 this debate. Over the 2008 Spring Festival, 19 provinces experienced power disruptions and large-scale blackouts that brought areas of China’s south to a standstill, amid bitter and sometimes deadly winter snow storms.64 From 2002 up to the present, recurring periods of electricity shortages mean that factories, enterprises, and sometimes even entire local grids, have undergone electricity rationing. Some areas have experienced planned blackouts for several days at a time, at great cost to local economies.65 In reaction to this, some of China’s leading energy scholars now argue that “the key threat [to China’s energy security] is evergrowing consumption without significant improvements in energy efficiency,” as a result of massive internal failures of China’s domestic energy and economic systems.66 They argue that considerations over energy security should begin by looking at how energy impacts upon the daily life of China’s ordinary citizens.67 China’s energy scholars point out that ‘electricity security’, ‘coal security’, and the security of China’s internal energy system have a far greater effect on everyday economic activity, political stability, and quality of life in China than fluctuating oil prices or the remote possibility of foreign resource wars.68 However, this redefinition of energy security has implications that stretch beyond simply controlling energy demand and reforming energy supply. New energy security also seeks to reform the model of economic development that formed unsustainable patterns of high consumption and inefficient energy use in the first place. In the wake of the global 64 65 D. Zha, op. cit. (2008a), p. 80; C. Zhu, op. cit. (October, 2008), p. 1-2 K. Fisher-Vanden, E. T. Mansur, Q. Wang, “Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages”, China Economic Summer Institute, (8 June, 2010), available online: http:// www.chinasummerinstitute.org/wp-content/uploads/costlyblackouts.pdf (accessed: 20 October, 2011), pp. 4-7; T. Mitchell, “Power Shortage Hobbling Delta’s Industrial Machine: Investors Say the Problem May Damage Guangdong’s Ability to Attract Capital”, South China Morning Post, (29 January, 2003), p. 18 66 D. Zha, “China’s Energy Security: Domestic and International Issues”, Survival, Vol. 48, No. 1 (Spring, 2006), p. 187; C. Zhu, op. cit. (October, 2008), pp. 3-4; D. Zha, op. cit. (2008a), pp. 79-80 67 D. Zha, “If We Want Scientific Development, We Cannot Rely on Cheap Energy” [要科学发展， 就不可能 有廉价能源], Green Leaf, Issue 9 (2008b), p. 39 68 C. Zhu, op. cit. (October, 2008), pp. 2-3 24 financial crisis, Zhou Dadi of the NDRC’s Energy Research Institute concluded that China’s “economic slide is not only due to the influence of the global economic crisis and external shocks, even more importantly it is due to the fact that our country’s internal model of economic growth will prove hard to sustain.”69 For many Chinese academics, the natural advantages that propelled China’s economic rise, such as cheap and abundant labour, low costs, land and resources, the uninhibited exploitation of China’s natural environment and subsidised, cheap energy, are now being either expended or have become a burden on the Chinese economy.70 The economic patterns that these past natural advantages produced - large levels of investment with low productivity; a large share of export-led heavy industry and low-level manufacturing; small incomes for the vast majority of Chinese citizens; high inflation rates; a need for cheaply priced energy; and over-investment in heavy industry - is thus unsustainable and must change.71 The heavy industry boom of the early 2000s has been widely blamed for the fact that China’s energy consumption growth exceeded GDP growth by as much as 5% in this period, energy consumption was 4 times higher between 2000 and 2008 than the previous decade, and China’s 20 year trend of declining energy intensity went into reversal.72 Projections of China’s future energy supply and demand paint a grim picture of continuing energy insecurity and a widening gap between supply and demand if current 69 D. Zhou, “The Focus of China’s Clean Energy Development - Nuclear Power, Hydropower, Natural Gas” [中 国清洁能源发展重点− 核电， 水电， 天然气], Green Leaf, No. 6 (2009), p. 41 70 J. Pan, “Energy Efficiency and Emissions Reductions Should Be Vigorously Promoted and Steadily Progress” [节能 排要高歌稳进], China Economic and Trade Herald, Issue 9 (2011a), p. 11; K. Jiang et al., “China’s Cost Advantages in Developing a Low-Carbon Economy - Analysis of Energy and Emissions Situation to 2050” [中国发展地毯经济的成本优势 − 2050年能源和排放情景分析], Green Leaf, No. 5 (2009), p. 11; J. Pan, China’s Low Carbon Transformation: Drivers, Challenges and Paths, Working Paper 6.10 (Centre for Climate Economics and Policy Working Paper, October 2010), p. 3; D. Zhou, op. cit. (2009), p. 42 71 A. Hu, “China’s Green Development and the 12th Five Year Plan” [中国绿色发展与‘十二五’规 ], Agricultural Economic Management, No. 4 (2011a), p. 15; D. Zhou, op. cit. (2009), p. 42; D. Zha, op. cit. (2008b), pp. 36-37 72 Q. Liu, K. Jiang, X. Hu, “China’s Energy Sector Low-Carbon Technology Development Route” [中国能源领 技术发展路线图], Advances in Climate Change Research, Vol. 6, No. 5 (September, 2010), pp. 370-371; 域低 D. Zhou, “Thoughts on China’s Energy Consumption Strategy” [我国能源消费的战略思考], China Technology Investment, No. 8 (2010a), p. 38; D. Zhou, op. cit. (2007), p. 52; A. Hu et al., op. cit. (July, 2010), p. 30; X. Lu et al., op. cit. (2006), pp. 89-90; L. Price et. al., op. cit. (April, 2010), p. 2165 25 patterns of energy supply and energy consumption continue.73 As a result, energy scholars and government documents repudiate China’s “old development road of expansive energy use”, characterised by high energy consumption and policies that only address supply without taking strong action to control demand. 74 The Stronger Link Between GHG Emissions-Reducing Energy Reform and New Energy Security Due to its focus on curbing consumption, ‘new energy security’ as a concept has more clear and direct links to carbon emissions reductions than previous concepts of energy security. The ‘traditional’ concept of energy security has been overwhelmingly focused on international oil supply, and has often been marked by: a distaste for China’s dependence on oil imports; concern over the aggressive actions of other countries to block China’s oil supply; price volatility in the international oil market; and the physical supply of world fossil fuel reserves.75 However, within this narrower definition of energy security, the co-benefits that emissions reductions may bring to energy security are not always clear-cut. The debate over fossil fuel reserves and ‘peak oil’ is a case in point. Because proven world reserves of oil stand at only 43 years and global coal reserves stand at only 122 years Pan Jiahua of the Chinese Academy of Social Sciences argues that diversifying China’s energy mix and improved energy efficiency will bring important benefits for both climate change and China’s 73 D. Zhou, “Analysis of China’s Energy Strategy to 2020” [2020年中国能源战略分析], China Higher Education Technology and Industrialisation, Vol. 11, (2007), p. 52; Pan et al., op. cit. (2006), p. 87-88; NDRC, Notification from the National Development and Reform Commission on Distributing the Medium to Long Term Energy Conservation Specialised Plan [国家发展改革委 于印发节能中长期专项规 的通知], No. 2505, (2004), available online: http://www.ndrc.gov.cn/fzgh/ghwb/115zxgh/P020070924519078999203.pdf (accessed: 20 October, 2011), p. 5; Andrews-Speed reviews Chinese and foreign projections and discusses the debate over whether energy intensity figures in the 10th FYP were a freak, or whether they are indicative of a more prolonged stage of higher energy consumption, P. Andrews-Speed, “China’s Ongoing Energy Efficiency Drive: Origins, Progress and Prospects”, Energy Policy, Vol. 37 (2009), pp. 1335-6 74 State Council, White Paper: China’s Energy Conditions and Policies, (December, 2007), available online: http://www.china.org.cn/english/environment/236955.htm (accessed: 20 October, 2011), p. 6; A. Hu, op. cit. (2011a), p. 15; D. Zhou, op. cit. (2009), p. 43; NDRC, op. cit. (September, 2007), p. 14; D. Zha, op. cit. (Spring, 2006), p. 185 75 A. B. Kennedy, op. cit. (2010), pp. 138-143; D. Zha, op. cit. (Spring, 2006), pp. 179-185 26 energy security.76 By contrast, Zhou Dadi acknowledges limited world reserves, but maintains that overall world fossil fuel resources remain abundant and that the progress of technology and new economic incentives will drive expanded fossil fuel exploitation to keep pace with future demand.77 According to BP statistics, oil and gas reserve-to-production ratios have remained constant at roughly 46 and 69 years respectively for the past few decades, while the reserve-to-production ratio for coal has steadily fallen over the same time period, to 118 years in 2011. If past trends are any indication of future ones, declining coal reserves would lend weight to Pan Jiahua’s ‘pessimistic’ point of view, while steady oil and gas reserves would lend more weight to Zhou Dadi’s ‘optimistic’ point of view.78 The debate over ‘peak oil’ and growing concerns over ‘peak coal’ are examples of the tenuous linkages between climate change mitigation and energy security when energy security is defined according to traditional energy security discourse, which is focused more on supply-side issues and international trade and diplomacy.79 In practice, few studies have tested the commonly espoused view that increased energy security brings benefits for climate change mitigation.80 However, the redefinition of the main sources of insecurity involved in ‘new energy security’ is significant because the strong focus on the dangers of domestic overconsumption and energy inefficiency create a clear imperative to conserve domestic energy use, which also reduces GHG emissions. 76 X. Lu, J. Pan, Y. Ceng, “Sustaining Economic Growth in China under Energy and Climate Security Constraints”, China and World Economy, Vol. 14, No. 6 (2006), pp. 91-92; J. Pan, “Motivations and Paths for Controlling Greenhouse Gas Emissions” [控制温室气体排放的动因和途径], Dongwu Scholarship, No. 2 (2011b), p. 12; J. Pan, op. cit. (October, 2010), p. 2 77 78 D. Zhou, op. cit. (2007), p. 52-53 This is according to reserve-to-production ratio statistics from BP, see sections on gas, oil and coal reserves in, British Petroleum, BP Statistical Review of World Energy, (June, 2011), available online: http://www.bp.com/ sectionbodycopy.do?categoryId=7500&contentId=7068481 (accessed: 20 October, 2011) 79 Worries about ‘peak coal’ are growing internationally, but especially in China due to its heavy reliance on coal in its energy mix, see D. Winning, “China’s Coal Crisis” Wall Street Journal, (New York: 16 November, 2010) 80 J. Jewell, Energy Security and Climate Change: Tensions and Synergies, (Canberra: The Australian National University, lecture delivered 5pm, 9 May, 2011) 27 This redefinition of energy security has an important and ongoing influence on government policy making. According to Zha Daojiong, a political scientist at Peking University: In the context of Chinese academic and policy discussions, whether or not a type of energy is raised to the level of energy security, makes a difference as to the extent to which it receives government policy support ... If electricity security was, like oil security, raised to the level of national security, [this issue] would probably have greater force in terms of policy reform and action and legal resources.81 By redefining China’s greatest energy security threats to focus inward on domestic problems such as inefficient energy use, high consumption, and weak domestic systems of supply, scholars of ‘new energy security’ have sought to reshape official ideas of what priorities are most pressing in the reform agenda. 2.3 Controlling Demand Through Energy Efficiency Policies The concept of a ‘supply-demand contradiction’, often repeated within government energy documents, mirrors many of the issues and concepts of new energy security. It refers to central government concerns that rapidly growing energy demand has strained an overstretched energy system in which median per capita energy consumption remains low.82 This shift in energy policy focus is encapsulated by the 2007 White Paper which states that China “stresses both development [of energy resources] and saving [of energy], with priority 81 82 D. Zha, op. cit. (2008a), p. 80 State Council, op. cit. (December, 2007), p. 6; NDRC, op. cit. (September, 2007), p. 14 28 given to saving.”83 Energy efficiency now lies at the heart of the central government’s new energy policy, and the government has used a variety of methods to achieve its aims.84 Target-Setting Top-down target setting from the central government is one of the principal methods through which energy efficiency reforms have been implemented. Within the overall context of an energy intensity reduction of 20% from 2005 to 2010 and 16% from 2010 to 2015, government documents also set specific targets for the most energy intensive sectors of the economy, such as heavy industry, construction, electrical power generation, the oil and petroleum industry, chemical engineering, vehicles and transport, government procurement, lighting, and household appliances.85 They also lay out stringent targets for energy use for local and provincial government and individual danwei (work units). Failure to meet these targets is accompanied by a system of punishments, blocked or reduced access to government investment, and an injunction to submit a programme of monitored policy changes to a higher level of government.86 For individual danwei, these documents make clear the central government’s determination to close down large numbers of smaller and more ‘backward’ enterprises that fail to meet their pollution and energy use targets.87 The closure of small, old, 83 84 85 State Council, op. cit. (December, 2007), p. 12 P. Andrews-Speed, op. cit. (2009), p. 1338 NDRC, op. cit. (2004), pp. 6-12; State Council, State Council Notification on [the Need to] Exert Greater Efforts to Assure the Achievement of the 11th Five Year Plan Energy Conservation and Emissions Reduction Targets [国务院 于进一步加大工作力度 保实现‘十一五’节能 排目标的通知], Number 12, (2010), available online:http://www.gov.cn/zwgk/2010-05/05/content_1599897.htm (accessed: 20 October, 2011); State Council, State Council Decision on Strengthening Energy Saving Work [国务院 于加强节能的决定], No. 28 (2006), available online: http://www.gov.cn/zwgk/2006-08/23/content_368136.htm (accessed: 20 October, 2011) 86 State Council, State Council Notification on Instructions for Monitoring and Evaluating the Implementation of Energy Efficiency and Emissions Reductions [国务院批转节能 排统计监测及考核实施方案和办法的通知], No. 36, (2007), available online: http://www.gov.cn/zwgk/2007-11/23/content_813617.htm (accessed: 20 October, 2011); Government of the P. R. China, op. cit. (14 March, 2011), p. 22 87 State Council, op. cit. (2007); State Council, op. cit. (2010) 29 and inefficient enterprises has been a vital part of meeting China’s energy efficiency targets.88 In the case of local government officials, energy efficiency is explicitly linked to the ‘target responsibility system’, which determines promotions and job performance assessments. It is an important method through which the central government imposes its control at the local level.89 These targets specifically aim to use energy intensity policy to increase the share of tertiary industry and lower the share of heavy industry in China’s economy, as a way to effect a shift away from China’s energy and industry intensive model of economic growth. For example, aside from achieving lower energy use per unit of GDP (40% of potential points in the evaluation system), in target responsibility criteria for local government officials “adjusting and improving the industrial structure situation” is the second most heavily weighted category for judging local government performance (20%). This includes prerogatives to increase the total share of tertiary industries and high-end manufacturing in local GDP, while at the same time eradicating outdated and highly energy-intensive facilities.90 Although GDP growth statistics continue to feature very strongly in these target responsibility assessments, strengthening the weighting of energy efficiency in these assessments will be a key method through which the central government is able reign in those vested interests most responsible for China’s high energy intensity. 91 Regulations, Laws and Programmes 88 K. Morton, “China and Global Climate Governance”, Unpublished Manuscript (Presented at the Beijing Forum 2010: 5-7 November, 2010), p. 7 89 State Council, op. cit. (2007), p. 8; State Council, op. cit. (2006); Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 22 90 91 State Council, op. cit. (2007), pp. 8-9 D. Rosen, T. Houser, China Energy: A Guide for the Perplexed, (Centre for Strategic and International Studies/Peterson Institute for International Economics, May, 2007), http://www.petersoninstitute.org/ publications/papers/rosen0507.pdf (accessed: 20 October, 2011), p. 39; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 22; P. Andrews-Speed, op. cit. (2009), p. 1336 30 Aside from targets, government energy documents also outline specific programmes, laws, and regulations to realise energy efficiency targets and control energy demand. For example, government energy documents stress the importance of support systems and monitoring to implement laws such as the Energy Efficiency Law and the Circular Economy Law. 92 Legal and regulatory measures and targets are supported by a number of projects, such as the 1000 Top Enterprises programme, which lays out energy targets for China’s 1008 most energy intensive industries, as well as the 10 Key Projects, various ‘model’ cities’, ‘model danwei’ and ‘model counties’, and technology research and development programmes, which are designed to improve energy efficiency in order to meet China’s overall targets, and to develop energy efficient technologies.93 Management and Public Education Another wing of the government’s efforts to meet its energy efficiency targets is public education and the provision of technological and educational support to major energy users. Key government documents display a concern for capacity building in the sense of improving the ‘overall quality’ of managers, with different sectors, such as statistical data collection and coal mining, given different programmes to improve the management of energy efficiency initiatives.94 These documents also advocate incorporating energy efficiency into public education, largely through ‘top-down measures’ such as publicising energy efficiency practices through the mass media, and short-term energy efficiency ‘campaigns.’95 Despite 92 Government of the People’s Republic of China, op. cit. (14 March, 2010), pp. 6-7, p. 11, p. 22; State Council, op. cit. (2007) 93 Government of the P. R. China, op. cit. (14 March, 2010), p. 22; L. Price et al. op. cit. (April, 2010), pp. 2167-2171 94 NDRC, Eleventh ‘Five Year Plan’ for the Development of the Coal Industry [煤炭工业发展‘十一五’规 ], (January, 2007), available online: http://www.ndrc.gov.cn/fzgh/ghwb/115zxgh/P020070925583241015610.pdf (accessed: 20 October, 2011), pp. 15-16; State Council, op. cit. (December, 2007), p. 18; State Council, op. cit. (2007) 95 State Council, op. cit. (2006); State Council, op. cit. (December, 2007), p. 19 31 this, managerial capacity and public engagement do not appear to be as high on the government energy efficiency agenda as targets, laws and programmes, and market mechanisms. Market Mechanisms Finally, the central government emphasises the role of market mechanisms in achieving its energy efficiency targets. Taxes, tariffs, and removal of subsidies have been important market tools for raising energy efficiency. For example, subsidies have been removed for coal, oil, and gas, raising the prices of these fossil fuels, and the government has successfully imposed a resources tax on coal mining. 96 New taxes and tariffs have been imposed on energy intensive goods, to create disincentives for high rates of investment in energy intensive industries.97 For example, new tax policies that are roughly equal to a $US50 per tonne of CO2 tariff have been imposed on all steel exports.98 Pricing changes have also played a role in the energy efficiency drive. In particular the government has imposed higher electricity prices for selected energy intensive industries and danwei.99 However several commentators argue that the central government has displayed less willingness to use economic and financial instruments to complement the favoured administrative approach. As a result, energy efficiency has relied heavily on top down measures, the financial benefits for those engaging in ambitious energy efficiency programmes have been small, and energy efficiency has failed 96 D. Held, E. Nag, C. Roger, The Governance of Climate Change in China: Preliminary Report, LSE-ADF Climate Governance Programme January 2011, (London School of Economics and Agence Francaise Dévelopement, January, 2011), available online: www2.lse.ac.uk/globalGovernance/publicationsworkingPapers/ climateChangeInChina.pdf (accessed: 20 October, 2011), p. 29; NDRC, op. cit. (January, 2007), pp. 23-24 97 98 D. Rosen, T. Houser, op. cit. (May, 2007), p. 39 T. Houser, R. Bradley, B. Childs, J. Werksman, R. Heilmayr, Leveling the Carbon Playing Field: International Competition and US Climate Policy Design, (Washington DC: Peterson Institute of International Economics/ World Resources Institute, May, 2008), p. xix 99 NDRC, op. cit. (January, 2007), pp. 22-23; Government of the People’s Republic of China, op. cit. (14 March, 2010), p. 6; State Council, op. cit. (2006); D. Held, et al., op. cit. (January, 2011), p. 29 32 to attract private investment.100 Government energy documents unequivocally state the importance of strong governance from the centre and repudiate the view that market mechanisms alone, without strong government oversight, can achieve meaningful energy saving, and many academics seem to share this view.101 However, some suggest that the cheap and quick energy efficiency gains latent in the Chinese energy sector have been largely exhausted as a result of the large energy efficiency gains in the 11th FYP achieved mainly through the closure of inefficient enterprises.102 Deeper reforms are needed to address many of the underlying and systemic causes of China’s high energy consumption. 2.4 Difficult Compromises Between Administrative Controls and Market Reform Improving China’s domestic energy security cannot be achieved by top-down government efforts to control energy demand alone. Chinese energy academics also stress the fact that inefficient and irrational domestic systems of energy supply must be reformed in order to address the sources of China’s excessive energy consumption, high energy intensity, and insecure energy supply. While this involves a number of issues such as transportation, infrastructure, and technology, seeking ways to reconcile market reform with strong government control will present one of the most difficult impediments to the effective implementation of the energy efficiency policies that flow from new energy security. 100 P. Andrews-Speed, op. cit. (2009), p. 1342; M. Meidan et al., op. cit. (2009), pp. 613-164; R. Rosen, T. Houser, op. cit. (May 2007), p. 39 101 NDRC, op. cit. (January, 2007), p. 13; NDRC, op. cit. (2004), pp. 4-6; NDRC, op. cit. (September, 2007), pp. 13-14; A. Hu, et al., op. cit. (July, 2010), pp. 32-34; X. Lu et al., op. cit. (2006), p. 94; D. Zhou, op. cit. (2007), p. 53 102 J. Feng, D. Yuan, “Behind China’s Green Goals”, China Dialogue (24 March, 2011), available online: http:// www.chinadialogue.net/article/show/single/en/4181-Behind-China-s-green-goals (accessed: 20 October, 2011); S. W. Ng, “China’s Challenge to Europe”, China Dialogue (7 March 2011), available online: http:// www.chinadialogue.net/article/show/single/en/4145-China-s-challenge-to-Europe (accessed: 20 October, 2011); J. Pan, op. cit. (2011a), p. 11 33 Institutional Constraints A number of important institutional constraints provide the broad context for the difficult relationship between government controls and market reform in China’s energy sector. Although the blackouts from 2002 shocked the government into greater reform of its own energy governance apparatus, spurring the creation of the National Energy Administration and the National Energy Commission, China still lacks a powerful government energy agency with full ministerial status.103 Current government energy organisations remain under-resourced and are relatively powerless when it comes to setting major energy targets and controlling key levers such as energy pricing.104 Zha Daojiong identifies this point as one of the main weaknesses in achieving meaningful energy efficiency and energy sector reform, stating that “the threat [to China’s energy security] from inefficient energy industry governance is probably as great as that from the international energy market.”105 A second problem is that the process of setting targets is the result of an opaque bargaining process between the central government, different central government ministries, major state-owned enterprises, and local government.106 Given the intensely political nature of target setting for every FYP, the question arises as to whether the concepts involved in new energy security will remain a top priority should the next generation of leadership place less emphasis on enforcing high energy efficiency goals. This is especially so given that China lacks a ‘ministry of energy’ that can articulate a clear policy, negotiate between different stakeholders, fight for its own ministerial ‘vested interests’, and act as an important champion 103 104 D. Held et al., op. cit. (January, 2011), p. 25; P. Andrews-Speed, op. cit. (January, 2010), p. 41 E. S. Downs, “China’s ‘New’ Energy Administration”, China Business Review (November-December, 2008), pp. 42-43; P. Andrews-Speed, op. cit. (January 2010), pp. 39-41 105 106 D. Zha, op. cit. (Spring, 2006), p. 186 P. Andrews-Speed, op. cit. (January, 2010), p. 46; M. Meidan et al., op. cit. (2009), p. 597, p. 604 34 to push the agenda that new energy security entails.107 As Andrews-Speed points out, there is a tendency for sudden changes in policy priorities, objectives and instruments, which can make China’s energy policy “highly unpredictable in the short term.”108 Long- and mediumterm commitments, such as the targets to 2020, provide a little more certainty in terms of investment support for energy efficiency and renewables.109 However, more ‘bottom-up’ measures, such as energy market reform, may be a crucial part of creating wider incentives for and vested interests in energy efficiency, which would support government leaders that favour continued climate-related energy reform. These two institutional constraints are important features of efforts to reform the electricity market. Low Electricity Pricing - Plugging Up Reform Failures Through Administrative Means China’s low, state-set electricity price has given rise to situations in which central government controls often seek to ‘plug up’ the failures of a half-marketised electricity pricing system, while in the process impeding greater energy efficiency gains and reproducing sources of domestic energy insecurity. In recent years, China has fully marketised the price of coal, the fuel that provides 80% of China’s electrical power generation, and as a result the coal price has risen dramatically. 110 However, central government control keeps the price of electricity low for both end-use electricity consumers, and for the state-owned enterprises that operate China’s electricity grids. Rising coal prices and growing energy consumption have squeezed the profit margins of China’s electricity power generators. Many electricity generation companies, including the five state owned companies that control over 60% of the 107 108 109 110 E. S. Downs, op. cit. (November-December, 2008), p. 42 P. Andrews-Speed, op. cit. (January, 2010), p. 49 NDRC, op. cit. (September, 2007), pp. 13-14 State Council, op. cit. (December, 2007), pp. 36-37; C. Zhu, op. cit. (2009), p. 15 35 market, have been driven into debt.111 This has led to a number of problems that have heightened China’s energy insecurity. There is some evidence that power cuts, or at least the threat of power cuts, have been used by electricity generators in times of high demand as a form of blackmail to convince the grid to buy electricity at raised prices, when generation utilities debts have become too burdensome.112 This is representative of the ‘soft budget’ constraints that Chinese power generators operate under as a result of investment in the electricity sector which is driven largely through central government sectoral plans rather than market incentives. In this situation, power generation companies know that the central government will bail them out at a point of crisis (through ad hoc loans or electricity price rises or both), but up to that point the government leaves electricity generation utilities to sustain the losses caused by low electricity prices. 113 Thus low electricity prices can add to China’s immediate energy insecurity because utilities raise the threat of power outages as a way to recover some of their financial losses. A second problem that arises out of low electricity prices is that generation utilities have little available capital to upgrade their generator fleet, raise coal burning efficiency, or switch their fuel mix to more efficient combinations, such as gas, coal-gas combined power generation and renewables, all things that high coal prices might normally provide greater 111 C. Zhu, “Ladder Electricity Pricing is the Ladder to Electricity Reform” [阶梯电价是电价改革的阶梯], Popular Utilisation of Energy, No. 1 (2011a), pp. 3-4, p. 6; C. Zhu, “Why Are We Short of Electricity?” [为什么 我们缺电?], Popular Utilisation of Energy, No. 7 (2011b), pp. 3-4 112 L. Hook, “China: Are Power Cuts Possible?”, Beyond Brics (Financial Times), (3 May, 2011), available online: http://blogs.ft.com/beyond-brics/2011/05/03/china-are-power-cuts-possible/#axzz1VfnH1Y70 (accessed: 20 October, 2011) 113 S. Howes, “Does Carbon Pricing Make Sense for Developing Countries?”, Unpublished Manuscript, (Presented at Canberra: The Australian National University, 6 June, 2011), p. 11 36 incentives to do. 114 Government planning has sought to address the inability of major power generators to improve their own capacity, by centrally directing where to site new power plants, what fuel they should use, and what model these power plants should be.115 Administrative measures have had notable successes in raising the efficiency of power generation in the last few years. China’s ‘new model’ super-critical coal-fired power plants have thermal efficiency rates higher than the OECD average and the US.116 However, in the absence of market incentives for utilities to upgrade their own fleets, improving energy efficiency in power generation is heavily reliant on plans and targets that emerge as a result of intense political bargaining. A change of leadership or a rethinking of China’s energy security priorities would thus have a larger effect on the continued improvement of energy efficiency in the power sector than if utilities themselves continued to improve efficiency as a result of ‘bottom-up’ market incentives. The central government has made some efforts to address the energy security issues that have arisen out of low electricity prices. China has a mechanism in place to adjust the electricity price every six months if the coal price changes by more that 5%. However, even though this condition has been met 10 out of 12 time from the introduction of this mechanism in 2004 to 2010, the electricity price has only changed three times, and by far less than the mandated formula.117 A second more successful attempt to address low electricity prices has been the introduction of ‘ladder pricing’ to raise the price of electricity and provide incentives for selected end-users to reduce their electricity usage. Through electricity ‘ladder price’ 114 115 C. Zhu, op. cit. (2011a), p. 4 C. Zhang, T. C. Heller, Reform of the Chinese Electric Power Market: Economics and Institutions, Working Paper 3 (Stanford Institute for International Studies: January, 2004), available online: http://iis-db.stanford.edu/ pubs/20182/wp3%2C_10_May_04.pdf (accessed: 20 October, 2011), p. 35 116 A. Cuevas, Fossil Fuel Resources and Technologies, (Canberra: The Australian National University, 15 August, 2011); F. Kahrl, J. Williams, J. Ding, J. Hu, “Challenges to China’s Transition to a Low Carbon Electricity System”, Energy Policy, No. 39 (2011), p. 4034 117 S. Howes, op. cit. (6 June, 2011), p. 20 37 policies, since 2007 industry has paid a higher and higher price compared to household consumers and energy-intensive heavy industry has paid a higher price for electricity on top of that.118 Chinese academics and the NDRC have in the past also discussed extending a ladder price to household consumers, whereby high income earners pay a higher electricity price than low-income earners.119 However this point highlights another difficulty for the central government - its long-term commitment that “electricity generation and selling prices [be] eventually formed by market competition” is compromised by a reliance on low end-use electricity prices as a form of social welfare and poverty alleviation.120 Pushing market reform forward to address China’s inefficient systems of energy supply will mean confronting the embedded habit of falling back on quick-fix top-down measures to plug up failures in market reform. Dispatch Orders - Reconciling Dual Benefits of Administrative Measures and Market Reform The central government has initiated a number of pilot programmes to improve energy efficiency through dispatch order reform. However, these pilots demonstrate that striking the best balance between market reform and top-down administrative measures will continue to challenge the successful implementation of energy efficiency policies. Because electricity cannot be stored in large amounts at an economic price, different electrical power generation utilities dispatch power to the grid at different times to anticipate troughs and peaks in electricity demand: dispatch order refers to which generators dispatch their power to the grid, when and for how long. Since electricity generation and transmission companies were 118 S. Howes, op. cit. (6 June 2011), p. 21; State Council, op. cit. (2010); NDRC, op. cit. (January, 2007), pp. 22-23; Government of the P. R. China, op. cit. (14 March, 2010), p. 6; State Council, op. cit. (2006); D. Held, et al., op. cit. (January, 2011), p. 29 119 120 C. Zhu, op. cit. (2011a), p. 3, p. 6 State Council, op. cit. (December, 2007), p. 37 38 separated in 2002, payments to generators are based solely on the dispatch of power and no payments are made for providing spare capacity (which is important for stand-by reasons, to meet peaks in demand). 121 As a result of this policy constraint, electricity generators are given a quota of total forecasted electricity demand to produce, and are paid according to how much power they dispatch from this quota.122 Dispatch payments by quota act to shield power generators from market pressures to upgrade their efficiency or change their fuel mix because they do not have to offer a competitive price to the grid to sell their electricity. This quota system also ensures that less efficient coal-fired generators remain economically viable.123 In the 11th FYP, government injunctions to close old and inefficient coal-fired power plants sought to address this last point. However, because there remained sufficient market incentives for these plants to operate, by 2009 many of these plants had sprung back up ‘illegally’.124 Two pilot programmes to address China’s dispatch order problems illustrate both the failings and strengths of market mechanisms and government administrative controls and highlight the need to reconcile these two methods of realising energy efficiency gains to make them sustainable in the long term. The first such pilot is generation rights trading, which has been successfully rolled out in several provinces since 2005. Under this scheme, power plants are still issued quotas from the central government based on forecasted energy demand. However, inefficient plants that have greater running costs and less profits, because they need to consume more coal per kilowatt hour of electricity produced, are able to sell some of their quota of electricity production to a more efficient power plant. The more efficient plant is able 121 122 123 124 S. Howes, op. cit. (6 June 2011), pp. 8-9 F. Kahrl et al., op. cit. (2011), p. 4034; S. Howes, op. cit. (6 June, 2011), p. 9 S. Howes, op. cit. (6 June, 2011), p. 9 State Council, op. cit. (2010) 39 to produce more electricity and sell it back to the grid at a higher profit (due to lower fuel costs per kilowatt hour) than the less efficient plant, but the less efficient plant is still paid for its traded quota. The less efficient plant remains financially viable, but less profitable than the efficient one.125 Thus generation rights trading saves energy and provides incentives for generators to raise their efficiency, but it ensures that there is enough spare capacity to bring online in times of peak demand, and maintain electricity security. However, as China’s energy efficiency and environmental policies strengthened through the period of the 11th FYP, the central government felt that although pilot programmes had demonstrated the economic sustainability of this system of dispatch, it did not yield strong enough energy efficiency gains to meet stringent central government targets.126 As a result, the government introduced another pilot system, the energy saving power dispatch principle (ESPD), which was rolled out from 2007 in five provinces. Under this scheme, dispatch order is determined by a mix of efficiency and environmental criteria, with the most efficient and least polluting generators dispatched first to meet base load, through to the least efficient and most polluting dispatched last, to meet peaks in demand, or not at all, to be on constant stand-by. Roughly the order is: first dispatch renewable energy, then nuclear power, combined heat and power units and comprehensive resource use plants, gas power plants, coal power plants ordered according to thermal efficiency, and finally oil fired plants.127 Unlike the market-based generation rights trading pilot, ESPD is a scheme that is controlled and set by the government. However, the environmental and energy efficiency outcomes this scheme yields are far greater than generation rights trading, in which placing renewables at the front of the dispatch order would only be viable in the context of a very 125 C. Gao, Y. Li, “Evolution of China’s Power Dispatch Principle and the New Energy Saving Power Dispatch Policy”, Energy Policy, Vol. 38 (2010), pp. 7349-7350 126 127 Ibid, p. 7350 C. Gao, Y. Li, op. cit. (2010), p. 7350 40 high carbon price.128 However ESPD has not progressed beyond its initial pilot stage for a number of reasons. Because the grid only pays generators for dispatch and not stand-by capacity, those units that come last on the ESPD dispatch order (inefficient coal plants and oil plants) are not economically viable and simply shut down, compromising electricity security in periods of peak demand when such spare capacity is needed.129 In terms of improving China’s electricity generation capacity, ESPD once again leaves investment in improved energy efficiency and cleaner sources of electricity completely reliant upon central government planning and target setting and does not include more bottom-up market incentives, opening up the risk that a change in political priorities might have a greater effect on long-term energy efficiency improvements in the power sector. 2.5 Conclusion The last few years of ambitious energy efficiency policies have been influenced by a changed perception of the sources of China’s energy insecurity. High energy consumption and low energy efficiency, weak and contradictory systems of energy supply, and a developmental model that fosters high energy consumption, have been influential in reshaping China’s energy security agenda. This changed agenda has influenced ambitious energy efficiency policies, which include efforts to reign in over-reliance of heavy industry and export- and investment-led growth. However, there are a number of issues that may challenge this wave of reform. In particular, overcoming barriers to market reform, and finding ways to reconcile the benefits of administrative controls and market mechanisms will be a crucial part of embedding stringent energy efficiency policies in the long-term, and maintaining the relevance of new energy security. 128 129 S. Howes, op. cit. (6 June 2011), p. 22 S. Howes, op. cit. (6 June 2011), p. 22, C. Gao, Y. Li op. cit. (2010), p. 7356 41 Green Development 3.1 Introduction Within the context of a transition towards ‘green development’ Chinese academics have highlighted the idea that economic growth that takes little account for environmental protection and resource constraints will be unsustainable in the long-term. A growing awareness of the current and future costs of environmental degradation has influenced central government attempts to enact ‘win-win’ policies that provide benefits for both environmental protection and economic growth, and it has shaped the government’s growing response to climate change. However, green development also involves difficult trade-offs. These tradeoffs often involve complex and tense interactions between the government and Chinese citizens, in which the threat of political instability can complicate efforts to maximise opportunities for local and global environmental protection, economic development, and poverty alleviation. 3.2 The Deep Costs of Environmental Degradation From ‘Pollute First’ to the Present Over the past two decades, concern over environmental and resource constraints upon economic growth has risen amongst China’s top energy academics and government leaders. For much of the 1980s and 1990s, China’s leaders considered environmental protection to be a ‘luxury’, and consciously traded environmental health for economic growth. The refrain of ‘first development, then environment, first pollute, then clean up’ was commonly repeated by 42 the Chinese government and the Chinese media in this period.130 In the 1990s ‘sustainable development’ became part of government policy in the wake of exposure to international environmentalism through the UN; however, these policies were weakly implemented in practice.131 By the time of the 10th FYP, critics within China were voicing concerns over the huge environmental costs involved in China’s pursuit of GDP growth and industrial development. However, weak institutions for environmental governance, breakneck economic growth, and lack of political will meant that no specific targets were set for energy efficiency and most environmental targets were missed, with crucial SO₂ emissions targets overshot by 40%.132 According to Hu Angang of Tsinghua University, until recently conventional wisdom in China accepted that there was only one road for economic development, based on the experience of industrial development in Western and developed East Asian countries.133 However, scholarship on green development, as well as related concepts such as green growth and a low-carbon economy, have emphasised how environmental degradation that such forms of development entail now poses a serious threat to China’s overall economic development, both in the short- and long-term. In the period of the 11th FYP, Hu Angang estimates that large scale ‘environmental disasters’ cost China well over 1.5% of its GDP.134 In the context 130 E. Economy, The River Runs Black: The Environmental Challenge to China’s Future, (Ithica: Cornell University Press, 2004), p. 18 131 H. Haifeng, G. Zhou, M. Liu, Chinese Environmental Innovation Policy: Retrospect and Prospect, (2008), p. 3; E. Economy, op. cit. (2004), pp. 98-99, p. 189 132 I. Hilton, “Introduction” in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/reports (accessed: 20 October, 2011), p. 6; T. Wang, J. Watson, China’s Energy Transition: Pathways for Low Carbon Development, (Sussex Energy Group SPRU and Tyndall Centre for Climate Change Research, 2009), available online: http:// www.tyndall.ac.uk/publications/technical-report/2009/chinas-energy-transition-pathways-low-carbondevelopment (accessed: 20 October, 2011), p. 11 133 A. Hu, “Global Climate Change and China’s Green Development” [全球气候变化与中国绿色发展], Journal of the Party School of the Central Committee of the C. P. C., Vol. 14, No. 2 (April, 2010), p. 7 134 A. Hu, op. cit. (April, 2010), p. 7 43 of energy security, Zha Daojiong has argued that cheaply priced coal reflects neither current market costs based on supply and demand, nor does it reflect the deep costs in terms of health and environmental damage to Chinese citizens. Factoring in these health and environmental externalities, he argues that coal is one of the most expensive energy sources.135 Moreover, Chinese scholars of ‘green development’ have sought to highlight the strong scientific consensus that climate change is already changing China’s environment and that climate change will impose enormous and unanticipated costs on the Chinese economy in the future.136 Thus climate change is an important motivation for a transformation of China’s energy system as part of a broader transition to ‘green development’.137 In 2004, the State Environment Protection Agency (SEPA) attempted to implement the world’s most ambitious exercise in environmental accounting, the ‘Green GDP’. 138 SEPA estimated the cost of environmental damage and pollution to be 3.05% of total GDP, or one third of the total GDP growth rate for that year, although it stressed that “this accounting is only a fraction of [the] ultimate green GDP calculation result”, since many vital environmental indicators were not included.139 Although the Green GDP project petered out in 2007, Chinese attempts at environmental accounting suggests that concern over the economic costs of environmental damage is strengthening within China’s policy-making mainstream. More recently, many from within and outside of China have hailed the 12th FYP as a turning point towards a path of green development, and a transition “from moderate ambition 135 136 137 138 D. Zha, op. cit. (2008b), pp. 39-40 J. Pan, op. cit. (2011b), p. 8; A. Hu, op. cit. (2011a), pp. 10-12; A. Hu, op. cit. (April, 2010), p. 7 D. Zhou, op. cit. (2010a), p. 38 V. Li, G. Lang, “China’s ‘‘Green GDP’’ Experiment and the Struggle for Ecological Modernisation”, Journal of Contemporary Asia, Vo. 40, No. 1, (February, 2010), p. 47 139 SEPA, Green GDP Accounting Study Report 2004 Issued, (11 September, 2006), available online: http:// english.gov.cn/node_12044/content_387775.htm (accessed: 20 October, 2011) 44 to a significant change of course” in addressing environmental issues.140 The language in the opening of the plan certainly seems to indicate that environmental constraints have become a vital consideration in overall efforts to restructure China’s economy and change its developmental model: Facing increasingly strong environmental and resource restraints, we must strengthen our consciousness of crisis. [We must] establish the idea of green, low carbon development, with an emphasis on energy efficiency and emissions reduction, with sound incentive mechanisms and constraining mechanisms, [we must] hasten the construction of energy saving and environmentally friendly modes of production and modes of consumption, strengthen our sustainable development abilities, increase our level of ecological civilisation.141 The Environment and the Shift to Domestic Consumption-Based Growth Improving China’s environment will not only depend upon environmental policy. Chinese academics argue that China’s shift toward a ‘green economy’ will hinge upon wider issues surrounding the transformation of China’s overall model of economic development. This model of economic development has been intrinsically linked with the political legitimacy of China’s Party-state. With the erosion of former socialist ideologies, the Party has found a new source of political legitimacy in the promise of economic freedoms and a steadily increasing standard of living for its citizens, while containing political freedoms and political dissent.142 Jiang Zemin’s theory of the ‘Three Represents’ stated that the Party 140 A. Hu, J. Liang, “China’s Green Era Begins” in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/reports (accessed: 20 October, 2011), pp. 20-21; I. Hilton, op. cit. (27 April, 2011), p. 5 141 142 Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 21 J. Delman, “China’s ‘Radicalism at the Centre’: Regime Legitimation Through Climate Change Politics and Climate Change Governance”, Journal of Chinese Political Science, No. 16 (November, 2010), pp. 185-186; J. I. Lewis, op. cit. (2008), p. 156 45 represents not only the working classes, peasants, and other socialist forces, but also “the fundamental interests of the vast majority of the Chinese people.” This shifted the image of the Party from a revolutionary force to a regime that represents the entire nation, including the middle class and the aspiring middle class.143 Joanna I. Lewis and Emily T. Yeh argue that “economic reforms were undertaken to help the CCP maintain political control”, and that the popularisation of a leisure culture based on mass consumption and a middle class lifestyle has been one of the key promises through which the CCP has secured the acquiescence of key sections of Chinese society.144 The new Hu-Wen vision of a rebalanced Chinese economy fits the middle-class, consumption-based sources of the Party’s legitimacy as articulated by Jiang Zemin. Concepts such as ‘scientific development’ also reflect growing concerns over social equity and the need for ‘balanced’ economic growth that addresses China’s yawning gap between the rich and poor.145 More recently, the global financial crisis precipitated a dramatic drop in demand for China’s exports. This demonstrated the need to hasten the long-term shift from export-driven economic growth to growth that is primarily driven by domestic consumption, a shift which would be accompanied by a declining share of polluting heavyindustry and a rising share of less polluting and energy-intensive tertiary industries and services.146 As a result, the government has sped up plans to raise the average wealth and living standards of Chinese citizens as part of ‘inclusive growth’ and the aim to achieve ‘a moderately well-off society’. 147 Finding ways to reduce China’s high savings rates and 143 Revised Party Charter of the Sixteenth Party Congress, cited in J. Fewsmith, “The Sixteenth National Party Congress: The Succession That Didn’t Happen”, The China Quarterly, No. 173 (March, 2003), pp. 13-14 144 E. T. Yeh, J. I. Lewis, “State Power and the Logic of Reform in China’s Electricity Sector”, Pacific Affairs, Vol. 77, No. 3 (Fall, 2004), pp. 455-456 145 146 M. Meidan et al., op. cit. (2009), p. 593; K. Halding et al., op. cit. (2009), pp. 123-125 Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 4; K. Jiang et al., op. cit. (2009), p. 11; D. Zhou, op. cit. (2009), pp. 40-42 147 O. Boyd, T. Copsey, “What’s in the Five Year Plan?” in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/ reports (accessed: 20 October, 2011), p. 14 46 increasing consumption will be key in achieving this huge economic transition.148 Above all, efforts to rebalance the economy and boost domestic consumption reflect the need to find sustainable sources of growth and prosperity to maintain the long-term stability of one-Party rule. Chinese scholars of green development argue that a system which has traditionally relied on the unhindered exploitation of cheaply priced environmental resources for growth led by industrial expansion will be difficult to sustain into the future in the face of dwindling natural resources and rising commodity prices.149 They also view the social and economic aims of the current fourth generation leadership as a key part of the transition to green ‘human development’ is just as important as environmental protection.150 development: Continued economic growth remains vital to raise the wealth and prosperity of individual Chinese citizens, many of whom still struggle with absolute poverty.151 However, growth alone is not sufficient to deliver strong social welfare. This is because living standards in China are also badly affected by environmental pollution and its serious effects on popular health.152 Therefore Chinese scholars argue that policies which aim to protect the environment must be balanced against the demands of continued development and improved social welfare. 148 149 Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 4 J. Pan, “China’s Motivations for A Low-Carbon Transformation - Not Just To Address Climate Change” [中 转型 − 不仅仅是为了气候变化], China Party and Government Cadres Forum, No. 12 (2010a), p. 30; 国低 J. Pan, op. cit. (2011b), p. 12; D. Zhou, op. cit. (2010a), p. 38; D. Zhou, op. cit. (2009), pp. 42-43; A. Hu, op. cit. (2011a), p. 15 150 G. Zhuang, J. Pan, S. Zhu, “The Purpose of a Low-Carbon Economy and Establishing a General System of Targets and Evaluation” [低 经济的内涵及综合评价指标体系构建], Developments in Economics, No. 1 (2011), p. 133 151 Ibid Hu, op. cit. (2011a), p. 14 47 152 A. 3.3 Government Efforts to Create ‘Win-Win’ Energy Policies Government energy policy from the 11th FYP to the present has displayed a greater commitment to creating ‘win-win’ situations in which environmental and economic goals are mutually supporting. Whereas the 10th FYP set environmental targets and missed most of them by a large margin, the 11th FYP stopped just shy of its 20% reduction in energy intensity target, to reach a 19.06% reduction. It also overshot 10% reduction targets for SO₂ emissions and chemical oxygen demand (COD - a measure of water quality), achieving reductions of 12. 45% and 14.29% reductions respectively.153 The overall quality of China’s environment remains poor across many indicators. 154 Yet the government has displayed a greater willingness to work environmental targets into mainstream energy policy and pressure local actors in order to achieve them.155 The ‘Circular Economy’ Discourse relating to green development and past failures to meet environmental targets have influenced central government efforts to seek out ‘win-win’ policies, which bring benefits for both the environment and economic development. ‘Circular economy’ policies have been a notable feature of attempts to achieve this aim in the energy sector. This concept was incorporated into government policy from the 11th FYP onwards as a key principle upon which the government aims to address the significant environmental problems that arise from 153 154 Jiahua Pan cited in J. Liu, op. cit. (27 April, 2011), p. 24 J. Watts, “A Report Card for China’s Environment” The Guardian (3 June, 2011), available online: http:// www.guardian.co.uk/environment/blog/2011/jun/03/report-card-for-china-environment (accessed: 20 October, 2011); S. Geall, “The Continuing Crisis” in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/reports (accessed: 20 October, 2011), pp. 52-55 155 J. Watts, op. cit. (3 June, 2011); S. Geall, op. cit. (27 April, 2011), pp. 52-55 48 the energy production and use.156 According to the Circular Economy Law, a circular economy is based on three principles: 1. reducing consumption of resources and the production of waste; 2. reusing waste materials in other products, and; 3. recycling waste as raw materials.157 Despite China’s energy shortages during the past decade, the 11th FYP seeks to control production at 2.6 gigatonnes of coal in the year 2010.158 While capping supply, energy efficiency policies to reduce energy consumption have been the subject of wideranging and fairly successful government initiatives in the 11th FYP period.159 Even as energy efficiency policies have been undertaken in order to reduce emissions of damaging pollutants, as well as to improve energy security. For example, targets to 2020 that aim to reduce coal use to 1.54 tonnes of standard coal per 10,000 yuan of GDP output are estimated to lower SO₂ emissions by 21 million tonnes to 2020. 160 Similarly, the Comprehensive Working Plan of Energy Conservation and Emissions Reduction released in 2007 set out guidelines for closing small inefficient, polluting, and outdated plants with the aim of saving 3.46 exajoules of energy, and reducing SO₂ emissions by 2.4 megatonnes in 2010.161 The central government has also sought to build new plants fitted with flu gas de-sulphurisation units and retrofit older plants, in order to reduce SO₂ emissions.162 SO₂ emissions cause acid rain, which affects massive crop losses from soil acidification and damage to vegetation, contributes to China’s 156 L. Pintér, International Experience in Establishing Indicators for the Circular Economy and Considerations for China (Draft), (International Institute for Sustainable Development, May, 2006), available online: http:// www.iisd.org/pdf/2006/measure_circular_economy_china.pdf (accessed: 20 October, 2011), pp. 1-2; H. Haifeng et al., op. cit. (2008), p. 4 157 Government of the People’s Republic of China, Circular Economy Law of the People’s Republic of China, (China Environmental Law, translation by Squire, Sanders and Dempsey L. L. P., 29 August, 2008), available online: http://www.chinaenvironmentallaw.com/wp-content/uploads/2008/09/circular-economy-law-cn-enfinal.pdf (accessed: 20 October, 2011) 158 159 NDRC, op. cit., (January, 2007), preface, p. 10 Government of the P. R. China, op. cit. (14 March, 2011), p. 22; State Council, op. cit. (2007); D. Rosen, T. Houser, op.cit. (May, 2007), p. 39; D. Held et al., op. cit. (January, 2011), pp. 25-29 160 161 162 NDRC, op. cit. (2004), p. 6 L. Price et al., op. cit. (April, 2011), p. 2172 State Council, op. cit. (December 2007), p. 34 49 shrinking percentage of arable land, and adds to China’s pressing food security issues.163 More generally air pollution from energy and industry has been estimated to cost China between 1.3 and 9% of GDP in terms of health damages alone.164 Circular economy policies to reduce energy consumption have been an important part mainstreaming reduced SO₂ emissions into other priorities related to energy efficiency. ‘Reuse’ and ‘recycle’, the two other principles upon which the concept of a circular economy is built, have also been the subject of strong targets in the 11th FYP. In plans for the coal mining sector, the 11th FYP sets out targets to save 340 thousand cubic meters of water. For example, the plan aims to reuse water inside mines pits and waste water from coal washing at a rate of 70-80%.165 All waste water released from mine sites must meet China’s environmental standards.166 Water conservation is a particularly urgent priority as half of the rivers in northern China do not even meet the lowest water standard (grade 5) for irrigation, and roughly 300 million people lack access to clean water.167 The large volume of water used in the coal sector places great strain on water resources in the coal-rich, water-poor north.168 The government has promoted ‘general use electrical plants’ that generate electric power from 163 World Bank/State Environmental Protection Agency, People’s Republic of China, Cost of Pollution in China: Economic Estimates of Physical Damages, (Washington: The World Bank. February, 2007), pp. 113-117; Xinhua News Agency, “1/10 of China’s Arable Land Polluted”, China Net (9 November, 2009), available online: http:// www.china.org.cn/english/environment/188431.htm (accessed: 20 October, 2011); Xinhua News Agency, “Shrinking Arable Land Adds Concerns on China’s Grain Security”, Xinhua Net (18 October, 2010), available online: http://news.xinhuanet.com/english2010/china/2010-10/18/c_13562418.htm (accessed: 20 October, 2011) 164 K. Matus, K. Nam, N. E. Selin, L. N. Lamsal, J. M. Reilly, and S. Paltsev, Health Damages From Air Pollution in China, Report Number 196, (MIT Joint Policy on the Science and Policy of Global Climate Change, March 2011), available online: http://globalchange.mit.edu/pubs/abstract.php?publication_id=2142 (accessed: 20 October, 2011); World Bank/State Environmental Protection Agency, People’s Republic of China, op. cit. (February, 2007), p. xiii 165 NDRC, The 11th Five Year Plan for Energy Development [能源发展‘十一五’规 ], (April, 2007), available online: http://www.ndrc.gov.cn/fzgh/ghwb/115zxgh/P020070925543261533041.pdf (accessed: 20 October, 2011), p. 11; NDRC, op. cit. (January, 2007), p. 8 166 167 NDRC, op. cit. (April, 2007), p. 11 K. Morton, “Surviving and Environmental Crisis: Can China Adapt?”, Brown Journal of World Affairs, Vo. 31, No. 1 (Fall/Winter 2006), p. 65 168 World Bank/State Environmental Protection Agency, People’s Republic of China, op. cit. (February, 2007), pp. 81-82 50 coal mining and coal refining waste products such as coal tar (a waste product from the process of turning coal into coke and turning coal into coal gas), coal gangue (the waste rock from mined coal ore), and coal dust.169 Similarly, the government has sought to find ways to recycle coal ash, a waste material from coal-fired electrical power generation. To address this waste management problem the government has sought to reuse coal ash as a substitute for clinker, a major component in the production of cement.170 A report by Greenpeace and the Chinese Centre for Disease Control finds that coal ash from power generation is China’s largest single source of industrial solid waste. In 2009 it was at levels twice that of domestic urban waste.171 Difficulties in managing such huge quantities of waste make coal ash a large contributor to both air pollution (in the form of particulate matter) and water pollution over a wide area, contaminating the environment with a toxic mix of heavy metals, radioactive substances, and other dangerous chemicals.172 An example of these circular economy policies in action is the Tongmei Datang Tashan industrial park in Shanxi, which includes a coal mine and coal preparation plant, a power plant fired by coal gangue and a regular coal-fired power plant, as well as a cement and building materials plant.173 Policies that aim to ‘reduce, reuse and recycle’ create efficiency gains and resource savings that benefit economic development, and they also minimise environmentally harmful waste and overexploitation of natural resources associated with mining, energy, and industrial production. Climate Change and the Possibility of Longer-Term Commitments 169 170 NDRC, op. cit. (January, 2007), p. 21 McKinsey & Company, China’s Green Revolution: Prioritizing Technologies To Achieve Energy and Environmental Sustainability, (McKinsey & Company, 26 February, 2009), p. 16 171 A. Yang, R. Kang, X. Zhao, H. Xu, H. Zhou, M. Su, H. Tang, F. Li, The True Cost of Coal - An Investigation Into Coal Ash in China, (Greenpeace, 2010), pp. i-ii 172 A. 173 Yang et al., op. cit. (2010), pp. 2-12 International Energy Agency/Organisation for Economic Cooperation and Development, Cleaner Coal in China, (Paris: International Energy Agency, 2009), available online: http://www.iea.org/textbase/nppdf/free/ 2009/coal_china2009.pdf (accessed: 20 October, 2011), p. 109 51 Rising concern over the potential impacts of climate change on China’s long-term economic development have influenced the Chinese government’s growing response to climate change. In recent years a clear consensus has emerged from Chinese academic and government publications that climate change will have potentially dire effects and that China is one of the countries most susceptible to damage from climate change.174 In particular, these documents highlight: (1) the damage that extreme and unpredictable weather will pose to already declining crop yields and livestock; (2) damage to biodiversity; (3) melting permafrost and glaciers, with disastrous effects on the Tibetan Plateau and the rivers that flow from it; (4) greater incidence and severity of both floods and droughts, but with an overall decline in water resources; (5) rising sea levels, threatening China’s populous and rich coastal areas, and; (6) enormous social and economic costs, especially given that widespread poverty and underdevelopment will exacerbate the difficulties of adapting to climate change.175 Newly cognisant of these issues, the government has established a number of relevant institutions since 2007, including energy and climate change leading groups at the national and provincial levels, and a dedicated mechanism for external relations on climate change in the Ministry of Foreign Affairs.176 Thus far China’s approach to climate change mitigation has sought to maximise the climate benefits from policies that have been formulated in response to other concerns. While 174 State Council, China’s Policies and Actions to Address Climate Change [中国应对气候变化的政策与行动], (October, 2008), available online: http://www.gov.cn/zwgk/2008-10/29/content_1134378.htm (accessed: 20 October, 2011), p. 1; J. Pan, Y. Xun, J. Zou, D. Zhou, K. Jiang, X. Zhang, F. Zhou, Z. Ca, Y. Lang, X. Zhang, C. Gao, T. Zhang, G. Sun, M. Duan, H. Yang, S. Shen, “The Newest Scientific Understanding on Mitigating Climate Change” ［ 缓气候变化的最新科学认知], Advances in Climate Change Research, Vol. 3, No. 4 (July, 2007), pp. 187-194; J. Pan, op. cit. (2011b), p. 9 175 Government of the People’s Republic of China, China’s National Assessment Report on Climate Change [气 候变化国家评估报告], (Beijing: Kexue Chubanshe, 2007), pp. 182-290; State Council, op. cit. (October, 2008), pp. 2-3 176 G. Heggelund, I. F. Buan, “China in the Asia-Pacific Partnership: Consequences for UN Climate Change Mitigation Efforts?” International Environmental Agreements, Vol. 9 (2009), p. 306; D. Held et al. op. cit. (January, 2011), p. 25; K. Halding et al., op. cit. (2009), p. 126-127 52 the pledge offered at Copenhagen to reduce carbon intensity 40-45% by 2020 demonstrates that the Chinese government is concerned about climate change and takes the issues seriously, up to the present this pledge has been implemented through broader energy intensity targets that serve a range of policy priorities related to energy security and local environmental protection. Copenhagen commitments to raise non-fossil fuel energy consumption to 15% by 2020 demonstrate the importance of climate change in the growth of renewable energy; however, renewable energy policies also target poverty alleviation in remote and rural areas, increased international competitiveness in a lucrative and growing international market, stimulating a new source of domestic growth, and protecting the local environment by displacing coal-fired power generation.177 Thus far, China’s climate policies have been a ‘repackaging’ of other energy, environmental and transport policies undertaken for a number of different purposes.178 However, recent policy announcements as part of the 12th FYP suggest that China may be willing to impose greater costs on some sections of the economy in the short term in order to more directly address the problem of GHG mitigation in the long-term. Building upon the success of 11th FYP energy efficiency targets, the government released a target to reduce China’s CO₂ intensity by 17% over the period of the 12th FYP.179 Although the plan released few details on how this target would be achieved beyond existing policies, recent debates within China suggest that the government may consider carbon pricing as one mechanism to 177 State Council, op. cit. (December, 2007), p. 12; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 24; NDRC, op. cit. (September, 2007), pp. 13-15, p. 7 178 179 K. Halding, et al., op. cit. (2009), pp. 129-130; C. Richerzhagen, I. Scholtz, op. cit. (2008), p. 311 Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 5 53 implement its climate policy.180 This would be consistent with a broader shift in the methods through which the 12th FYP seeks to achieve its energy efficiency and environmental targets. Having exhausted many of the easier energy efficiency gains to be made through top-down administrative direction, the 12th FYP is increasingly turning to market mechanisms to affect efficiency gains. 181 There are several voluntary emissions trading schemes in China that set a precedent for the possible implementation of government-sponsored pilot CO₂ trading schemes or a pilot carbon tax. China has has been experimenting with SO₂ quotas and emissions trading since the 1990s, and several cities such as Beijing, Tianjin, and Shanghai have set up CO₂ emissions trading markets with accompanying institutions for carbon credit certification.182 Moreover powerful government backers have been promoting a carbon tax within China. The Ministry of Finance and the NDRC’s Energy Research Institute jointly published a report calling for the introduction of a carbon tax in 2012, and the possibility of a carbon tax has been debated in China’s annual legislative session.183 If current consideration of a carbon tax results in explicit policy-making, as more detailed 12th FYP documents are released in the coming months, a more active approach to incorporating green development into climate policy may gain momentum. 180 Q. Liu, K. Jiang, X. Hu, “Implications of Carbon Energy Taxes as Instrument for Environmental Emissions Reduction in China’s Power Sector”, Electricity, No. 4 (2006), pp. 42-46; S. W. Ng, “A Test for Europe?” in China’s Green Revolution: Energy, Environment and the the 12th Five-Year Plan (China Dialogue, 27 April, 2011), available online: http://www.chinadialogue.net/reports (accessed: 20 October, 2011), p. 39; S. Meng, “China Must Tax Carbon”, China Dialogue (15 October, 2010), available online: http://www.chinadialogue.net/ article/show/single/en/3878 (accessed: 20 October, 2011) 181 182 K. Jiang quoted in S. Meng, op. cit. (15 October, 2010); S. W. Ng, op. cit. (27 April, 2011), p. 39 Oster, “China’s Expands Markets for Emissions Trading” Wall Street Journal (11 November, 2008), available online: http://online.wsj.com/article/SB122636062518315545.html (accessed: 20 October, 2011); D. Held et al., op. cit. (January, 2011), pp.43-45; S.; K. Morton, op. cit. (2009), p. 56 183 “China Plans to Commence a Carbon Emissions Tax Around the Year 2012” [中国拟在2012年前后 征二 氧化 排放说], China Climate Change Info-Net (11 May, 2010), available online: http://www.ccchina.gov.cn/ cn/NewsInfo.asp?NewsId=23889 (accessed: 20 October, 2011); B. Finamore, “China On the Path Towards Putting a Price on Carbon”, Natural Resources Defence Council (16 May, 2010), available online: http:// switchboard.nrdc.org/blogs/bfinamore/china_on_the_path_towards_putt.html (accessed: 20 October, 2011) 54 3.4 Difficult Trade-Offs and Social Stability Hu Angang has claimed that China’s authoritarian political system gives it unique advantages over democratic systems such as the US, because China’s “enduring and stable political system ... ensures that the country maintains a consistent, long-term strategy for tackling climate change ... [that can create] steady progress towards green development.”184 However, given the lack of public input into formal governance in China, trade-offs between local environmental protection, global environmental protection, economic prosperity and poverty alleviation frequently have implications for political stability. When considering such trade-offs, “a balanced assessment cannot be made if decision-making power is concentrated in the hands of a few decision makers with strong interests in pursuing short-term gains at the expense of broader social concerns.”185 The implications of climate change on China’s future political stability are particularly grim, as more frequent extreme weather events and changing weather patterns (for example increasing water scarcity in the north) could exacerbate China’s very high existing levels of income inequality.186 However, seeking out ‘win-win’ climate policy to address this will also be hampered by the delicate popular political legitimacy of the Party-state. Coal-Bed Methane - Potential Tensions Between Local Environment and GHG Reductions Despite mounting efforts to address climate change, there is a consensus amongst China’s leading energy scholars and government policy makers that coal is an ‘assurance of development’ and that China’s energy system will be predominantly reliant on coal at least up 184 A. 185 186 Hu, J. Liang, op. cit. (27 April, 2011), p. 19 K. Morton, op. cit. (Fall/Winter, 2006), p. 71 J. B. Wiener, op. cit. (2007-2008), pp. 1818-1819 55 to 2020.187 As a result, China has invested considerable energy and funds into the search for different methods and technologies to produce ‘clean coal’, i.e. coal with fewer local environmental pollutants and GHG emissions.188 Coal-bed methane (also known as coal-seam gas) extracted from underground coal seams can act as a substitute for natural gas and provide fuel for power generation. Using methane as an energy source reduces the global warming potential of methane from 72 times that of CO₂ over a 20 year period, to roughly the same global warming potential as CO₂. 189 When coal-bed methane mixes with oxygen in mine shafts, it turns into a highly explosive gas that is the main cause of China’s repeated mining accidents and fatalities.190 As a result methane is often blown off directly into the atmosphere through ventilation shafts. Thus coal-bed methane utilisation has been widely touted as a way for China to reduce its emissions from coal use, improve mining safety, and exploit a new source of energy. Coal bed methane has received strong government support through 187 D. Zhou, “The Crucial 40 Years for an Energy Transition” [能源变革的 键40年], China Economics and Informatisation, No. 15 (2010b), p 24; K. Jiang, “China’s Energy Structure Against the Background of Energy Conservation and Emissions Reductions” [节能 排背景下的能源结构], Green Leaf, No. 12 (2011), p. 40, p. 43; G. Zhuang, J. Pan, S. Zhu, op. cit. (2011), p. 133; C. Zhu, op. cit. (2009), p. 15; NDRC, op. cit. (September, 2007), p. 1; NDRC, op. cit. (January, 2007), p. 1; A. Hu, op. cit. (2011a), p. 9; D. Zhou, op. cit. (2009), pp. 43-45 188 D. Zhou, op. cit. (2010a), p. 38; K. Gordon, J. L. Wong, J.T. McLain, Out of the Running? How Germany, Spain and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind, (Center For American Progress: March, 2010), pp. 25-36; G. Sun, Coal Initiative Series White Paper: Coal in China: Resources, Uses and Advanced Coal Technologies, (Pew Center on Global Climate Change, March 2010), available online: http://www.pewclimate.org/white-papers/coal-inititive/coal-china-resources-usestechnologies (accessed: 20 October, 2011), p. 12, p. 17; K. Jiang et al., op. cit. (2009), pp. 11-19; X. Lu et al., op, cit. (2006), p. 96; Q. Liu, et al., op. cit. (September, 2010), pp. 370-375; D. Zhou, op. cit. (2010b), p. 24; State Council, op. cit. (December, 2007), pp. 27-29; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 5, p. 11; F. Kahrl et al., op. cit. (2011), p. 4040; 189 P. Forster, V. Ramaswamy, P. Artaxo, T. Berntsen, R. Betts, D.W. Fahey, J. Haywood, J. Lean, D.C. Lowe, G. Myhre, J. Nganga, R. Prinn, G. Raga, M. Schulz and R. Van Dorland, “2007: Changes in Atmospheric Constituents and in Radiative Forcing”, in S. Solomon, D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M.Tignor and H.L. Miller (eds.) Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge: Cambridge University Press, 2007), available online: http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4wg1-chapter2.pdf (accessed: 20 October, 2011), p. 212; McKinsey & Company, op. cit. (26 February, 2009), p. 96 190 McKinsey & Company, op. cit. (26 February, 2009), p. 96 56 subsidies, favourable tax regimes, government-regulated operating systems, and emissions regulations designed to encourage the growth of this industry.191 However, the coal-bed methane exploitation brings with it serious local environmental impacts. To exploit coal-bed methane gas, a mixture of water and chemicals are pumped into the coal seam to open fractures through which the gas can be extracted. Issues relating to health, water pollution, and water scarcity that are currently surfacing in the Australian debate could foreshadow many of the issues that China might face. Chemicals used in the hydraulic fracturing (fracking) process have in the past leaked into underground aquifers and contaminated bore water, and pools that hold contaminated water at the surface can also contaminate local water supply.192 This issue is particularly serious given the evidence that water from fracking contains carcinogens and other chemicals that bear potential health risks.193 Moreover, high water demand from the coal-bed methane extraction process creates conflict with farmers in agricultural areas where water scarcity is a pressing and serious threat both to farmers’ livelihoods and to food security.194 Heavy infrastructure building and transportation has caused conflict between miners and farmers in Australia, whose land has been negatively impacted by coal-bed methane extraction. 195 191 A. Hu, “New Content from ‘Green Cat’ Model: Low Carbon Economy” [‘绿猫’模式的新内容−低 经济], World Environment, No. 2 (February, 2008), p. 27; IEA/OECD, Cleaner Coal in China, (Paris: International Energy Agency, 2009), available online: http://www.iea.org/textbase/nppdf/free/2009/coal_china2009.pdf (accessed: 20 October, 2011), pp. 113-116; IEA/OECD, Coal Mine Methane in China: A Budding Asset with the Potential to Bloom, IEA Information Paper (Paris: International Energy Agency, February, 2009), available online; http://www.iea.org/papers/2009/china_cmm_report.pdf (accessed: 20 October, 2011); NDRC, op. cit. (January, 2007), pp. 20-21; McKinsey & Company, op. cit. (26 February, 2009), p. 96 192 D. Cooke, “Switching to Coal Seam Gas Could Drastically Reduce Emissions - So What’s the Fraccing Problem?” The Conversation (29 March, 2011), available online: http://theconversation.edu.au/switching-tocoal-seam-gas-could-drastically-reduce-emissions-so-whats-the-fraccing-problem-16 (accessed: 20 October, 2011); T. Hunter, “Food or Fuel: How Will Governments Solve the Coal-Seam Gas Dilemma?” The Conversation (16 August, 2011), available online: http://theconversation.edu.au/food-or-fuel-how-willgovernments-solve-the-coal-seam-gas-dilemma-2887 (accessed: 20 October, 2011) 193 D. Shearman, “Coal Seam Gas Fraccing Could Be a Disaster for Our Health”, The Conversation (26 May, 2011), available online: http://theconversation.edu.au/coal-seam-gas-could-be-a-fracking-disaster-for-ourhealth-1493 (accessed: 20 October, 2011) 194 195 T. Hunter, op. cit. (16 August, 2011) Ibid 57 The potential for popular unrest associated with coal-bed methane exploitation demonstrates that the relationship between local environmental protection and reducing GHG emissions is not always mutually supportive, and that the process of deciding which priorities are more important can have consequences for political stability. Local environmental degradation has often served as a locus for popular unrest. According to Elizabeth Economy, the central government sees environmental damage as a major source of political instability because it fears that failure to protect the environment may one day serve as a catalyst for broader political change, as it did in the former Soviet Union.196 Air and water pollution and concern over public health impacts have led to numerous protests in recent years, and the potential for water pollution and associated damages to popular health associated with fracking could potentially stir similar sorts of unrest. 197 China’s growing middle class has been strongly represented in many of these protests. Rising personal prosperity has led to calls for the government to ensure that the environment Chinese citizens live in and the food they eat are clean and safe, and the internet has enabled rapid mobilisation for demonstrations.198 The rising number of urban demonstrations prompted by concern over the environment and popular health issues is particularly dangerous to political stability, given changes in Party 196 197 E. Economy, op. cit. (2004), pp. 19-23 For example, J. Watts, “China Orders Petrochemical Plant Shutdown After Protests”, The Guardian (14 August, 2011), available online: http://www.guardian.co.uk/world/2011/aug/14/china-petrochemical-plantshutdown-protest (accessed: 20 October, 2011); R. Chan, S. Taylor, “Hundreds Protest Shanghai Maglev Rail Extension”, Reuters (12 January, 2008), available online: http://www.reuters.com/article/2008/01/12/us-chinamaglev-protest-idUSPEK32757920080112 (accessed: 20 October, 2011); M. Moore, “China’s Middle Class Rises Up in Environmental Protest”, The Telegraph (23 November, 2009), available online: http:// www.telegraph.co.uk/news/worldnews/asia/china/6636631/Chinas-middle-class-rise-up-in-environmentalprotest.html (accessed: 20 October, 2011); J. Kaiman, “China Closes Solar Panel Plant After Protests”, Los Angeles Times (20 September, 2011), available online: http://www.latimes.com/news/nationworld/world/la-fgchina-solar-20110920,0,2015603.story (accessed: 20 October, 2011) 198 E. Economy, Testimony Before the U.S.-China Economic and Security Review Commission: ‘China’s Internal Dilemmas’ (U.S.-China Economic and Security Review Commission, 25 February, 2011), available online: http://www.uscc.gov/hearings/2011hearings/written_testimonies/11_02_25_wrt/ 11_02_25_economy_testimony.pdf (accessed: 20 October, 2011), pp. 2-4; Y. Lu, “China’s Middle Class: Mobilizing for Political Action?” The Wall Street Journal (24 August, 2011), available online: http:// blogs.wsj.com/chinarealtime/2011/08/24/china’s-middle-class-mobilizing-for-political-action/ (accessed: 20 October, 2011); M. Moore, op. cit. (23 November, 2009); R. Chan, S. Taylor, op. cit. (12 January, 2008); J. Watts, op. cit. (14 August, 2011) 58 ideology that have based political stability more firmly on the acquiescence of the middle class to one Party rule.199 Anger over the intrusion into farmland that coal-bed methane extraction entails could also potentially lead to popular anger. A ready example of this situation is the use of Mongolian farmlands and grasslands as a transportation route by heavy and polluting coal trucks, and the widespread ethnic-inspired conflict incited by the death of a Mongolian herder at the hands of a Han Chinese coal truck driver last year, when the herder tried to prevent a convey of trucks crossing his land.200 Failure by the party to adequately manage issues of political legitimacy that arise in such cases as coal-bed methane exploitation may complicate the search for viable long-term solutions to trade-offs between local environmental protection and GHG abatement. Electricity Pricing - Tensions Between Climate-Related Market Reform and Poverty Alleviation Altering China’s system of low, state set electricity prices will be an important part of improving energy efficiency and a vital basic reform if China is to seriously pursue carbon pricing. However, electricity pricing is also a key lever through which the government delivers social welfare and poverty alleviation, two priorities that form a core basis of political legitimacy for the Party-state. Reconciling this difficult trade-off between increased domestic energy security and reduced GHG emissions on the one hand, and maintaining popular acceptance of the Party-state through its embedded methods of providing of social welfare on the other, will prove a significant challenge. In terms of spreading ‘clean coal technology’ electricity price reform is of vital importance. While central government control over planning and pricing in the electricity sector has been relatively successful in mobilising 199 E. Economy, op. cit. (25 February, 2011), p. 1 200 A. Jacobs, “Anger Over Protestors’ Death Leads to Intensified Demonstrations by Mongolians”, The New York Times (30 May, 2010), available online: http://www.nytimes.com/2011/05/31/world/asia/31mongolia.html (accessed: 20 October, 2011) 59 investment to increase China’s power generation capacity and support newer technologies, the combination of rising coal prices and low electricity prices has sapped money from power generation utilities, many of whom are now in debt.201 Without adequate investment from electric utilities, investment will fall below levels required to meet the coming growth in demand and environmental targets. In addition, new and more efficient technologies will not be so attractive to utilities because of their higher upfront cost.202 Low electricity prices and inadequate price incentives affect the usage rates of clean coal technologies as well. For example, although flu gas desulphurisation units are installed on 40% of newly constructed power plants and older plants are being retrofitted, in practice many plants rarely operate their units because of high running costs and weak enforcement by local environmental protection bureaux.203 A marketised electricity price would be an essential part of the success of a possible carbon price in reducing GHG emissions. Higher costs involved in electricity generation that utilities would face from a carbon price would need to be passed through to the grid and electricity consumers. This would be essential in order for utilities to stay profitable enough to invest in newer, more environmentally friendly technology, and to use currently installed technology that adds to running costs but reduces pollution (such as flu gas de-sulphurisation or, further down the track, carbon capture and storage technologies).204 However, a marketised electricity price comes up against some of the core bases of the popular legitimacy of the Party-State. The government now sees increasing levels of individual consumption and lower levels of savings as a key part of moving the Chinese 201 202 203 C. Zhu, op. cit. (2011a), pp. 3-4, p. 6; C. Zhu, op. cit. (2011b), pp. 3-4; F. Kahrl et al., op. cit. (2011), p. 4039 C. Zhu, op. cit. (2011a), p. 4; F. Kahrl et al., op. cit. (2011), p. 4039 E. Economy, “Environmental Governance: The Emerging Economic Dimension”, Environmental Politics, Vol. 15, No. 2 (2006), p. 185-186; IEA/OECD, op. cit. (2009), p. 102 204 S. Howes, op. cit. (6 June, 2011), pp. 19-24 60 economy away from export-led growth to greater domestic consumption.205 However, limited access to quality schooling, health care, old-age care and pensions, and other forms of social welfare all contribute to the insecurity of large sections of China’s population, which in turn contributes to higher savings rates and discourages individual consumption. 206 In the absence of reliable national systems of wealth redistribution, energy pricing often doubles as a social welfare tool. By keeping the price of electricity low, the central government hopes to protect private citizens, particularly low-income earners, from high living costs.207 This is especially the case in the context of high levels of inflation over the last few years that has driven up the price of basic commodities, such as food. If the price of electricity were to be fully marketised, it would probably lead to an increase in the price of electricity, given high coal prices.208 A sudden rise in the price of electricity, an associated rise in the price of consumer goods, and the possibility of price gouging could very possibly lead to widespread public discontent.209 This is in part because the Party has based much of its political legitimacy on the promise of continued economic development, rising personal wealth and living standards, and the promise of a ‘middle class lifestyle’ that will become more widespread as the benefits of development are spread across society.210 Mixed with this are sources of political legitimacy that relate to older, socialist methods of welfare provision. China’s poorer citizens, who would be most affected by raised electricity prices, tend to support ideals involving greater equality, the provision of public welfare, labour protections, and a reduction in 205 206 Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 4 Y. Du, M. Wang, “Population Aging, Domestic consumption and Future Economic Growth in China” in L. Song and J. Golley (eds.) Rising China: Global Challenges and Opportunities (Canberra: Australian National University E-Press and Social Sciences Academic Press, 2011), pp. 301-302; I. Hilton, op. cit. (27 April, 2011), p. 6; Weak social welfare is not the only cause of high savings and low consumption, many commentators also point to factor market distortions as a major contributor to this issue. 207 208 209 210 P. Andrews-Speed, op. cit. (January 2010), p. 1341 E. T. Yeh, J. I. Lewis, op. cit. (Fall, 2004), p. 459 Ibid T. Wright, Accepting Authoritarianism: State Society Relations in China’s Reform Era, (Stanford: Stanford University Press, 2010), pp. 2-3; M. Pei, op. cit. (2006), pp. 88-89; Andrew Nathan, op. cit. (January, 2003), p. 14 61 absolute poverty. 211 Popular protest from China’s poorer citizens has often involved calls for the central government to live up to its socialist rhetoric.212 As Zha Daojiong puts it “it seems a ‘harmonious society’ actually means that the price of household water and electricity must remain cheap.”213 However, the combination of capitalist enthusiasm mixed with a socialist heritage of cheap basic resources aggravates the large-scale and wasteful exploitation of these resources, to the detriment of both the local and global environment.214 The example of electricity pricing demonstrates that issues of political legitimacy complicate already difficult trade-offs. Market reforms in the energy sector that could bring benefits to energy efficiency and it may be a vital prerequisite to strong climate mitigation policy, but this reform is currently at odds with China’s embedded patterns of social welfare provision and poverty alleviation. 3.5 Conclusion The concept of green development has raised the profile of the environmental and resource constraints on economic growth and the costs of environmental degradation in the agenda-setting process. Influenced by growing awareness of the need for greater environmental protection, the government has sought to implement energy policies that create ‘win-win’ situations for environmental protection and economic development, and it has deepened its domestic response to climate change. However, this should not mask the fact that green development involves difficult trade-offs. The deep political legitimacy issues that trade-offs over the environment and climate change excite could be one of the most 211 212 213 214 T. Wright, op. cit. (2010), p. 3, p. 8, pp. 16-17 Ibid, p. 8 D. Zha, op. cit. (2008b), pp. 36-37 K. Halding et al., op. cit., (2009), p. 121 62 unpredictable and least understood forms of ‘policy feedback’ that influences green development and related environmental policies. 63 Low-Carbon Leadership 4.1 Introduction Chinese academic discourse on low-carbon development outlines a number of features of the emerging low-carbon future that make it imperative for China to ensure it develops as a ‘green’ great power and a low-carbon leader. The Chinese government also seems to increasingly attach importance to ensuring China’s leadership position in international lowcarbon development. Economically, strong government support has underpinned the rise of China’s wind and solar industries, which have become global market leaders in the span of only a few years. Politically, the past four to five years have seen China alter many of the principles that have traditionally defined its approach to multilateral climate change cooperation. In doing so, China has taken on a new kind of leadership role in the UNFCCC and elsewhere. However, in both of these areas international mistrust and misunderstanding will continue to pose a challenge to China’s emergence as a global low-carbon leader. 4.2 Why China Must Become a Global ‘Low-Carbon Leader’ The Wave of the Future and Pressure to Act For many of China’s top energy academics, a transition to a low-carbon economy presents many challenges, but it also represents an important opportunity to shift China’s development onto a more sustainable path, and to use this shift to strengthen China’s constructive leadership in a changing international order. Chinese literature on low-carbon development reflects a view that different waves of modernisation and industrialisation have historically been tied to the emergence of important new sources of energy through 64 technological breakthroughs. The countries that have been best able to exploit these new sources of energy and new technologies have been able to greatly increase their international influence and change the balance of power in the international system.215 Hu Angang charts how China has so far remained behind and marginal from the first industrial revolution of the 17th and 18th century through to the third wave of industrial revolution based on nuclear power and information technology.216 Hu argues that the world has already entered a new wave of industrial change - the ‘green revolution’, based on low- and zero-carbon energy, and green development. Having missed the opportunities of the previous three industrial revolutions, China should now become an ‘innovator’, ‘leader’, and active participant, along with other ‘green powers’ such as the US, the European Union (EU) and Japan.217 This is because: ... history will not allow us to once again make the same past mistakes [of missing the opportunities of being a world leader in the past waves of industrial revolutions] ... Now we must have a strong sense of crisis, we must turn challenges into opportunity.218 Other Chinese academics also express an expectation that the world is inexorably moving towards low-carbon development. According to Zhou Dadi, developed countries are already changing their energy structures and finding ways to transition to a low-carbon economy, and their efforts will intensify as low-carbon technologies become cheaper, the benefits of a lowcarbon economy become clearer, and the threat of climate change becomes more evident. In the face of this growing world transition, China needs to change its entire economic model 215 A. Hu, “‘Green Rise’: China’s New Contribution to the World” [‘绿色崛起’： 中国对世界的新贡献], People’s Tribune, Issue 18 (2008), pp. 24-25; A. Hu, op. cit. (2011a), pp. 13-15 216 A. 217 A. 218 A. Hu, op. cit. (2011a), p. 14 Hu, op. cit. (2008), p. 25; A. Hu, op. cit. (April, 2010), pp. 5-6; A. Hu, op. cit. (2011a), pp. 13-14 Hu, op. cit. (April, 2010) 65 towards low-carbon development in order to remain competitive into the future or be left once again trying to catch up to developed countries.219 Indeed, while Pan Jiahua argues that developed countries have a moral responsibility to act first and prove that deep emissions cuts are economically feasible, he also argues that “the voice of China’s low carbon transformation is louder than that of the developed countries,” indicating that China has already stepped ahead of other competitors in the ‘low-carbon race.’220 There is also a growing sense that China has a responsibility to transition to low-carbon development, because of the dire effects of China’s high energy consumption on other countries into the future. Despite arguments from Chinese scholars that China’s motivations for a low-carbon transition are mostly internal, they recognise that “China has to bear international responsibility in world energy and climate security.”221 China now has the unenviable title of being the world’s largest GHG emitter and the world’s largest energy consumer.222 Low efficiency and high industrial energy use is dramatically reflected in the international sphere, with China accounting for 7% of world GDP, 17% of energy use and 28% of world industrial energy use.223 This means that domestic Chinese investment cycles contribute greatly to international price volatility and international energy security concerns.224 China’s efforts to assure its oil security through state patronage of oil SOEs (state-owned enterprises) and through signing deals with so-called ‘rogue states’ has raised worries that China may seek to challenge the interests and leadership of great powers such as 219 D. Zhou, op. cit (2009), p. 44; D. Zhou, op. cit. (2010b), p. 24; D. Zhou, op. cit. (2010a), p. 38; J. Pan, op. cit. (2011a), p. 11 220 221 222 J. Pan, op. cit. (October, 2010), p. 3 X. Lu et al.,op. cit. (2006), p. 96; J. Pan, op. cit. (October, 2010) International Energy Agency/Organisation for Economic Cooperation and Development, op. cit. (9 November, 2010), p. 47, p. 87 223 224 D. Zhou, op. cit. (2010b), p. 38; IEA/OECD, op. cit. (9 November, 2010), p. 98 D. Rosen, T. Houser, op. cit. (May, 2007), p. 42 66 the US and Europe.225 China’s responsibility for international energy stability will only increase in the future, with Zhou Dadi estimating that China could account for over 50% of world energy consumption in 2020, or 30% if China is able to sustain a very ambitious energy intensity reduction of 20% every five years.226 Chinese scholars worry about increasing international pressure for China to take action to reduce its GHG emissions, but this pressure also reflects a growing sense of internal responsibility for China’s contribution to climate change.227 China has faced international pressure (particularly from the US) to take on legally binding emissions caps under the UNFCCC for some time.228 However this pressure reached a new pitch amidst the furore that followed the 2009 Copenhagen Conference of the Parties (COP), in which China was widely blamed for obstructing an agreement. 229 While Chinese media and academic sources vigorously defended China’s role in Copenhagen, Chinese academics also see international pressure as reinforcing the need for China to both take on the responsibility of cutting emissions, and take on the political responsibility of cutting through 225 A. B. Kennedy, “China’s Petroleum Predicament: Challenges and Opportunities in Beijing’s Search for Energy Security” in J. Golley and L. Song (eds.) Rising China: Global Challenges and Opportunities, (Canberra: The Australian National University E-Press/Social Sciences Academic Press, 2011), pp. 124-126; D. Zha, op. cit. (Spring, 2006), pp. 180-185 226 227 D. Zhou, op. cit. (2010a), p. 38 J. Pan,op. cit (2011b), p. 11; A. Hu, op. cit. (April, 2010), p. 5; A. Hu, op. cit. (2011a), p. 10; X. Lu et al., op. cit. (2006), p. 96; D. Zhou, op. cit. (2009), pp. 42-43 228 D. Bodansky, W[h]ither the Kyoto Protocol? Durban and Beyond, Policy Brief (Harvard Project on Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School, August 2011), p. 4 229 Anonymous, “China’s Thing About Numbers; Climate Change After Copenhagen”, The Economist, Vol. 394, Iss. 8663 (2 January, 2010), p. 43; T. Arup, “India Confesses It Helped Derail Copenhagen Deal”, Sydney Morning Herald (25 December, 2009), available online: http://www.smh.com.au/environment/climate-change/ india-confesses-it-helped-derail-copenhagen-deal-20091223-ldf1.html (accessed: 20 October, 2011); J. Garnaut, “Rich Nations ‘Ganged Up’ In Copenhagen; China Defends Tough Summit Stance”, The Age, 11 January, 2010, p. 3; J. Lee, “How China Stiffed the World In Copenhagen”, Foreign Policy (21 December, 2009), available online: http://www.foreignpolicy.com/articles/2009/12/21/how_china_stiffed_the_world_in_copenhagen? page=0,0 (accessed: 20 October, 2011), p.102; M. Lynas, “How Do I Know China Wrecked the Copenhagen Deal? I Was There”, The Guardian, (Tuesday 22 September, 2009), available online: http://www.guardian.co.uk/ environment/2009/dec/22/copenhagen-climate-change-mark-lynas (accessed: 20 October, 2011); T. Rapp, C. Schwälgerl, G. Traufetter, “How China and India Sabotaged the UN Climate Summit”, Der Spiegel, (5 May, 2010), available online: http://www.spiegel.de/international/world/0,1518,692861,00.html (accessed: 20 October, 2011) 67 the barriers that currently confound efforts to agree to a new multi-lateral framework for climate change mitigation. 230 China’s Low-Carbon Advantages Despite these challenges, Chinese energy scholars argue that China has advantages that make it uniquely placed to seize the opportunity of global leadership through low-carbon development. China’s economy is already in a state of transition. Increasing consumption, expanding the share of tertiary industries, lowering the share of heavy manufacturing, and controlling rates of growth are state policy in the 11th and 12th FYP.231 However, Chinese scholars also view this economic transition as part of the natural evolution of the Chinese economy. This is due to a number of reasons. One is the decline of China’s ‘demographic dividend.’ As the process of urban migration begins to slow down, China’s population begins to age, and per capita wealth rises, the abundance of cheap labour on which China’s manufacturing-heavy growth model has relied will vanish.232 Cheap energy necessary for energy intensive industry will decline as energy security becomes more of a concern and the marketisation of China’s energy sector continues to deepen.233 China’s GDP growth rate will slow as growth relies less on rapid expansion of industry and more on the rising quality and 230 J. Zhang, “China Not To Blame On Climate”, China Daily, (23 December, 2009), available online: http:// www.chinadaily.com.cn/china/2009-12/23/content_9217026.htm (accessed: 20 October, 2011); Q. Yu, “China’s Interests Must Come First”, China Dialogue, (August 27, 2010), available online: http://www.chinadialogue.net/ article/show/single/en/3792--China-s-interests-must-come-first- (accessed: 20 October, 2011); “Premier Wen’s 60 Hours in Copenhagen”, China Daily, (26 December, 2009), available online: http://www.chinadaily.com.cn/ china/2009-12/26/content_9233055_2.htm (accessed: 20 October, 2011); J. Ma, “To Seal A Deal We Need Justice”, China Dialogue, (17 December, 2009), available online: http://www.chinadialogue.net/article/show/ single/en/3410 (accessed: 20 October, 2011); C. Zhao, F. Tian, D. Wei, “Verdant Mountains Cannot Stop Water Flowing; Eastward the River Keeps on Flowing - Premier Wen Jiabao at the Climate Change Conference” Ministry of Foreign Affairs of the People’s Republic of China (14 December, 2009), available online: http:// www.fmprc.gov.cn/eng/zxxx/t648096.htm (accessed: 20 October, 2011); A. Hu, op. cit. (2011a), p. 18; J. Pan, op. cit. (October, 2011), p. 4; J. Pan, op. cit. (2011a), p. 11 231 232 Government of the People’s Republic of China, op. cit. (14 March, 2011), pp. 3-4 Y. Du, M. Wang, op. cit. (2011), p. 312 Hu, “New Three Industries In the Future” [未来新三产], 21st Century Business Review, No. 8 (2011b), p. 68 233 A. 46; D. Zhou, op. cit. (2007), pp. 52-53; J. Pan, op. cit. (2011a), pp. 12-13 competitiveness of products, and rising economic productivity.234 Pollution-intensive industry will also decline as rising per capita wealth leads to popular political demands for a higher standard of living and a clean and safe natural environment.235 For China’s energy scholars, these and other factors signify that the internal momentum of large-scale economic reform towards a less energy-intensive economy is already in place. Seizing the opportunities involved in low-carbon leadership will mean harnessing this momentum for economic transformation in order to speed up the rate at which China de-carbonises its economy and deepen the scale of change. 236 4.3 Leadership in Renewables Markets and the UNFCCC Chinese government support for domestic wind and solar markets and changes in China’s approach to the UNFCCC indicate that the idea of low-carbon leadership has had an impact upon central government energy policy. Competitiveness and Strong Government Support in Wind and Solar Power Government concerns over China’s international competitiveness in the renewable energy industry, combined with a growing realisation of the huge economic opportunities China has in international renewables markets, have been important considerations behind China’s investment in wind and solar power. Chinese renewable energy has boomed since the Renewable Energy Law of 2004 and the Medium to Long Term Renewable Energy Development Plan in 2007 set up the overall framework for the growth of the renewables 234 J. Pan, “The Internal Motivations for Speeding Up China’s Low-Carbon Transition” [我国加速地毯转型的 内在动因], China Petroleum Enterprise, No. 9 (2010b), p. 23; D. Zhou, op. cit. (2009), p. 44 235 236 D. Zhou, op. cit. (2010a), p. 38 D. Zhou, op. cit. (2010b), p. 24; D. Zha, “Say Goodbye to the New Energy ‘Plot Thesis’” [告 新能源‘ 谋论’], For the Public Good, Issue 69 18 (August, 2009), p. 35; J. Pan, op. cit. (2010b), p. 22; J. Pan, op. cit. (October, 2010), p.3 market.237 China currently has greater installed hydropower, wind power, solar water heaters and small-scale bio-gas capacity than any other country, and in 2010 China became the leading country in terms of overall renewable energy investment.238 The government has also laid out ambitious targets for renewable energy, with renewables set to constitute 15% of China’s overall energy mix in 2020.239 Installed capacity for wind power has grown dramatically from less than 1 gigawatt of installed power in 2004 rising to 44.7 gigawatts at the end of 2010, with projections that China will reach around 248 gigawatts of installed wind power by 2030.240 The development of China’s wind industry has been primarily focused on the domestic market so far. However, domestic demand alone makes China a world leader in wind power, with Chinese wind companies Sinovel and Goldwind among the top five world wind companies in terms of global market share.241 With these top wind manufacturers rapidly increasing their production capacities, they are starting to look beyond the domestic market to aggressively pursue export opportunities.242 In contrast to wind, the Chinese photovoltaic solar power industry has been largely export-driven.243 In recent years China’s PV solar panel production has risen dramatically: from supplying 1% of world PV production to becoming the world’s largest exporter of solar panels, with 40% of current global market share, in the span of a decade.244 However the success of China’s solar companies overseas 237 238 D. Held et al., op. cit. (January, 2011), pp. 30-32; K. Gordon et al., op. cit. (March, 2010), p. 25 China Greentech Initiative, The China Greentech Report 2011: China’s Emergence as a Global Greentech Market Leader, 2011, available online: http://www.china-greentech.com/report (accessed: 20 October, 2011), p. 77; J. Watson, “China’s Low Carbon Leadership Headlines Fail to Capture the Reality”, The Guardian (18 April, 2011), available online: http://www.guardian.co.uk/environment/2011/apr/18/china-low-carbon-leadershipclaims (accessed: 20 October, 2011) 239 240 241 242 243 244 NDRC, op. cit. (September, 2007), p. 18; Department of Climate Change, NDRC, op. cit. (28 January, 2010) China Greentech Initiative, op. cit. (2011), p. 77 IEA/OECD, op. cit. (9 November, 2010), p. 291 K. Gordon et al., op. cit. (March, 2010), p. 30 K. Jiang, op. cit. (2011), p. 43 M. Richardson, “China’s Green Ambition, US Sees Red” YaleGlobal Online (Singapore: YaleGlobal Online, 5 January, 2011), available online: http://yaleglobal.yale.edu/content/chinas-green-ambition-us-sees-red (accessed: 20 October, 2011) 70 and the decline in global demand following the financial crisis has seen central government support for developing the domestic solar market increase. In particular, the recent government announcement of a feed-in tariff for domestic solar power producers has been widely hailed as a symbol that the Chinese government is ready to ‘hit the go button’ and massively expand its domestic solar power capacity.245 The competitiveness concerns and market opportunities highlighted by scholars of lowcarbon leadership have been an important motivation for the wind and solar power boom in Chinese production and consumption in the last few years. Like China’s energy academics, the Medium to Long Term Renewable Energy Development Plan expresses an expectation that “each country will ... hasten their development of renewable energy,” and goes into great detail in describing the policies, laws, targets, research and development, and market mechanisms that other countries have put into place to expand their renewable energy industry. 246 The review concludes that, since the price of renewable technologies is being driven down by international innovation and the market for renewable energy is expanding, the market competitiveness of renewable energies is rapidly improving. Moreover, the plan predicts that after 2020, the international renewables market will expand exponentially, gradually becoming the world’s primary form of energy supply. Therefore opportunities for future growth in this market are very great.247 However, government documents express concern that China is technologically ‘behind’ compared to developed countries, and that this 245 G. Parkinson, “China’s Great Big Solar Boost”, Climate Spectator (5 August, 2011), available online: http:// www.climatespectator.com.au/commentary/chinas-great-big-solar-boost (accessed: 20 October, 2011); J. Bai, L. Walet, “Unified Power Tariffs Mean Clearer Guidance for Solar Projects”, China Daily (2 August, 2011), available online: http://www.chinadaily.com.cn/cndy/2011-08/02/content_13028967.htm (accessed: 20 October, 2011); L. Hook, “China Backing for Solar Power”, Financial Times (1 August, 2011), available online: http:// www.ft.com/intl/cms/s/0/50f42d70-bc42-11e0-80e0-00144feabdc0.html#axzz1Wt6EqLfp (accessed: 20 October, 2011) 246 247 NDRC, op. cit. (September, 2007) pp. 7-9 Ibid, p. 7 71 may constrain the growth of China’s renewables industry.248 As a result China’s renewable energy industry is forced to import many key components as well as high-end and cutting edge technology.249 These documents also highlight other motivations for intensifying the development of China’s renewable energy industry, such as poverty alleviation through rural electrification and increased energy security.250 However, the great opportunities for growth in the international renewables market and the awareness that China is at a technological disadvantage to developed countries means that both leading Chinese academics and government documents have repeatedly stressed the need for the government to take on a very strong leading role, if Chinese renewable energy companies are to successfully compete in the international market.251 Having identified renewable energy as a key industry specially targeted by the government for ‘leaping development’, the government has enacted vigorous regulations and policies to aid its domestic industries until they become fully competitive on the international market.252 In terms of financing, direct government investment, subsidies and tariffs, and favourable loans from state-run banks have been the monetary foundation of the take-off of Chinese wind and solar, and the key to their cost-competitiveness overseas. 253 Regulations such as the 70% local content rule for all wind projects within China have been vital for the 248 249 250 Ibid, p. 12 Ibid, p. 12 State Council, op. cit. (December, 2007), p. 12; Government of the People’s Republic China, op. cit. (14 March, 2011), p. 24; NDRC, op. cit. (September, 2007), pp. 13-15, p. 7; 251 State Council, op. cit. (December, 2007), p. 12; NDRC, op. cit. (September, 2007), pp. 13-15, p. 7; NDRC, op. cit. (April, 2007), p. 9; D. Zhou, op. cit. (2009), p. 44; X. Lu et. al., op. cit. (2006), pp. 94-95 252 K. Bradsher, “China Builds High Wall to Guard Energy Industry”, China Environmental News Digest (15 July 2009), available online: http://china-environmental-news.blogspot.com/2009/07/china-builds-high-wall-toguard-energy.html (accessed: 20 October, 2011); Government of the People’s Republic China, op. cit. (14 March, 2010), p. 11 253 “Cheap Finance Strategically Being Used to Export Chinese Renewable Energy Products - Sinovel Wins Largest Wind Turbine Order 1 GW from Mainstream with CDB Funding” Green World Investor (1 July, 2011), available online:http://www.greenworldinvestor.com/2011/07/01/cheap-finance-strategically-being-used-toexport-chinese-renewable-energy-products-sinovel-wins-largest-wind-turbine-order-1-gw-from-mainstreamwith-cdb-funding/ (accessed: 20 October, 2011); China Greentech Initiative, op. cit. (2011), p. 75 72 growth of the Chinese wind power industry. As a result of local content rules, domestic manufacturers have been more willing to use lower-cost domestic components, fostering the development of a domestic wind power components industry that has since become internationally competitive.254 Finally, the relationship between the central government and major SOEs has been vital to the development of the solar and wind industries. Winning almost all of the competitive bidding for renewable energy projects to date, they have developed 90% of China’s wind farms and all of China’s solar power plants.255 Particularly in the energy and electricity sectors, SOEs have close relationships with the government and are often able to forgo short term profits in order to help the government meet its energy and environmental targets. 256 According to the China Greentech Initiative, “aware of the lucrative future clean energy development offers globally, SOEs have clear ambitions to be leading players in the international market.”257 Strong government support and investment has underpinned the phenomenal rise of China’s wind and solar industries. This indicates that the government is also aware of the lucrative opportunities for economic development from renewable energy, mindful of the stiff competition China faces from other green energy exporters, and is ambitious to see its renewable industries strengthen their leading market position. A Changing Concept of Leadership in International Climate Change Negotiations While China’s image as a defender of developing countries’ rights has always been an important basis of legitimacy for China in the UNFCCC negotiations, changes in China’s 254 255 256 257 China Greentech Initiative, op. cit. (2011), p. 79 China Greentech Initiative, op. cit. (2011), pp. 75-76 E. T. Yeh, J. I. Lewis,op. cit. (Fall, 2004), p. 451; China Greentech Initiative, op. cit. (2011), p. 76 China Greentech Initiative, op. cit. (2011), p. 76 73 negotiating position suggest that the idea of China as a low-carbon leader has had some impact on recent international pledges related to emissions reduction through energy reform. In UNFCCC climate change negotiations, China has historically derived much of its political legitimacy from its image as a defender of developing countries. In terms of its negotiating principles, China’s moral and ethical stance has clearly entailed a strong defence of developing countries’ right to develop unimpeded by constraints upon their emissions. In the 1992 UN Conference on Environment and Development at Rio, China was a key player in including the principle of ‘common-but-differentiated responsibilities’, which became a cornerstone of the climate change regime when the UNFCCC was signed a year later.258 This is based on the fact that developed countries have the most responsibility for cumulative GHG emissions and have greater resources, in terms of prosperity and stable governance, to mitigate their own current emissions. By contrast, developing countries have contributed relatively little to cumulative GHG emissions and have limited capacity to mitigate their emissions due to the overriding imperatives of economic development and poverty alleviation.259 Historically China has argued that on the basis of this principle of equity, developed countries should move first and pay for mitigation costs in developing countries, while developing countries should be under no obligation to take on any mitigation efforts.260 In terms of the alliances China has formed in the UNFCCC, China’s leadership and solidarity with the Group of 77 developing countries (G-77) has been an important source of political support and legitimacy. 261 According to Joanna I. Lewis, China’s image as a defender of 258 R. Foot, A. Walter, China, the United States and Global Order, (Cambridge: Cambridge University Press, 2011), p. 200 259 260 261 K. Morton, op. cit. (2009), p. 74, p. 78 Z. Zhang, op. cit. (2003), pp. 67-68 S. Kasa et al., op. cit. (2008), p. 121, p. 125; J. I. Lewis, op. cit. (2008), pp. 162-163; Z. Zhang, op. cit. (2003), pp. 78-80 74 developing countries’ rights has become increasingly important as China’s fears of being singled out and blamed for UNFCCC failures has grown with its international influence.262 The desire to be a responsible player in international climate change politics has always been an important consideration for China in UNFCCC negotiations.263 However, China’s concern to be seen as a constructive leader in the UNFCCC has emerged more obviously in recent years, even when this came into conflict with China’s solidarity with the G-77. In the 2007 COP in Bali, China broke with its long-held negotiating position of ‘no obligations, no voluntary commitments, and no future negotiations to bind China’ by agreeing to the principle of voluntary, nationally appropriate mitigation actions, and then by offering a voluntary commitments to achieve a 40-45% carbon intensity reduction by 2020 at Copenhagen in 2009.264 Although China did not back down on a core part of this stance, that no developing country should be subject to legally binding emissions caps, this represented a significant departure from previous rhetoric on voluntary commitments. Moreover China abandoned its previous ‘no regrets’ position, in which developed countries are expected to cover all mitigation costs in developing countries. Not only has China adopted energy efficiency, coal, and renewables policies that represent a significant deviation from business-as-usual, it has also said it does not expect to be first in line for developed country financial transfers for mitigation.265 After being surprised by the degree to which monitoring and reporting became a source of tension in Copenhagen, in Cancun China agreed to international consultation and 262 263 J. I. Lewis, op. cit. (2008), p. 162 State Council News Office, China’s Policies and Actions to Address Climate Change [中国应对气候变化政 策与行动] (Beijing: State Council, January, 2008), available online: http://www.gov.cn/zwgk/2008-10/29/ content_1134378.htm (accessed: 20 October, 2011), p. 1; G. Heggelund, op. cit., (2007), p. 178 264 Z. Zhang, op. cit. (2003), p. 67; D. Held et al., op. cit. (January, 2011), pp. 39-41; Department of Climate Change, NDRC, op. cit. (28 January, 2010) 265 A. Hsu, Y. Zhao, “Talking Tactics” China Dialogue (27 January, 2011), available online: http:// www.chinadialogue.net/article/show/single/en/4076-Talking-tactics- (accessed: 20 October, 2011);S. Howes, op. cit. (6 June, 2011), p. 2 75 analysis, a form of monitoring for China’s 2009 carbon intensity pledge that is more stringent than China’s past practice of self-reporting, but less stringent than the monitoring regime to which developed countries are subject.266 In pushing for developing countries to do more, China continues to vociferously uphold equity principles such as ‘common-but-differentiated responsibilities’ and ‘historical responsibility’; however, these principles no longer entail no action by developing countries. China also significantly stepped away from its traditional solidarity with the G-77 at Copenhagen. In past negotiations, China had sought to project the image of a ‘responsible great power’ by acting to moderate extreme opinion and build a consensus within the G-77, in order to arrive at a united position. 267 However in Copenhagen, China, along with other members of BASIC (Brazil, South Africa, India, China), displayed a willingness to sacrifice solidarity with the G-77 and negotiate directly with the US in order to salvage an agreement and prevent the conference from ending with no outcome. 268 On the one hand this reflects the fact that emerging economies such as China are increasingly powerful enough to negotiate by themselves, without the help of the G-77.269 On the other hand this reflects great international pressure on China from both developed and developing countries to take stronger action to mitigate its own emissions.270 According to interviews of Chinese officials, China’s position at Bali in 2007 owed much to constant international pressure on Hu Jintao over China’s 266 S. Meng, “China Will Be Transparent” China Dialogue (29 November, 2010), available online: http:// new.chinadialogue.net/article/show/single/en/3966--China-will-be-transparent (accessed: 20 October, 2011); A. Hsu, Y. Zhao, op. cit. (27 January, 2011) 267 268 269 270 M. T. Hatch, op. cit. (2003), p. 51 R. Foot, A. Walter, op. cit. (2011), p. 203 S. Kasa et al., op. cit. (2008), p. 119 Tan Copsey, “Briefing: The Copenhagen Accord”, China Dialogue (24 December, 2009), http:// www.chinadialogue.net/article/show/single/en/3442-Briefing-the-Copenhagen-Accord (accessed: 20 October, 2011); R. Foot, A. Walter, op. cit. (2011), p. 201 76 position on climate change.271 Such international pressure has been effective because it is also reflected in changing government opinions over the nature of China’s own moral responsibilities, which now extend beyond just defending the rights of the developing world. As Su Wei, Director-General of China’s Leading Group on Climate Change in 2009 puts it, “China will not continue growing emissions without limit or insist that all nations must have the same per capita emissions. If we did that, this earth would be ruined.”272 China has also responded to the obstacles to progress within the UNFCCC by seeking alternatives to the UN. China is now involved in a plethora of sub-national, trans-national, bilateral, and multilateral arrangements through which it can pursue its own interests freer from the stricture of UNFCCC negotiations.273 Through such organisations, China now promotes technological cooperation on a reciprocal basis, instead of through donor-recipient relationships.274 Indeed China has indicated that it will begin giving financial aid to other developing countries specifically for climate change mitigation and adaptation projects. 275 China’s changing approach to the UNFCCC and efforts at climate leadership outside of the UN process suggests that China sees itself as a major political leader with global responsibilities in forging international agreements to address climate change and not just a leader for developing countries. In the international renewables markets, strong government support for Chinese wind and solar power suggest that the government is aware of the opportunities in low-carbon markets, and dedicated to overcoming China’s competitiveness 271 272 273 R. Foot, A. Walter, op. cit. (2011), p. 203 Su Wei cited in Ibid, p. 192-193 K. Morton, op. cit. (2011), p. 12; D. Held et al., op. cit. (January, 2011), pp. 41-48; State Council News Office, op. cit. (January, 2008), pp. 13-14 274 275 K. Morton, op. cit (2009), p. 79 Government of the P. R. China, op. cit (4 March, 2011), p. 22; A. Hu, op. cit. (2011a), p. 18 77 barriers. Many of the principles that inform the discourse on low-carbon leadership appear to have also informed government energy policy. 4.4 Mistrust and Miscommunication China’s efforts to move into a position of greater leadership on reducing emissions has been widely praised and welcomed by the international community. However the experience of international renewables markets and recent UNFCCC conferences suggests that mistrust and misunderstanding between China and other major powers could present a major challenge to China’s emerging ambitions for international low-carbon leadership. Mistrust: China’s Wind and Solar ‘Protectionism’ The government support that has underpinned the rapid rise of China’s solar and wind companies has been labelled ‘unfair’ and ‘protectionist’ by many onlookers and has already given rise to disputes between the US and China. The close relationship between the government and SOEs, which has been so important to meeting China’s energy targets and aiding competitiveness overseas, is one source of this mistrust. In competitive bidding schemes for solar and wind contracts, European and US renewable energy companies complain that even though they meet local content rules by building factories and buying components within China, contracts are awarded with a clear preference for Chinese firms and SOEs, regardless of their experience and expertise.276 Local content rules have been a point of contention between China and the US, with the US claiming that such rules are 276 K. Bradsher, op. cit. (15 July, 2009) 78 ‘protectionist’.277 Recently, the powerful United Steelworkers Union filed a petition to the US government to address China’s local content rules, citing the need to protect jobs in the US from unfair competition. 278 As a result, in June of this year, the US successfully challenged some of China’s wind subsidy policies under World Trade Organisation (WTO) law, forcing China to repeal its Special Fund programme that was conditioned upon the use of domestic over imported goods.279 From the Chinese side, Obama’s increased government support for ‘green technology’ and ‘green jobs’ has given rise to what Zha Daojiong describes as a ‘plot thesis’, which states that the US is seeking to use market competition over green energy to overstretch China’s resources and put China at a greater disadvantage. 280 Concern over China’s local content rules and similar forms of possible ‘green protectionism’ are heightened by broader suspicions that China seeks to dodge WTO rules and engage in unfair trade practices to give domestic industry a competitive advantage.281 Ongoing tension over claims that China keeps the exchange rate for the renminbi artificially low in order to put its exports at a greater advantage is the most high profile manifestation of suspicions in the international community over China’s trade practices.282 However, the US’ WTO challenge to China also occurred against the backdrop of growing fears within the US 277 J. I. Lewis, “A Review of Potential International Trade Implications of Key Wind Power Industry Policies in China”, Energy Foundation China Sustainable Energy Program (1 October, 2007), available online: http:// www.resource-solutions.org/pub_pdfs/China.wind.policy.and.intl.trade.law.Oct.07.pdf (accessed: 20 October, 2011), pp. 1-2; Q. Ding, “Clean Energy Probe Equals ‘Protectionism’”, China Daily (20 October, 2010), available online: http://www.chinadaily.com.cn/bizchina/2010-10/20/content_11434998.htm (accessed: 20 October, 2011) 278 United Steel Workers Media Center, “USW Files Trade Case to Preserve Clean, Green Manufacturing Jobs in America”, United Steel Workers (9 September, 2010), available online: http://www.usw.org/media_center/ news_articles?id=0621 (accessed: 20 October, 2011) 279 Office of the United States Trade Representative, China Ends Wind Power Equipment Subsidies Challenged by the United States in WTO Dispute, (Washington D. C.: The United States Trade Representative, June 2011), available online: http://www.ustr.gov/about-us/press-office/press-releases/2011/june/china-ends-wind-powerequipment-subsidies-challenged (accessed: 20 October, 2011) 280 281 282 D. Zha, op. cit. (August, 2009), pp. 34-35 Office of the United States Trade Representative, op. cit. (June 2011) P. Krugman “The Renminbi Runaround”, New York Times (25 June 2010) 79 that it is losing its own competitive advantage in green technology, and that Chinese competition is forcing job losses in the midst of an ongoing downturn in the domestic US economy.283 The extent to which this sort of mistrust becomes politically dominant over regular market competition and international renewables cooperation with China may have an effect on the willingness of key players such as the EU, the US, and China to work together on GHG emissions reductions through renewable energy. Cameron Hepburn and John Ward echo Chinese scholars when they point out that: ... in the long-term they [G-20 emerging economies] have an opportunity to disrupt the political and economic status quo. Eras of rapid technological progress in core industries such as energy generation have sometimes driven major changes in relative rankings of countries ... It is unsurprising that US and EU firms are increasingly fearful of the consequences if [G-20 emerging economies] win the clean energy race.284 As well as economic competitiveness, constructive political low-carbon leadership is thus an essential part of diffusing international tensions over the rise of China as a low-carbon leader. Misunderstanding: Laying the Blame at the UNFCCC One of the most notable features of the Copenhagen conference was the gap in perceptions of China’s performance between China and other countries. Western leaders and media outlets expressed exasperation with China’s ‘obstructionist’ tactics, and accused China of serving its own interest and ignoring its responsibility to the rest of the world. The current UK opposition leader Ed Miliband dramatically declared that China tried to “hijack” the UN 283 284 M. Richardson, op. cit. (5 January, 2011); K. Gordon et al., op. cit. (March 2011), pp. 1-4, pp. 25-36 C. Hepburn, J. Ward, op. cit. (October, 2010), p. 16 80 summit and “hold the world to ransom.”285 China was a main player in removing a proposed pledge by EU countries to reduce industrialised country emissions by 80% and global emissions by 50% by 2050, as well as a proposal for a peaking of emissions in 2020. It also removed language in the Copenhagen Accord that framed the document as a step towards a legally binding treaty.286 In contrast, views expressed within China saw China’s role in the Copenhagen conference as largely constructive.287 Through last minute negotiations between BASIC and the US after other negotiations had ended without agreement, China contributed to salvaging a deal and producing a political agreement to keep global warming below 2 degrees, with space for voluntary developing country pledges.288 China significantly moderated its past negotiating position on commitments from developing countries and put forward pledges for a 40-45% reduction in carbon intensity by 2020, an increase in non-fossil fuel sources to 15% of China’s primary energy supply, and ambitious targets for forest cover.289 China also successfully defended the existing UN process and the Kyoto Protocol, a position that it appears to be continuing into the meeting in Durban this year. 290 Both China and the rest of the world have learnt much about making climate change deals in a context where many of the basic principles that underlie the UNFCCC and the Kyoto Protocol are in a state of flux. China’s relative lack of experience in climate diplomacy and confrontational approach at Copenhagen meant that it failed to adequately deliver its 285 J. Vidal, “Ed Miliband: China Tried to Hijack Copenhagen Climate Deal”, The Guardian (20 December, 2009), available online: http://www.guardian.co.uk/environment/2009/dec/20/ed-miliband-china-copenhagensummit?INTCMP=SRCH (accessed: 20 October, 2011) 286 Anonymous, 287 288 289 op. cit. (2 January, 2010); M. Lynas, op. cit. (22 December, 2009) H. Zhang, K. Morton, op. cit. (2011), pp. 1-2: J. Delman, op. cit. (November, 2011), pp. 183-184 J. Delman, op. cit. (November, 2011), p. 184 D. Held et al., op. cit. (January, 2011), p. 53; Department of Climate Change, NDRC, op. cit. (28 January, 2010) 290 “BASIC Push Kyoto as Focus of Durban Climate Meet”, Bridges Trade BioRes, Vol. 11, No. 15 (5 September, 2011), available online: http://ictsd.org/i/news/biores/113219/ (accessed: 20 October, 2011) 81 message - that it was willing to compromise and make voluntary pledges to meet its international responsibilities - and as a result China walked away a scapegoat.291 This was not helped by the flexible way in which the conference was conducted, with face-to-face negotiations by world leaders flown in to smooth over difficulties, secret and closed-door meetings that went against the UN tradition of universal consensus, and high-level phone calls to manage misunderstandings.292 By contrast, in the 2010 Cancún COP China adopted much softer language, seeking to avoid singling out the US and agreeing to a more stringent form of international monitoring. 293 Whereas in Copenhagen, China’s official public engagement was limited to a few flyers handed out from the Chinese booth at the Conference, in Cancún, Chinese NGOs, youth groups and the media organised side-events, special news coverage, provided information on what China is doing domestically to abate its emissions and explained many of China’s negotiating positions.294 Since the emotionally charged accounts of Copenhagen that flooded the media at the end of 2009 have settled, the magnitude of change in China has gradually seeped into international consciousness. Many have now tempered China’s refusal to take on legally binding emissions cuts with recognition that China is fast becoming a world leader in renewable energy and that China’s 2020 carbon intensity target is truly ambitious.295 However, powerful underlying tensions remain. As Zha Daojiong points out, China is not regarded as ‘like minded‘ by other Western powers, and this often gives rise to questions over whether China can match its power with its responsibility.296 Such mistrust and misunderstanding is further heightened by widespread debate over the ‘rise of 291 A. 292 Hsu, Y. Zhao, op. cit. (27 January, 2011) N. Mabey, S. Tomlinson, “Cancún’s Climate Colonels”, China Dialogue (3 December, 2010), available online: http://www.chinadialogue.net/article/show/single/en/3979 (accessed: 20 October, 2011); T. Copsey, op. cit. (24 December, 2009) 293 A. 294 A. 295 296 Hsu, Y. Zhao, op. cit. (27 January, 2011) Hsu, Y. Zhao, op. cit. (27 January, 2011) R. Garnaut, op. cit. (2011), p. 27 D. Zha, op. cit. (Spring, 2006), pp. 182-183 82 China’, in which many express fear that China may seek to revise the current international order and wrestle power away from the US and its allies.297 In the context of this broader mistrust and misunderstanding, China’s emerging leadership role could also throw up fresh challenges in international relations over renewable energy and climate politics. According to Hu Angang, the last 30 years of China’s economic development has been founded on international peace and stability. Since dramatic climate change could pose a grave threat to international peace, China will need to take a strong leadership role in mitigating climate change, if it is to preserve the most important international foundation of its future prosperity.298 4.5 Conclusion Many of China’s most prominent energy academics argue that China should become a global ‘low-carbon leader’ to seize the opportunities of greater economic prosperity and strengthened international leadership that a global low-carbon transition presents. This concept has helped to frame government-directed international expansion of China’s wind and solar power industries. The concept of China as a low-carbon leader meeting its global responsibilities seems to have also affected recent changes in some of China’s core negotiating positions at the UNFCCC. However, international mistrust and misunderstanding over China’s intentions in the international renewables market and international climate change politics remain a significant barrier to international cooperation on China’s climaterelated energy reform. The strength of international mistrust and misunderstanding could, in 297 H. White, “The Limits to Optimism: Australia and the Rise of China”, The Australian Journal of International Affairs, Vol. 59, No. 4 (December, 2005), pp. 469-480; S. Suzuki, “Chinese Soft Power, Insecurity Studies, Myopia and Fantasy”, Third World Quarterly, Vol. 30, Issue 4 (2009), pp. 781-783; B. Buzan, “China in International Society: Is ‘Peaceful Rise’ Possible”, The Chinese Journal of International Politics, Vol. 3. Issue 1 (2010), pp. 5-36; J. Mearsheimer, The Tragedy of Great Power Politics, (New York: Norton, 2001), pp. 401-402 298 A. Hu, op. cit. (April, 2010), p. 8 83 turn, negatively affect the progressive vision of Chinese international leadership advanced by scholars of low-carbon development. 84 Implications For International Climate Governance 5.1 Introduction The preceding chapters have highlighted the role of ideas in influencing China’s recent climate-related energy reforms. New energy security, green development, and low-carbon leadership have reframed the way in which Chinese elites respond to the multiple challenges of China’s modernisation drive. These are not isolated or limited ideas that apply only to one or two sectors in the Chinese economy. Instead they constitute a radical rethinking of the economic model that has powered China’s rise over the past three decades. These ideas have contributed to a renewed emphasis upon energy efficiency, local environmental protection, climate change, renewable energy, and an alternative approach to engaging in the UNFCCC negotiations. However, incorporating these ideas into a coherent policy framework is no easy task. The Chinese government may not be able to consistently strike a workable balance between market reform and administrative measures, manage the political expectations of the Chinese people, and resolve international mistrust and misunderstanding associated with its rising power and influence. Successfully dealing with these key implementation issues will profoundly influence energy and climate related reforms and the ideas that have influenced them. What are the implications for international climate governance? Of course, a focus upon China is inadequate for the purpose of assessing the most appropriate model of international climate governance for all countries. However, a renewed understanding of the motivations for China’s domestic reforms can offer insights into the critical question of how the international community can best support China’s deeper engagement in global action. 85 This study of the key ideas motivating China’s climate-related energy reforms provides important insights into the ongoing international debate over ‘top-down’ and ‘bottom up’ approaches to international climate governance. ‘Top down’ approaches emphasise the UNFCCC and the Kyoto Protocol as the most important institutions through which international climate action occurs, because they define legally binding emissions reduction targets for states, to be achieved within a certain timeframe.299 By contrast, ‘bottom-up’ approaches argue that the most effective climate change action occurs at multiple levels of governance, through a diverse range of institutions, often emphasising the value of linking climate change mitigation with other policy priorities to produce co-benefits 300 at the domestic and international levels.301 Although many bottom-up approaches emphasise governance at the sub-national level, this section will focus explicitly on theorists who examine state actions and state participation in multilateral institutions, because this thesis has specifically focused on China’s international and national-level actions. However, it cannot be assumed that co-benefits can always provide strong outcomes for climate protection on the basis of decentralised climate governance. Because of this, the ‘top-down’ approach of the UNFCCC remains crucial in international climate governance. This is because the UNFCCC 299 See W. Hare, C. Stickwell, C. Flachsland, S. Oberthür, “The Architecture of the Global Climate Regime: A Top-Down Perspective”, Climate Policy, Vol. 10, No. 6 (2010), pp. 600-614; J. Frankel, “Formulas for Emissions Targets” in in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 31-56; A. Michaelowa, “Graduation and Deepening” in in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 81-104 300 ‘Co-benefits’ and ‘ancillary benefits (i.e. the concept that something that is good for abating GHG emissions can also being benefits to a range of other policy priorities) are sometimes treated separately but this discussion will simply refer to this more general definition of co-benefits, see E. Jochem, R. Madlener, The Forgotten Benefits of Climate Change Mitigation: Innovation, Technical Leapfrogging, Employment and Sustainable Development, (Paris: OECD Working Party on Global and Structural Policies, 2003), p. 6. 301 See S. Rayner, “How to Eat an Elephant: A Bottom-Up Approach to Climate Policy”, Climate Policy, Vol. 10, No. 6 (2010), pp. 615-621; D. G. Victor, “Fragmented Carbon Markets and Reluctant Nations: Implications for the Design of Effective Architectures”, in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 133-160; W. Pizer, “”Practical Global Climate Policy” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 280-314; E. Ostrom, “Polycentric Systems for Coping With Collective Action and Global Environmental Change”, Global Environmental Change, Vol. 20, Issue 4 (October, 2010), pp. 550-557 86 continues to play a vital role in defining the “international norm of climate protection.”302 This international norm plays an important role in influencing domestic ideas and debates, which in turn inform the national interests upon which climate mitigation and other policy priorities are implemented at the domestic level. Emphasising the role of ideas in motivating climate-related energy reforms within China, this study suggests that a combination of bottom-up and top-down approaches is likely to offer the best opportunities for China to become more actively engaged in international efforts to mitigate climate change. 5.2 Bottom-Up Approaches and Engagement with China ‘Bottom-Up’ Criticisms of the UN Approach to Climate Mitigation Critics of the UNFCCC and the Kyoto Protocol argue that these approaches have so far failed to entice meaningful climate mitigation at the national level amongst the largest emitters, in part because these approaches have not fully taken into account the diverse motivations that states have to reduce their emissions.303 Instead, the design of the UNFCCC and the Kyoto Protocol largely reflects approaches to dealing with pollution problems which have traditionally assumed that ‘top-down’, legally binding instruments work best because that is what governments take seriously.304 Conventional wisdom on controlling environmental pollution has assumed that ‘output’ targets (i.e. how much pollution is released) are better than ‘input’ targets (policies and efforts to reduce emissions) because 302 303 R. Foot, A. Walter, op. cit. (2011), pp. 180-186 D. Bodansky, “Targets and Timetables: Good Policy But Bad Politics?” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 61-65; J. B. Wiener, “Incentives and Meta-Architecture” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 73-74; J. E. Aldy, R. N. Stavins, “Introduction” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the PostKyoto World, (Cambridge: Cambridge University Press, 2007), pp. 11-12; S. Rayner, op. cit. (2010), pp. 616-619; D. G. Victor, op. cit. (2007), pp. 133-134 304 M. P. Vanderbergh, op. cit. (July, 2008), p. 907; D. G. Victor, op. cit. (2007), p. 138 87 governments will be held accountable for a particular level of environmental pollution, ensuring the best outcome for the environment.305 Although recent UNFCCC conferences resulted in voluntary national policies and measures, China and other large emerging economies continue to face pressure in international negotiations to take on legally binding, quantifiable emissions reductions targets.306 For theorists of ‘bottom-up’ approaches, addressing climate change through one international institution and confining climate change to one problem, that of pollution control, narrows the opportunity for meaningful climate action in the short-term. Since many of the most significant polluters, such as the US and China, continue to see GHG emissions targets as a constraint upon economic growth, proponents of more diverse and decentralised forms of climate governance argue that climate mitigation strategies that also serve other policy priorities would offer greater opportunities for deeper emissions reductions, at least in the short-term.307 Market mechanisms within the Kyoto Protocol have also come under criticism for focussing too narrowly on pollution control, and ignoring the wider opportunities for climate change mitigation that exist when co-benefits are taken into account. On the one hand, the CDM aids the development agenda of recipient countries and helps prevent future ‘carbon lock-in.’ 308 In that sense the CDM does bring some developmental co-benefits. On the other hand, the fact remains that CDM projects are designed to produce quantifiable emissions reductions by the end of 2012, so that developed Annex I countries in the Kyoto Protocol can factor CDM-generated carbon credits into calculating whether or not they have met their 305 306 307 308 D. Bodansky, op. cit. (August, 2011), pp. 2-3; D. G. Victor, op. cit. (2007), p. 138 D. Bodansky, op. cit. (August, 2011), p. 4 S. Rayner, op. cit. (2010), p. 620; J. B. Wiener, op. cit. (2007), p. 74; D. G. Victor, op. cit. (2007), pp.133-160 J. I. Lewis, “The Evolving Role of Carbon Finance in Promoting Renewable Energy Development in China”, Energy Policy, Vol. 38. No. 6 (June, 2010), pp. 2875-2877 88 emissions reduction targets.309 This means that “projects that are intrinsically marginal gain favour (e.g. industrial gasses that are destroyed by special equipment bolted to the end of a pipe), while projects that actually put countries on different development pathways are impossible to credit because it is impossible to determine ex ante the carbon emissions profile of a whole country.”310 China’s motivations for climate-related energy reforms do not stem only from concerns over global pollution control. Alongside concern for climate change, changes in how elites within China view energy security, local environmental damage, international trade and leadership and China’s overall model of economic development have been vitally important motivations for climate mitigation policies. International efforts to engage China on climate change may be better served by seeking a variety of ways to capitalise on these different motivations, rather than confining global climate change governance solely to a top-down international regime that is based so heavily on GHG emissions reduction targets. Bottom-Up Proposals for International Climate Governance Three proposals for bottom-up multilateral climate governance - ‘issues-linkage’ in multilateral fora, David Victor’s proposal for a ‘large emitters club’ and sectoral agreements demonstrate how bottom-up approaches that build upon co-benefits between climate change and other policy areas could potentially strengthen China’s participation in international climate mitigation efforts. Proponents of ‘issues-linkage’ in multilateral fora suggest that linkages between other policy areas and climate change should be emphasised so that “whatever the issue world 309 310 D. Victor, op. cit. (2007), p. 148 Ibid, p. 149 89 leaders are going to analyze and discuss, climate change should be a dimension of their own analysis and discussion.”311 Specifically for developing countries, this would mean finding ways to satisfy current sustainable development goals, such as poverty alleviation or energy security, in a way that entails reduced GHG emissions.312 China is already deeply involved in international organisations that seek to link climate change with other issues. For example, Hu Jintao has used APEC as a forum in which to outline China’s own mitigation efforts and push for greater climate-related economic cooperation, and Wen Jiabao has sought similar goals through the East Asia Forum.313 ASEAN+3 has outlined policies on climate change that seek to mainstream the issue into other areas of sustainable development, including in the ASEAN-China free trade agreement. 314 China joined with other countries such as the US and Australia to establish the Asia-Pacific Partnership, which aimed to achieve a variety of environmental, climate and energy security objectives for member states (before the Partnership closed early this year).315 The fact that China already actively practices ‘issues linkage’ in various multilateral fora suggests that this approach holds the potential to deepen China’s engagement in international climate cooperation. As Heggelund and Buan note in their study of China’s involvement in the Asia-Pacific Partnership, China’s involvement in 311 J. Gupta, “Beyond Graduation and Deepening: Toward Cosmopolitan Scholarship” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 122; also, C. Carraro, “Incentives and Institutions: A Bottom-Up Approach to Climate Policy” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 169 312 J. Pershing, “Using the Development Agenda to Build Climate Mitigation Support”, in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), pp. 231-232 313 Xinhua, “Hu Jintao Puts Forward Four-Point Proposal On Climate Change” People’s Daily Online (9 September, 2007), available online: http://english.peopledaily.com.cn/90001/90776/6258190.html (accessed: 20 October, 2011); K. Halding et al., op. cit. (2009), p. 126 314 R. Letchumanan, “Is There a ASEAN Policy on Climate Change?” in Climate Change: Is South-East Asia Up to the Challenge (London School of Economics, 2010), available online: http://www2.lse.ac.uk/IDEAS/ publications/reports/SR004.aspx (accessed: 20 October, 2011), pp. 50-62; “ASEAN Multi-Sectoral Framework on Climate Change and Food Security” ASEAN-China Free Trade Area (27 September, 2009), available online: http://www.asean-cn.org/Item/1151.aspx (accessed: 20 October, 2011) 315 About the Asia Pacific Partnership on Clean Development and Climate, Asia Pacific Partnership on Clean Development and Climate, available online: http://www.asiapacificpartnership.org/english/about.aspx (accessed: 20 October, 2011) 90 building an international response to climate change outside the UNFCCC has offered the chance of addressing a wider range of concerns for China related to energy security, technology improvements, and tackling climate change without slowing economic growth. These partnerships have also reflected China’s eagerness to form deeper political alliances with other world leaders and project an image of international political leadership on climate change.316 Other scholars have gone further than simply linking climate change to other issues and existing international structures, proposing completely new forms of international climate change governance that treat climate change as a multi-issue problem. For example, David Victor outlines a model of international climate governance that treats climate change as a global economic problem, whose solution should be based on past examples of successful economic cooperation such as the WTO and the EU.317 In Victor’s proposal, the largest emitters would form their own ‘club’ for international cooperation on climate change. Mitigation would be driven by sets of policies and proposals to be negotiated by member countries, subject to a review process assessing mitigation outcomes. 318 There would be no ‘one-size fits all’ approach in the sense of absolute caps on emissions or targeted emissions reductions that are binding under international law. 319 Rather, Victor argues that this ‘club’ approach would be more sensitive to the domestic needs and motivations of individual countries, because countries can more easily negotiate individually tailored solutions within a smaller group.320 Finance enticing the participation of developing countries would similarly be tailored to specific projects and issues that speak to a range of domestic priorities. In 316 317 318 319 320 G. Heggelund, I. F. Buan, op. cit. (August, 2009), p. 311 D. Victor, op. cit. (2007), pp. 150-151 Ibid, pp. 150-156 Ibid, p. 150 Ibid, p. 156 91 contrast to the CDM approach, in which financing must produce quantifiable emissions reductions in the short-term, Victor claims that this approach to financing would encourage deeper domestic economic reforms that provide a better foundation for low-carbon transformation in the long-term.321 While China already practices issues linkage through a number of international fora, there is no current precedent for Victor’s more comprehensive vision of a small club of major emitters. However, a flexible approach to setting mitigation pledges could be attractive to China, because its current climate-related policies would receive greater international recognition. Moreover, Victor’s proposal means that international cooperation on broader economic reforms in China, such as economic restructuring and rebalancing the economy towards greater consumption, could receive greater international support. Since the ‘small club’ would offer such support only when the proposed policies have demonstrated climate benefits, this approach could increase the GHG emissions reductions that arise from domestic economic policies that were originally pursued for different reasons. Sectoral agreements (i.e. agreements to internationally coordinate climate mitigation within a specific economic sector) also offer a way of addressing a range of different issues within one economic sector whilst at the same time abating GHG emissions. One way this could work would be through the imposition of absolute emissions reduction targets below a certain business-as-usual baseline, or carbon or energy intensity targets within a specific sector. Such targets would be applied to both developed and developing countries and would involve emissions trading within those sectors.322 Alternatively, international sectoral agreements could include technology standards or performance standards (e.g. for the efficiency of certain machines and appliances). Sectoral agreements could also involve international policy coordination, for example, in the form of an international carbon tax on 321 322 Ibid, pp. 156-157 J. I. Lewis, op. cit. (June, 2010), pp. 2884; T. Houser et al., op. cit. (May 2008), p. 68 92 certain sectors, or the removal of subsidies that make the price of goods and products from that sector artificially low.323 China already has stringent energy intensity targets and has levied taxes and enforced higher electricity prices on its most energy-intensive sectors, such as steel, cement, and chemicals.324 These policies reflect broader concerns over environmental protection and domestic energy security that have motivated energy efficiency policies in general. They also reflect efforts to restructure China’s economy further away from exportoriented heavy industry and manufacturing, in favour of services and the tertiary sector.325 Were sectoral agreements designed in such a way as to tap into China’s existing motivations for sectoral reform, for instance in heavy industry, they could command greater domestic support, have a greater likelihood of being successfully implemented and produce stronger outcomes for GHG emissions reductions in a particular sector. Issues-linkage in multilateral fora, Victor’s ‘small club’ proposal, and the idea of sectoral agreements demonstrate how global climate change governance can move beyond the limitations of dealing with climate change as a traditional pollution control issue. These approaches offer ways to capitalise on the co-benefits between climate change mitigation and other policy priorities, and entice China into deeper and more varied international commitments on climate change. 323 324 T. Houser et al., op. cit. (May, 2008), pp. 69-70 D. Rosen, T. Houser, op. cit. (May 2007), p. 39; NDRC, op. cit. (January 2007), pp. 22-23; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 6 325 State Council, op. cit. (2007), pp. 8-9; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 4; K. Jiang et al., op. cit. (2009), p. 11; D. Zhou, op. cit. (2009), pp. 40-42 93 5.3 Limitations of Climate Mitigation from Below A major limitation of approaches that stress co-benefits is that they often inadequately address the difficult trade-offs that can occur between different policy priorities. As a result, relying on each country’s national interests in climate mitigation may not always produce the strong measures required to avert dangerous climate change. Several examples from China suggest that GHG emissions abatement, domestic environmental protection and other policy priorities can sometimes be incompatible. For example, coal-bed methane gas exploitation has often been promoted as an important method through which China can reduce its greenhouse gas emissions, while addressing other priorities such as energy security and worker safety in coal mines.326 However, concern that coal bed methane exploitation may exacerbate water scarcity, pollute local water systems and degrade farmland shows how technologies that are widely touted to be an important part of a transition to low-carbon growth can endanger the local environment.327 Similarly, hydropower has been praised as a valuable source of low-carbon energy generation.328 However, largescale hydropower brings with it large-scale local environmental destruction, such as biodiversity loss, silt build-up behind dam walls, and erosion.329 It is estimated that hydropower projects in China have led to the displacement of roughly 23 million people. Moreover, the downstream environmental damage from ambitious dam-building in Yunnan 326 A. Hu, op. cit. (February, 2008), p. 27; McKinsey & Company, op. cit. (26 February, 2009), p. 96; IEA/ OECD, op. cit. (2009), pp. 113-116; IEA/OECD, op. cit. (February, 2009); NDRC, op. cit. (January, 2007), pp. 20-21 327 328 329 D. Cooke, op. cit. (29 March, 2011); T. Hunter, op. cit. (16 August, 2011) D. Zhou, op. cit. (2009), p.44 K. Morton, op. cit. (2009), p. 46 94 could undermine the livelihoods of millions of people who subsist on the freshwater river systems of the Mekong Basin.330 Furthermore, co-benefits between climate change mitigation and different kinds of economic reforms broadly associated with ‘green growth’ also cannot be assumed in every case. In China, electricity market reform would increase the efficiency of energy use and production, lowering GHG emissions, and it would be a crucial first step for the introduction of a possible carbon tax. However, marketising the price of electricity would not in itself abate GHG emissions. In fact, it could raise GHG emissions even further. There is evidence that a relaxation of electricity rationing under the planned economy and a series of electricity price hikes helped to finance a massive expansion in China’s power generation capacity over the period from the mid-90s to the present, contributing greatly to China’s rapid increase in emissions from the power sector.331 Efforts to rebalance the economy away from heavy industry towards the tertiary sector and consumption-led growth present a similar conundrum. On the one hand this shift will reduce emissions relative to business-as-usual as the share of China’s emissions-intensive heavy industry shrinks. This will also bring other positive benefits for reduced local environment pollution and higher living standards for Chinese citizens. However, household energy consumption is also predicted to fast become one of the main sources of China’s GHG emissions in the future.332 In the context of containing emissions from household energy use, consumption culture and individual choices will have a significant impact on China’s emissions growth.333 Absent policies and targets that specifically focus upon strong GHG emissions reductions, co-benefits by themselves may not 330 H. Qin, “On The Mekong, A Better Way”, China Dialogue (30 December, 2010), available online: http:// www.chinadialogue.net/article/show/single/en/4016-On-the-Mekong-a-better-way-1- (accessed: 20 October, 2011); K. Morton, op. cit. (2009), p. 94 331 332 333 S. Howes, op. cit. (6 June, 2011), pp. 25-26 T. Wang, J. Watson, op. cit. (2009), p. 3 Ibid, p. 5 95 be enough to ensure that reforms such as raised domestic consumption and marketised electricity pricing do not unleash new sources of GHG emissions growth. 5.4 The Continuing Relevance of the UNFCCC The UNFCCC and the ‘International Norm of Climate Protection’ Traditionally proponents of ‘top-down’ architecture have argued that ‘bottom-up’ approaches cannot ensure strong outcomes for climate protection. This argument has been based on collective action theories, which state that everyone benefits from a habitable world climate but no one will benefit from protecting the climate unless everyone else does also. Even if many people were to take action there is the suspicion that some may ‘free ride’ on the efforts of others, by bearing none of the costs of mitigation and yet still enjoying the benefits of a habitable climate. As there is no world government or world ruler who can ensure that everyone does their bit to protect the climate, the issue can only be addressed by international treaties with universal membership that can define an equitable level of effort and penalise free-riders.334 While this theory holds some insights into collective action at the international level, the reality of climate change mitigation seems to have discredited the power of this theory to fully describe the current situation, as nations such as China are already taking action to reduce their GHG emissions without a legally binding obligation.335 However, it is still important to recognise the value of the UNFCCC process in generating international norms that, in turn, can influence domestic policy priorities. The 334 J. K. Hammit, “Is ‘Practical Global Climate Policy’ Sufficient?”, in in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 324; G. Brennan, “Climate Change: A Rational Choice Politics View”, The Australian Journal of Agricultural and Resource Economics, Vol.53, Issue 3 (July, 2009), pp. 310-312; C. Carraro, op. cit (2007), p. 162; E. Ostrom, op. cit. (October, 2010), p. 551; W. Hare et.al., op. cit. (2010), pp. 602-605 335 D. Bodansky, op. cit. (2007), p. 63; W. A. Pizer, op. cit. (2007), p. 294 96 UNFCCC remains the most influential forum through which targets are set (even if these are seen as aspirational rather than legally binding), principles and ideas are negotiated by world representatives, and the norm of climate protection is consolidated.336 Some proponents of climate governance from below have suggested that the merits of bottom-up approaches render the UNFCCC process and the Kyoto Protocol redundant.337 However, proponents of the argument that “international agreement follows domestic action”338 have missed the important point that international norms can powerfully influence domestic ideas, which in turn set the priorities for domestic action. While the perceived value of the UNFCCC varies from country to country, China continues to view it as the most politically legitimate forum to coordinate climate change mitigation. As a result, the UNFCCC is the main international body through which the international norm of climate protection influences domestic debates and policy in China. The Political Legitimacy of the UNFCCC and China’s Participation While some criticise the political legitimacy of the UNFCCC as “a woolly concept that has not been subjected to careful empirical tests,”339 the fact remains that China has dedicated an enormous amount of diplomatic energy to maintaining the UNFCCC process and breaking through the political blockages that have threatened that process at different times. China has worked within the negotiations to defend the principles of equity for developing countries.340 336 337 J. Gupta, op. cit. (2007), pp. 119-120; R. Foot, A. Walter, op. cit. (2011), pp. 177-186 W. J. McKibben, P. J. Wilcoxen, “A Credible Foundation for Long-Term International Cooperation on Climate Change” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 185; S. Barrett, “A MultiTrack Climate Treaty System,” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 237; D. Victor, op. cit. (2007), p. 134 338 H. D. Jacoby, “Climate Favela” in J. E. Aldy and R. N. Stavins (eds.) Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World, (Cambridge: Cambridge University Press, 2007), p. 277; also D. G. Victor, op. cit. (2007), p. 134 339 340 D. G. Victor, op. cit. (2007), p. 135 S. Kasa et al., op. cit. (2008), p. 121, p. 125; J. I. Lewis, op. cit. (2008), pp. 162-163; Z. Zhang, op. cit. (2003), pp. 67-68, pp. 78-80 97 China has sought to overcome disagreement with developed countries and reach compromises on its own commitments (in the form of voluntary pledges) and international monitoring.341 China has been the subject of international blame and anger over its conduct at Copenhagen and has evidently dedicated time to changing its negotiating style at Cancún. 342 While other countries have indicated that they do not wish to take part in a second Kyoto commitment period, China has publicly affirmed its commitment to Kyoto in the lead-up to the COP 17 in Durban at the end of this year.343 Where some countries have sought to deepen the idea of ‘issues linkage’ by using other multilateral forums to set out climate change policy, China has often affirmed that the principal focus of action should remain within the UNFCCC. For example, when Australia sought to forge a climate change agreement out of the APEC meeting in 2007, China reacted by rejecting the proposal and reaffirming the central role of the UNFCCC and the Kyoto Protocol (which Australia had not signed at that point).344 While many of these individual actions are motivated by a mix of interests, together they demonstrate that China has developed a vested interest in the overall UNFCCC process and views it as the most politically legitimate forum for internationally coordinated action on climate change. How the UNFCCC Can Influence China’s Domestic Ideas The political legitimacy of the UNFCCC as the main forum through which the norm of international climate protection evolves has a significant influence on China’s domestic debates. This norm can provide political clout and legitimacy to domestic reformers who are 341 D. Held et al., op. cit. (January, 2011), pp. 39-40; S. Meng, op. cit. (29 November, 2010); R. Foot, A. Walter, op. cit. (2011), p. 203 342 A. 343 Hsu, Y. Zhao, op. cit. (27 January, 2011) “BASIC Push Kyoto as Focus of Durban Climate Meet”, op. cit. (5 September, 2011); D. Bodansky, op. cit. (August, 2011), p. 3 344 “China Rebukes Australia: No Climate Change Targets for APEC”, Der Spiegel (6 September, 2007), available online: http://www.spiegel.de/international/world/0,1518,504265,00.html (accessed: 20 October, 2011) 98 pushing for stronger climate mitigation. In China, signing up to international agreements has often been an important way to garner domestic support for important reforms. For example, scholars working on China’s environmental policy over the years have observed that waves of domestic environmental reforms have often come in the wake of China’s participation in international agreements, such as the 1972 United Nations Conference on the Human Environment in Stockholm, and the 1992 Rio Summit.345 Similarly, in the 1990s, domestic reformers were able to use accession to the WTO to help overcome domestic opposition and push through reforms that they had already been proposing. This was in no small part because accession to the WTO became a point of national pride and a symbol of international prestige.346 The UNFCCC has also played an important role as the dominant public institution through which individual states are judged on how much their are doing to uphold the norm of climate protection.347 As a result it is the main venue through which international pressure has been brought to bear on China to do more to address its own contribution to climate change. This pressure has been important in highlighting the opportunities for domestic climate mitigation amongst Chinese policy makers.348 In turn, these domestic actions have translated back to commitments in the UNFCCC on carbon intensity, renewable energy and forest cover.349 As Hu Angang has observed, international pressure for China to do more on climate change should not necessarily be viewed as a bad thing, because of the important role this pressure has played in spurring domestic climate mitigation policies. 350 345 346 347 E. Economy, op. cit. (2004), pp. 96-100 T. Houser et al., op. cit. (May, 2008), p. 67 R. Eckersley, Does Climate Leadership Matter? (Canberra: Australian Political Studies Association Annual Conference, 26-28 September, 2011), available online: http://law.anu.edu.au/COAST/events/APSA/papers/ 89.pdf (accessed: 20 October, 2011) 348 X. Lu et al.,op. cit. (2006), p. 96; J. Pan, op. cit. (October, 2010); Government of the People’s Republic of China, op. cit. (2007), pp. 182-290; State Council, op. cit. (October, 2008), pp. 2-3; J. Pan et. al., op. cit., (July, 2007), pp. 187-194; R. Foot, A. Walter, op. cit. (2011), p. 203 349 Department of Climate Change, NDRC, op. cit. (28 January, 2010) Hu, op. cit. (February, 2008), p. 26 99 350 A. Returning to the three ideas analysed in this thesis, energy security, environmental protection and international leadership could have been pursued in ways that were largely divorced from GHG emissions abatement. 351 Notions of energy security based on international oil security could have prompted greater reliance on coal, rather than energy efficiency policies. Environmental protection could have been framed in a way that took no account of global GHG emissions, and instead focused solely on local environmental pollutants. In its efforts to display international leadership, China could have chosen to pursue other international issues, without a focus on climate change and clean energy. However, while a number of factors influenced China’s changed energy policy, ideas related to new energy security, green development and international low-carbon leadership have also been strongly linked to China’s engagement in climate governance at the international level. The policies that have flowed from these ideas, such as energy efficiency and renewable energy, have been key to demonstrating that China is serious about fulfilling the carbon intensity and renewable energy pledges made at Copenhagen and meeting its global responsibility for climate change.352 Returning to the question of how ideas influence policy, as discussed in the methodology section of this thesis, for China the UNFCCC process and the international norm of climate protection has been important in every stage of that process. International pressure in the UNFCCC has been influential in highlighting China’s international responsibility to climate mitigation and and the IPCC has raised awareness of China’s vulnerability to climate change. 353 Climate-related ideas such as new energy security, green development and international low-carbon leadership have arisen in part due to the influence 351 352 Ibid, p. 199 K. Halding, et al., op. cit. (2009), pp. 129-130; A. Hu, op. cit. (February, 2008), p. 26; State Council, op. cit. (2010); NDRC, op. cit. (September, 2007), p. 7; Government of the People’s Republic of China, op. cit. (14 March, 2011), p. 21; State Council, op. cit. (December, 2007), p. 31; Department of Climate Change, NDRC, op. cit. (28 January, 2010) 353 R. Foot, A. Walter, op. cit. (2011), p. 177 100 of the international norm of climate protection in this “agenda-setting process.”354 It is quite possible that the perceived legitimacy of the UNFCCC has both increased the clout of domestic pro-mitigation reformers, who seek to “shake up the existing policy monopoly” and mainstream climate mitigation into broader policy design, and that it has emphasised the importance of achieving central government targets domestically.355 Finally, the international norm of climate protection has been influential at the stage of implementation and “policy feedback.”356 As China’s domestic climate-related reforms are linked more closely with voluntary commitments in the UNFCCC, the desire to fulfill those pledges can form its own ‘policy lock-in’ as climate mitigation becomes more mainstream at the national level. When difficult trade-offs over climate change mitigation are considered at the domestic level, international pressure and national commitments made in a politically legitimate, ‘top-down’ institution such as the UNFCCC can be important in strengthening the persuasive power of domestic ideas that seek to mainstream strong climate mitigation into other national priorities. 5.5 Conclusion For the foreseeable future, international climate governance that seeks to combine the virtues of both bottom-up and top-down approaches offers the best opportunity to deepen China’s participation in international climate change cooperation and support China’s process of internal reform. Bottom-up approaches to international climate change governance that stress co-benefits between climate change and other policy areas hold great potential for strengthened international engagement with China, because of China’s own varied motivations for emissions reductions. However, co-benefits and domestic interests alone may 354 355 356 D. Béland, op. cit. (February, 2005), pp. 6-7; P. Andrews-Speed, op. cit. (January, 2010), p. 8 D. Béland, op. cit. (February, 2005), pp. 11-12 P. Pierson, op. cit. (July, 1993), pp. 595-601 101 not provide a sufficient basis for action on climate change, given the difficult trade-offs that can arise between climate protection and other policy priorities. This reinforces the continuing relevance of the UNFCCC process. Above all, China regards the UNFCCC as the most legitimate international institution through which the norm of international climate protection is defined and debated. This norm, in turn, continues to influence domestic ideas that define the scope for co-benefits between climate change mitigation and other policy priorities in China. 102 Chapter 6: Conclusion The role that domestic ideas have played in motivating China’s approach towards climate change have been largely neglected in the existing literature. Through a survey of the works of China’s leading energy academics and key government energy documents, this thesis has sought to examine the main ideas that have set new agendas and reshaped the main priorities for energy policy and climate-related reform since the 11th FYP. This thesis has highlighted three ideas in particular that have altered China’s perceptions of the pressing priorities and concerns that energy policy must address. A new concept of energy security has shifted the focus away from international oil security towards an emphasis on the way in which high and inefficient domestic energy consumption and weaknesses in China’s internal energy system now constitute a major source of energy insecurity. By redefining China’s energy security priorities, new energy security has influenced recent government energy efficiency policies. The idea of green development has increased awareness of the environmental and resource constraints on economic growth and the growing costs of environmental degradation. This has impacted upon government efforts to create ‘win-win’ policies for environmental protection, climate change mitigation and economic development within China’s energy sector. Finally, new concepts of China’s international status as a lowcarbon leader have emphasised both international pressure for China to change its energy system, and the opportunities in terms of economic growth and political leadership that lowcarbon markets and multilateral climate change fora create. However, for each of these new ideas and the policies associated with them, there exist significant implementation impediments. How these challenges and impediments are dealt with will have profound ‘feedback effects’ on both future government policies, and the ideas that have inspired them. Managing the relationship between administrative measures and market reform in China’s 103 transitional, half-marketised economy will deeply influence future energy efficiency policies and ‘new energy security’. Public participation and the role of the Party-state in negotiating difficult trade-offs between local environmental protection, climate change mitigation, economic development and social welfare will deeply impact upon the course of China’s green development. Finally, managing international mistrust and misunderstanding associated with China’s rise will play a substantial role in the extent to which the progressive vision of China as an international low-carbon leader becomes a durable and meaningful feature of China’s international relations. While other interests as well as economic, social and political dynamics have all played a vital role in motivating China’s changing approach to energy reform and climate mitigation, the important role that ideas have played in framing and defining China’s interests has been largely overlooked. The role that these domestic ideas have played in motivating China’s climate-related energy reform have important implications as the world puzzles over the international climate architecture in the post-Kyoto period. ‘Bottom-up’ approaches that seek to maximise the cobenefits between climate change and other national agendas can take greater advantage of the varied motivations that are likely to stimulate China’s emissions reductions. However, relying on co-benefits and national interest to form the basis of a coordinated international approach to climate change may not deliver the global outcomes that are urgently needed to keep warming within the international recognised ‘safe’ zone of 2 degrees. Therefore, the ‘topdown’ approach centered around the UNFCCC process remains an essential part of climate governance and a vital part of encouraging deeper participation from China. This is in no small part because China continues to view the UNFCCC as the most legitimate institution through which the international norm of climate protection is defined and debated. This is important because of the influence international norms can have on ideas and debates at the 104 domestic level, which form national policy and set the scope for mediating co-benefits between climate change and other domestic priorities. This study of the motivations for China’s recent energy reform has demonstrated that ideas matter in forming China’s national interest in climate change mitigation and framing China’s engagement internationally. However, this study is by no means an exhaustive or complete account of the role of ideas within the domestic arena. Clearly, greater enquiry into the ways in which new and changing domestic ideas “act like switchmen” to frame China’s motivations for emissions reductions will be needed to fill the large gaps in our understanding.357 As the world struggles to negotiate a new climate governance architecture in the post-Kyoto era, this understanding will be vital in constructively engaging the world’s largest current and future GHG emitter. As the catastrophic effects that unmitigated climate change will have upon the earth become more clear and more frightening, a more comprehensive understanding of China’s motivations for GHG emissions reductions will be crucial for our common future. 357 Max Weber cited in J. L. Campbell, op. cit. 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