This post was written by Michael Davidson, who works at the NRDC (Natural Resources Defense Council).
China leads the world in renewable energy deployment and clean energy investments, according to the Pew/Bloomberg New Energy Finance report “Who’s Winning the Clean Energy Race? 2010 edition” released today. This is part of a larger trend we’re seeing in China, which in adopting its Twelfth Five-Year Plan has cemented long-term strategies for greening GDP, controlling energy use, greenhouse gas emissions and key pollutants, and capitalizing on the growing low-carbon economy (full Chinese plan).
Environment and climate took center stage in discussions where the sustainability of China’s economic engine was questioned by Chinese Premier Wen Jiabao. Following adoption of the Plan, he said economic indicators need to be expanded beyond simply GDP (original Chinese). This is because achieving a stunning 11% average annual growth over the last five years has put great pressure on its natural resources and environment. Energy demand doubled over the last decade, and with 70% of China’s energy supply coming from coal, the need for both energy efficiency and alternative energy options has weighed heavily on Chinese leaders.
The latest Plan puts in place several binding targets that will guide this transition. In the Chinese context, “binding” means that the promotion prospects of provincial and local officials and leaders of state-owned enterprises are linked with their success in meeting those targets. Key environmental targets in the Plan – which demonstrate the pressing environmental problems facing the nation – include:
- Decreasing energy intensity (energy consumed per unit GDP) by 16% by 2015.
- Decreasing carbon intensity (carbon emissions per unit GDP) by 17% by 2015.
- Increasing non-fossil energy as a proportion of primary energy to 11.4% by 2015, from the current 8.3%.
- Increasing R&D expenditures to 2.2% of GDP by 2015, from the current 1.8%.
- Decreasing water intensity (water consumed per unit of value-added industrial output) by 30% by 2015.
- Increasing forest coverage rate to 21.66% and forest stock by 600 million cubic meters by 2015;
- Decreasing sulfur dioxide and chemical oxygen demand (a measure of water pollution) by an additional 8% by 2015 (these were reduced by 14.29% and 12.45% during the 11th Five Year Plan), and reducing two new key pollutants, nitrogen oxide and ammonia nitrogen, by 10% by 2015. Reducing heavy metal pollution from industry will also be a key focus of the plan.
But China also sees clearly the opportunities of a low-carbon economy. According to the Pew/Bloomberg report, China’s private investment on clean energy topped $54.6 billion in 2010, accounting for more than one-fifth of a global market worth $243 billion. China leads the world in renewable energy deployment (at 103GW), manufacturing (over 50% of wind turbines and solar modules globally) and attractiveness to investors. Over the next five years, China plans to build at least 70GW of new wind farms and 5GW of new solar farms, increases of 225% and 715% over 2010 figures, respectively.
That’s also why over the next ten years China plans to invest 5 trillion Renminbi ($760 billion) in “new energy” (see footnote) as one of the central government’s seven “strategic emerging industries.” These industries – which are all high-value-added and R&D-intensive – will have their pick of government incentives to promote innovation and expand production. Low-carbon technologies supported include: energy-saving and environment protection technology, new energy, new-energy vehicles, new materials and next-generation IT. (Skip to page 17 of The Climate Group’s excellent summary of the 12th FYP for more info.)
Of the $760 billion public and private investment in new energy by 2020, renewables and grid investments take the largest shares: wind ($230 billion), smart grid ($210 billion) and solar ($30 billion). These investments will be guided by long-running, successful policies (such as the Renewable Energy Law) as well as several new ones, including national demand-side management (DSM) regulations, pilot environmental and carbon taxes and the equivalent of renewable portfolio standards.
China faces serious challenges to reining in its emissions and energy consumption growth and the path so far has not been perfect. As with everything in China, the key challenges lie in implementation and compliance: we are waiting for a number of regulations to be finalized such as amendments to the Renewable Energy Law and an enhanced reporting system of energy and climate data. However, the Twelfth Five-Year Plan’s proactive approach to energy and climate is changing the tenor of the false debate between economic prosperity and environmental protection.
(This piece was adapted from a post on Switchboard.)
1 This includes renewables, nuclear and unconventional gas, and is used interchangeably with “alternative energy.” China recently suspended approval of new nuclear plants pending a safety review.