In the first half of 2014, energy intensity in China declined 4.2 percent, and the carbon intensity of the country’s gross domestic product (GDP) fell 5 percent, compared with the same period in 2013. These are among China’s biggest “green” achievements since 2011, the first year of the 12th Five-Year Plan, which guides the nation’s economic development. According to the National Development and Reform Commission (NDRC), which announced the progress, slower growth of heavy industry and rapid expansion in the country’s service sector were the main forces behind these trends.
According to data released by China’s National Bureau of Statistics (NBS), industrial output continued to grow during the first half of 2014. However, the growth of some greenhouse gas emissions-intensive industries was lower during 2013–14 than during 2012–13. Among the major industries experiencing slower growth are paper making; oil processing; cement, glass, iron, and steel production; and automotive production. Some industries, such as crude oil and chemical fertilizer production, even showed negative growth. (See Figure 1.)
Figure 1. Growth of Selected Greenhouse Gas-intensive industries In China, 2012–2014
Note: The Figure compares production data for the first two quarters of the given years. Oil processing includes the production of gasoline, kerosene, diesel, and coke.
Source: NBS China
Noticeably, the production of air pollution control equipment has grown dramatically in China. NBS data for the first half of the year indicate that production increased 8.0 percent between 2012 and 2013, but then surged more than 35-fold to grow 288.8 percent between 2013 and 2014. According to a report released by Zhiyan Consulting Group, growth in this industry comes mainly from flue gas desulfurization systems and particulate collection devices.
NBS data also show that, in the first half of 2014, the value-added of the service sector exceeded that of the manufacturing sector. (See Figure 2.) (The service sector overtook the manufacturing sector in annual total added value for the first time in 2013.) This also contributed to the reduction in energy intensity and carbon intensity, since the service sector was less energy-consuming in general. Data suggest that the main drivers behind the growth between 2013 and 2014 were the wholesale and retail industry, and the financial services industry.
Figure 2. Value-added of China’s Manufacturing and Service Sectors
Note: The Figure compares data for the first two quarters of the given years.
Source: NBS China
Reduced growth in energy-intensive industries was accompanied by a greening of China’s overall energy mix. NBS data show that renewable energy sources—particularly wind and solar power—are gradually edging out fossil fuels in electricity generation. (Note that in the first half of 2014, curtailment of wind power was down 33 percent compared with the same period in 2013, saving 3.6 billion kilowatt-hours of electricity and ameliorating China’s wind curtailment problem; see the earlier Worldwatch post on this issue.)
If the trends in industrial growth and energy mix continue, China may be able to achieve its near-term goals for reducing climate-altering emissions. The country’s 12th Five-Year Plan aims for a 16 percent reduction in energy intensity and a 17 percent reduction in carbon intensity during 2011–15, with the goal of fulfilling a 2009 pledge to reduce carbon intensity 40–45 percent from 2005 levels by 2020. According to the NDRC, by 2013, China had achieved a 28.6 percent reduction in carbon intensity from 2005 levels, hitting 63 percent of its goal in just four years.
However, in one report, an NDRC official observes that further reductions remain challenging, and risks of rebound exist. Some regions that currently face the prospect of economic decline have plans for energy-intensive projects, and the per-unit energy consumption of some industrial products is likely to rise. Yet, from the national level to the enterprise level, China is making efforts to provide long-term momentum to the low-carbon transition.
Policies and legislation
In August 2014, the NDRC issued the Method to Assess the Accomplishment of Unit GDP Carbon Dioxide Emission Reduction Goal. Consistent with the Work Plan of Controlling GHG emissions during the 12th Five-Year Plan Period, issued by the State Council in 2011, the Method builds a connection between a region’s carbon reduction outcome, its system for assessing integrated socioeconomic development, and the track records of local government officials.
This more-detailed scoring system represents a step away from China’s near-singular focus on GDP as a measurement of progress. Local governments can now earn credits for actions such as reductions in carbon intensity, increasing the share of the service sector in local economic growth, increasing the share of renewable energy in primary energy consumption (and reducing the burning of coal), forest planting, and capacity building. The local government must meet both the annual and cumulative carbon intensity goals in order to pass the assessment.
To provide a solid legal basis for these climate-related efforts, the NDRC has reportedly completed a draft of the Climate Change Response Act, which could be released next month for consultation. The draft is based on an earlier version of the Act released in 2012, following a two-year drafting process led by researchers from the Chinese Academy of Social Sciences. The latest draft highlights air pollution control as the major entry point to tackling climate change.
Local markets and standards
China has adopted carbon intensity goals, rather than absolute emission reduction goals. However, the country’s emerging cap-and-trade carbon market can act as a bridge between the two. The development of regional and national emission trading systems is on the agenda, with calls for comprehensive standards, industry leadership, and public engagement.
In April, to support development of the emission trading market, the Beijing Municipal Commission of Development and Reform released a set of standards called “Advanced Carbon Emission Intensity Values” for 23 major energy-intensive industries, including power generation, heating, paper making, automotive production, electronic devices/component manufacturing, food processing, brewing, and a variety of services. The mandatory emission trading system will allocate carbon credits to newly added facilities based on these advanced standards.
In December 2013, the World Wide Fund for Nature (WWF) China office released the country’s first ranking of enterprises based on their carbon intensities, to encourage non-fossil fuel companies to pursue higher energy performance and lower carbon intensities. When comparing the performance of WWF’s top-ranked enterprises with Beijing’s advanced values, most electronic device manufacturers on the list showed leadership, with carbon intensities 80 to 98 percent lower than the advanced value; however, the carbon intensity of even the best telecommunication services companies was 88 percent higher than the advanced value, showing significant room for reduction.
Carbon intensity, or absolute emission reduction?
Through its carbon market, China is implementing a system to encourage companies to make absolute reductions in their emission levels; however, it seems unlikely that a national commitment of this kind could be made at or before the informal United Nations climate summit on September 23. Although it was initially reported that China could introduce an absolute cap on its greenhouse gas emissions under the 13th Five-Year Plan, Chief Climate Negotiator Su Wei recently reaffirmed that the country would stick with the carbon intensity target, as China still expects significant economic growth in the future. Nevertheless, the country’s effort and accomplishment should not be underestimated.
According to PricewaterhouseCooper’s (PwC’s) Low Carbon Economy Index 2014, in order to keep the rise in global temperature below two degrees Celsius while maintaining economic growth, the world needs to reduce its carbon intensity by 6.2 percent annually through 2100. The current five-year worldwide average is merely 0.6 percent annually, whereas China’s average was 1.6 percent during 2008–13. During this period, none of the countries with the highest reduction rates had an annual GDP growth above 4.5 percent, whereas China’s growth was 8.9 percent. (See Figure 3.)
Figure 3. Annual Average Changes in Carbon Intensity and GDP, World and Selected Countries, 2008–13.
That being said, China still has the second highest carbon intensity among the Group of 20 countries, just below South Africa. As China adopts new policies and market systems in an effort to pursue less-energy-intensive economic growth, the effectiveness of its emission reduction initiatives remains to be seen.
Wanqing Zhou is an intern with the China Program at th Worldwatch Institute and an associate with Brighter Green.