Climate change is a global challenge and requires a global solution. Through analysis and dialogue, the Center for Climate and Energy Solutions is working with governments and stakeholders to identify practical and effective options for the post-2012 international climate framework. Read more
In Brief: Clean Energy Markets: Jobs and Opportunities
July 2011 Update (originally published February 2010)
Download this Brief (PDF)
This brief discusses how investment in clean energy technologies will generate economic growth and create new jobs in the United States and around the globe. The United States stands to benefit from the expansion of global clean energy markets, but only if it moves quickly to support domestic demand for and production of clean energy technologies through well-designed policy that enhances the competitiveness of U.S. firms.
Clean energy markets are already substantial in scope and growing fast. Between 2004 and 2010, global clean energy investment exhibited a compound annual growth rate of 32 percent, reaching $243 billion in 2010. Forecasts of investment totals over the next few decades vary according to assumptions made regarding the nature of future global climate policies. Over the next decade, assuming strong global action on climate change, cumulative global investment totals for clean power generation technologies could reach nearly $2.3 trillion.
Recognizing the potential of these markets, the European Union, China, and other nations are moving to cultivate their own clean energy industries and to position them to gain large market shares in the decades ahead.
- The European Union continues to lead the world in clean energy investments, spending nearly $81 billion in 2010. Since 2009, China has invested more money per year in clean energy technologies than the United States, investing $54.4 billion in 2010 compared to the United States’ $34 billion. Over 85 percent of today’s market for clean energy technologies is outside of the United States, primarily in Asia and Europe.
- Germany’s clean energy investments of $41.2 billion were the second most for any country in 2010, surpassing the now third-place United States.
- China now boasts the world’s largest solar panel and wind turbine manufacturing industries, accounting for nearly 50 percent of manufacturing for both technologies.
- Danish wind manufacturers produce close to 22 percent of annual global installed wind capacity.
These countries have taken deliberate steps to position themselves as leaders in the 21st century clean energy economy. History shows that it matters where industries are first established, and countries can use policy to foster domestic “lead markets” for particular industries, giving them the foothold that can lead to significant growth in global market share. In the United States, well-crafted climate and clean energy policy can give nascent clean energy industries such a foothold by creating domestic demand and spurring investment and innovation. Strong domestic demand creates not only export opportunities but also jobs – many of which must be located where the demand is, thus fostering domestic job growth even when industry supply chains are globally dispersed.
National climate and clean energy policy in the United States can help create jobs and domestic early-mover industries with the potential to become major international exporters. Such policy should provide incentives for investment in clean energy, for example through a clean energy standard, that requires a certain amount of electricity be obtained from clean energy sources, or a market-based mechanism that puts a price on carbon. The time to act is now: through policy leadership at home and abroad, the United States can position itself to become a market leader in the industries of the 21st century.
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This post originally appeared on Txchnologist
At a time when many are adopting the narrative that carbon markets are faltering, the European Union (EU) is aggressively pursuing the expansion of theirs to include aviation. One of only two mandatory greenhouse gas (GHG) cap-and-trade systems in the world, the EU Emissions Trading Scheme (ETS) plans to fold in a new sector beginning in January 2012. Our research shows reducing GHG emissions from aviation is critical if we are to mitigate the impacts of global climate change. Low-carbon fuel technology and other technologies for airplanes are advancing at a rapid clip, but we need a climate policy – either a price on carbon or something else – to get over the hump.
|Glaciers on the summit of Mount Kilimanjaro|
I recently returned from climbing Mount Kilimanjaro in Tanzania for a great cause, and I was reminded why I left engineering to work on climate change. Mount Kilimanjaro, or Kili, is the tallest peak in Africa, and its summit is covered with beautiful glaciers (see the picture to the right). But those glaciers are rapidly disappearing, and scientists estimate Kili’s summit will be ice free by 2022. This trend is a prime example of forced adaptation to climate change and provides a serious warning of things to come unless we work together to reduce our global greenhouse gas emissions. The action we need has to come from government at all levels, businesses, and individuals as we explain in our Climate Change 101 series.
The International Spectator
By Namrata Patodia Rastogi
India’s approach to climate change has shifted dramatically in the span of a few years. Not only has India developed a comprehensive climate change program domestically, it has adopted a new stance in the international negotiations that has earned it the reputation of being a ‘deal maker’. This dramatic, and to many unexpected, shift in India’s climate change strategy can be understood if seen in the context of India’s economic and development aspirations and the changes occurring in the larger geopolitical landscape. Climate change, due to its multi-faceted nature, cuts across a spectrum of issues and India can benefit both domestically and internationally by addressing it. India’s desire to play a strategically important role in a new global order as well as deal with domestically critical issues like energy security and energy access, all coalesce with the climate issue. By engaging proactively on climate change, India may be able to advance all of these objectives at once. To succeed, it must demonstrate that action on climate change does not come at the expense of economic growth or development goals, and that these can, in reality, go hand in hand.
Pew Center on Global Climate Change presents:
MULTILATERAL CLIMATE EFFORTS BEYOND THE UNFCCC
UN Climate Change Conference
Monday, June 13, 6:15 – 7:45 pm
Ministry of Transportation, Room RAIL
This event features presentations and discussion of options for addressing climate mitigation through other multilateral regimes – including the Montreal Protocol, LRTAP, ICAO and IMO – and implications for the future direction of the UNFCCC.
- MARCO GONZALEZ
Executive Secretary, Ozone Secretariat
- EIVIND VAGSLID
Head, Air Pollution and Climate Change, International Maritime Organization (IMO)
- TETSUYA TANAKA
Environment Officer, International Civil Aviation Organization (ICAO)
- HARALD DOVLAND
Former Chair of the Executive Body of the CLRTAP
- ELLIOT DIRINGER
Vice President, International Strategies, Pew Center on Global Climate Change
Event Presentations and Related Report
Testimony of Elliot Diringer
Vice President for International Strategies
Pew Center on Global Climate Change
Subcommittee on Oversight and Investigations
Committee on Foreign Affairs
U.S. House of Representatives
May 25, 2011
Hearing on “UN Climate Talks and Power Politics – It’s Not About the Temperature”
Mr. Chairman, Ranking Member Carnahan, and members of the Committee, thank you for the opportunity to testify on the critical issues confronting the United States and other nations in the effort to address global climate change. My name is Elliot Diringer, and I am Vice President for International Strategies at the Pew Center on Global Climate Change.
The Pew Center is an independent non-profit, non-partisan organization dedicated to advancing practical and effective policies and actions to address global climate change. Our work is informed by our Business Environmental Leadership Council (BELC), a group of 46 major companies, most in the Fortune 500, that work with the Center on climate change risks, challenges, and solutions.
Mr. Chairman, climate change poses a serious long-term threat to our nation’s resources, our economic well-being, and our national security. While action to address climate change must begin at home, this is a quintessentially global challenge, which therefore requires a global solution. I would like to focus my testimony today on three topics: 1) the status of the international climate negotiations, and the objectives that should guide U.S. climate diplomacy; 2) the policies being implemented in other countries – including our major trading partners – to reduce greenhouse gas emissions; and 3) the environmental, economic and security rationales for stronger climate action.
My principal points are as follows:
- The past two years have seen the emergence of a more realistic and balanced approach in the international climate negotiations, thanks in large measure to the efforts of U.S. negotiators. The United States must remain fully engaged in the talks with the aim of strengthening multilateral support and transparency, thereby promoting action while laying the groundwork for a future binding agreement.
- A growing number of countries are pursuing policies that help reduce greenhouse gas emissions. Many see the challenge as an important opportunity as well. Some of our major trading partners are moving aggressively to grow their clean energy technology industries, which create domestic jobs and high-value exports. Without stronger policies creating similar incentives here, the United States risks falling further behind in the rapidly expanding clean energy market.
- U.S. inaction on climate change exposes our nation to real and rising risks. The longer we delay action, the harder it will be to avert the worst consequences of warming, the higher the cost of coping with those that can not be avoided, and the further we fall behind in the clean energy race. Taking steps now to expand clean energy and reduce greenhouse gas emissions is squarely in our strong national interest.
Moving the Negotiations Forward
Multilateral regimes do not generally spring forth fully formed – rather, they evolve over time. The international climate effort is no different. It began with the 1992 United Nations Framework Convention on Climate Change (UNFCCC), which was signed by the President George H. W. Bush and unanimously ratified by the U.S. Senate. The UNFCCC, now ratified by 195 parties, established a long-term objective of preventing “dangerous anthropogenic intereference with the climate system” and a framework within which countries can work together to achieve it. To be certain, countries’ positions in the climate negotiations are heavily conditioned by their respective national interests. But underlying the Framework Convention is a clear recognition that countries share a common interest in averting dangerous climate change. And a fundamental principle of the Convention is that while our respective responsibilities are differentiated, depending on nations’ circumstances, we all share a common responsibility for meeting this common challenge.
Since the signing of the Framework Convention, the climate regime has evolved in fits and starts. While the Convention is largely voluntary in nature, countries resolved shortly after its entry into force that stronger action was needed, and initiated a new round of negotiations aimed at establishing binding emission targets for developed countries. This led in 1997 to the Kyoto Protocol. Although the United States chose not to participate, Kyoto entered into force in 2005, and most other industrialized countries are on track to meeting their obligations. For many countries, the principal aim since 2005 has been to extend this legally-binding regime through a second round of targets. But many of the countries with targets have made clear that they will not assume new binding obligations without commensurate commitments by the United States and the major developing economies. Through this prolonged stalemate, the negotiations were stuck in a mode of binding-or-nothing, and consequently produced virtually nothing.
Over the past two years, however, we have seen the emergence of a more realistic, more balanced and more constructive approach, in large measure through the efforts of the United States. Many viewed the Copenhagen summit in 2009 as a major failure because they had hoped – unrealistically – that it would produce a binding agreement. In our view, the Copenhagen Accord, negotiated personally by President Obama and other world leaders, represented genuine progress. Among other things, the Accord set an aspirational goal of limiting global temperature increase to 2 degrees Celsius; set goals for mobilizing financial support to help developing countries reduce emissions, preserve forests, and adapt to climate change; and established the broad parameters of a system to ensure transparency and accountability. What’s more, it provided for mitigation pledges from both developed and developing countries. As a result, for the first time ever, all of the world’s major economies – including China and India – have now made explicit pledges to reduce or limit their greenhouse gas emissions.
In the chaotic final hours in Copenhagen, the Accord was not formally adopted by the UNFCCC Conference of the Parties. However, at the 16th Conference of the Parties last year in Cancún, parties adopted a package of decisions incorporating the essential elements of the Copenhagen Accord into the UNFCCC framework, and taking initial steps to implement them. The Cancún Agreements represent the most tangible progress within the UNFCCC negotiations in nearly a decade. First, they memorialize the pledges taken under the Copenhagen Accord by more than 80 countries accounting for more than 80 percent of global emissions. Second, the Agreements establish the fundamentals of a stronger support system for developing countries, and a stronger transparency system enabling countries to verify whether others are fulfilling their pledges.
The Agreements also reflect a more flexible and realistic framework for enshrining countries’ actions. Unlike the Kyoto Protocol, which allows only one type of commitment (a binding emissions target with a prescribed, common base year), the Agreements allow for a diversity of approaches. In the case of developed countries, pledges take the form of economy-wide emission targets, but with flexibility on base year and accounting. Developing countries have even broader discretion in defining their “nationally appropriate mitigation actions.” China and India, for instance, have pledged reductions in emissions intensity (emissions per unit of GDP), while Brazil, South Africa, Mexico and the Republic of Korea have pledged to reduce emissions below “business as usual.” This more realistic and balanced approach reflected in the Cancún Agreements, as well as the movement toward greater transparency for all major economies, are direct consequences of U.S. engagement and leadership in the climate negotiations.
It is important to emphasize that the pledges countries have made at this stage are voluntary in nature. We continue to believe that the global response to climate change should ultimately be enshrined in fair, effective and binding commitments among all of the world’s major economies. Countries will deliver their strongest possible efforts only if they are confident that others are also contributing their fair share, and this confidence is best maintained through mutual and binding commitments. We also recognize, however, that it will be a number of years before the United States, China and other key countries are prepared to assume binding commitments. Under these circumstances, we believe the United States must remain fully engaged in the climate negotiations with the aim of strengthening the UNFCCC as a means of delivering support and transparency, thereby promoting near-term action while laying the groundwork for a future legal agreement.
At the 17th Conference of the Parties later this year in Durban, we believe the aim should be further progress on the operational issues addressed in the Cancún Agreements, including the launch of a new Green Climate Fund to support developing country efforts and significant progress in strengthening transparency through new “measurement, reporting and verification” practices; and a clear declaration by parties of their intent to work toward legally binding outcomes. This outcome would build on the achievements of the past two years and continue the incremental progress needed to strengthen confidence in the regime and among parties.
Efforts in Other Countries
While international agreements and commitments are critical to our success in addressing global climate change, a more important measure of efforts to date are the policies and actions countries are undertaking domestically. A growing number of countries are developing or implementing policies contributing in one way or another to reducing greenhouse gas emissions. Many see the challenge as an important opportunity as well. A number of our major trading partners are moving aggressively to grow their clean energy technology industries, which create domestic jobs and high-value exports. Without stronger policies creating similar incentives here, the United States risks falling further behind our competitors in the rapidly expanding clean energy market.
The European Union is a clear leader in the development, manufacture, and deployment of clean technologies. The EU has set mandatory targets to reduce greenhouse gas emissions 20 percent below 1990 levels, and to increase renewables to 20 percent of its energy mix, by 2020. The centerpiece of EU climate policy is the Emissions Trading System (ETS) launched in 2005, which regulates carbon dioxide emissions (CO2) in the power and major industrial sectors generating about half of the EU’s CO2 emissions. Having overcome the early complications typical of a new compliance market, the system is set to expand in 2012 to cover other gases and the aviation sector. Europe’s clean energy investments, the world’s largest, doubled from 2009 to 2010, reaching nearly $81 billion. From 2004, the year before the ETS began, through 2008, the year before the global financial crisis, the European Union reduced its emissions 4.1 percent, while its GDP grew 9.8 percent.
China also has taken major steps towards increasing its manufacture and use of clean energy technologies. Under the Cancún Agreements, China pledged that by 2020 it will reduce the CO2 intensity of its economy 40 to 45 percent below 2005 levels; increase the share of non-fossil fuels in primary energy consumption to 15 percent by 2020; and increase forest coverage by 40 million hectares and forest stock volume by 1.3 billion cubic meters. These targets are reflected in domestic policy as well. Additional policies include: a national target for renewables to provide 15 percent of primary energy by 2020, with specific targets for wind, solar, biomass, and hydropower; feed-in tariffs for onshore wind power; and proposed fuel efficiency standards requiring urban cars and light trucks to achieve an average of 36.9 miles per gallon by 2015. The 12th Five-Year Plan adopted by the Chinese leadership in March devotes considerable attention to energy and climate, establishing a series of targets and policies for 2011-2015. These include a suite of policies to promote innovation in new strategic and emerging technologies, including nuclear, solar, wind, biomass, and hybrid and electric vehicles. The plan also includes a goal to "gradually establish a carbon trade market."
To be certain, China continues to build coal-fired power plants as well, and its emissions continue to rise. A recent analysis by the Lawrence Berkeley National Laboratory projects that on the present path China’s emissions will peak between 2030 and 2035. But the climate and energy provisions of the new Five-Year Plan show how China is moving forward with domestic policies in line with the pledge it offered in Copenhagen and formalized in the Cancún Agreements. Many of the policies also are clearly calculated to help ensure that China – which recently surpassed the United States and other countries to become the leading manufacturer of wind turbines and solar panels – retains a strong competitive edge going forward.
Other major developing countries are also stepping up their efforts to limit emissions growth and transition to cleaner energy. India, which pledged to reduce its emissions intensity (excluding the agricultural sector) 20 to 25 percent below 2005 levels by 2020, is pursuing a range of policies under its 2008 National Action Plan on Climate Change, including: a renewable energy target; a feed-in tariff for renewable energy; a market-based system of tradable energy savings certificates in industrial sectors; and a coal levy generating finance for clean energy research and innovation. Brazil and Indonesia have set goals to reduce deforestation. South Africa has set national renewable energy and energy efficiency targets and established a renewable energy feed-in tariff. Meanwhile, the governments of Mexico and South Korea have proposed establishing emissions trading systems.
While the global picture is uneven, these examples demonstrate a growing will among countries to undertake a wide variety of measures to promote clean energy and to reduce greenhouse gas emissions.
Addressing Climate Change is in Our National Interest
Earlier I emphasized that all nations share a common interest in averting dangerous climate change. It is important to understand why stronger efforts to address climate change and pursue clean energy are in our direct national interest as well. There are many reasons, whether from an environmental, national security or economic perspective.
The scientific and environmental rationale for lowering our greenhouse gas emissions is clear and compelling. As again underscored two weeks ago in America’s Climate Choices, a report produced by the U.S. National Academy of Sciences at the request of Congress, “Climate change is occurring, is very likely caused by human activities, and poses significant risks for a broad range of human and natural systems.” On these fundamental points, there is very strong consensus within the scientific community.
Due largely to the combustion of fossil fuels, atmospheric concentrations of carbon dioxide are at their highest level in at least 800,000 years. Over the last century, average global temperatures rose more than 1 degree Fahrenheit and in some places, including parts of the United States, temperatures rose more than 4 degrees. If greenhouse gas emissions continue to grow, average global temperatures are projected to reach 2.0°F to 11.5°F (1.1°C to 6.4°C) above pre-industrial levels by 2100, with warming in the U.S. expected to be even higher.
We are already witnessing the impacts of climate change here in the United States; the widespread flooding now inflicting communities along the Mississippi River vividly illustrates how vulnerable we are to the rising risks associated with climate change. Most of North America is experiencing increasing numbers of unusually warm days and nights and a decreasing number of unusually cool ones. At the same time, droughts are occurring more frequently while snowpacks are melting earlier in the year. Sea-level rise of 8 inches or more has been recorded in some coastal areas of the country. Continued warming will mean further sea-level rise, elevating storm surges and gradually inundating low-lying coastal areas along all U.S. coastlines; increased frequency and severity of extreme weather events; increased risk of droughts and floods; significant threats to ecosystems and biodiversity; and increased public health risks. Beyond such readily foreseeable impacts, the longer warming persists and the greater its magnitude, the greater the risk of abrupt or catastrophic changes in the global climate.
Actions to reduce the risks of climate change by lowering greenhouse gas emissions have other environmental co-benefits as well. Lower-carbon technologies such as natural gas and renewable energy also emit less of other pollutants including nitrogen dioxide, particulates, sulfur dioxide, lead, carbon monoxide, mercury, and other hazardous pollutants that have a wide range of harmful health effects, from asthma to cancer and premature death. Past regulatory efforts to reduce these pollutants have proven highly successful and cost-effective. The Office of Management and Budget (OMB) found that from 1992 to 2002 “major rules” enacted under the Clean Air Act produced benefits of between $145 billion and $218 billion a year, far exceeding the annual costs $22 billion to $25 billion. A study by researchers at MIT found total annual benefits rising from $50 billion in 1975 to $400 billion in 2000. We can expand these benefits by moving towards cleaner energy sources.
America’s military leaders recognize that climate change also poses increasing risks to our national security and new demands on our military resources. According to the Pentagon’s latest Quadrennial Defense Review, climate change may act as “an accelerant of instability or conflict, placing a burden to respond on civilian institutions and militaries around the world.”
Indeed, climate change will be a threat multiplier, further destabilizing regions of the world already burdened with countless other problems. Chronic drought, rising seas, extreme weather and other climate impacts could undermine weak governments, induce mass migrations, and trigger or heighten resource competition, contributing to social instability and, potentially, armed conflict. Rising seas could displace as many as 30 million people in Bangladesh, creating additional tensions on the Indian subcontinent. Receding glaciers could leave millions across Asia facing chronic water shortages. A distinguished group of retired three- and four-star U.S. military officers warns that drought, thirst, and hunger are already exacerbating the conflicts and humanitarian disasters in Darfur and Somalia, and climate change portends more situations like these.
Within the past year, devastating floods in Pakistan have strained the resources and stability of a key U.S. ally in the battle against international terrorism, and an intense drought and heat wave has diminished food production in Eastern Europe and Central Asia, causing a spike in global wheat prices. Yemen, where the CIA says Al Qaeda is of greatest concern today, is running out of groundwater for its under-employed population. While these events cannot be directly attributed to climate change, scientists are very clear that these types of events will occur more frequently in a warming world.
Other security issues are arising closer to home. The Arctic has long been a place where defense issues were minimized because the waterways were largely frozen over year-round. With warming now occurring there at twice the average global rate, the Arctic Ocean is opening to military and civilian transportation, and the potential security implications are already apparent. Receding sea ice is creating increased competition over territory and resources in a region where the United States is currently unprepared to address potential military situations.
Protecting our nation’s security necessarily involves being prepared to deal with an uncertain future. Indeed, planning under uncertainty is business as usual for the defense community. The fact that military and security experts are increasingly concerned about the risks associated with climate change should serve as an important wake-up call to us all.
Finally, addressing climate change is very much in our economic interest. The United States is the world’s leading manufacturer, producing 21 percent of global output while supporting 18.6 million domestic jobs. Yet in the growing clean energy sector, we risk falling further behind our competitors because the demand for these goods is not as strong at home as it is overseas.
China and other countries are investing heavily in clean energy technologies, positioning themselves to compete in a growing global market projected to reach $106 billion to $230 billion a year in 2020, and as much as $424 billion a year in 2030. In order for the United States to develop a successful, profitable, and competitive clean energy sector, companies need clear regulatory frameworks ensuring a strong domestic market for these goods.
The recent experience of the U.S. auto industry provides an instructive case study. While the technology in our cars has advanced significantly in the last two decades, the typical new vehicle today consumes gasoline at about the same rate as one produced in the late 1980s. But with gas prices again rising, consumers are increasingly turning to more fuel-efficient vehicles. Spurred by fuel economy standards enacted in 2007, American automakers have been ready to meet their customers’ needs. U.S. automakers reported strong sales and combined profits of nearly $5.9 billion in the first quarter of 2011, and all three cited higher sales of fuel-efficient vehicles as a contributing factor. Last year, the Smart car was the only conventional car available in the United States with a fuel economy rating of 40 miles per gallon or better. Today there are nine, and three of them – the Cruze, Elantra, and Focus – were among the 10 top-selling vehicles last month. All three are made in the United States.
Unfortunately , similar examples in the clean energy field must be found outside the United States. In Germany, for instance, renewable energy policies helped boost jobs in the renewable energy sector from 160,000 in 2004 to 370,000 in 2010.The German government credits this dramatic growth in clean energy jobs as a major factor in its relatively fast recovery from the 2008 recession. Germany’s renewable energy sector is projected to employ about 450,000 to 580,000 workers by 2020, and between 500,000 and 600,000 in 2030.
By contrast, U.S. clean energy manufacturers are increasingly finding their biggest growth opportunities overseas. First Solar, Inc., of Arizona, the world’s second largest solar manufacturer, plans to build a 2,000-megawatt solar photovoltaic power plant in China – the largest planned project of its kind in the world. While First Solar will also add new manufacturing jobs at its U.S. facilities, at least 71 percent of its planned growth is outside the United States. U.S. firms remain among the world’s top innovators. But if our clean energy firms are to invest and create jobs at home, and compete effectively overseas, we must provide the regulatory certainty that creates strong, sustained demand for their goods here in the United States. Doing so will strengthen our economy while protecting the United States against the risks of climate change.
Mr. Chairman, U.S. inaction on climate change exposes our nation to real and rising risks. The longer we delay action, the harder it will be to avert the worst consequences of warming, the higher the cost of coping with those that can not be avoided, and the further we fall behind other countries in the clean energy race. Taking steps now to expand clean energy and reduce greenhouse gas emissions is quite clearly in our strong national interest.
As the world’s largest economy, leading innovator, and largest cumulative emitter, the United States also has a responsibility to the international community. Thanks to U.S. efforts, the global climate effort now appears headed on a more reasonable course. Our ability to continue to shape that effort in the years ahead depends heavily on a demonstrated commitment to address climate change here at home.
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Energy and Climate Goals of China's 12th Five-Year Plan
By Joanna Lewis
The 12th Five-Year Plan (FYP) adopted by the Chinese government in March 2011 devotes considerable attention to energy and climate change and establishes a new set of targets and policies for 2011-2015. While some of the targets are largely in line with the status quo, other aspects of the plan represent more dramatic moves to reduce fossil energy consumption, promote low-carbon energy sources, and restructure China’s economy. Among the goals is to "gradually establish a carbon trade market." Key targets include:
- A 16 percent reduction in energy intensity (energy consumption per unit of GDP);
- Increasing non-fossil energy to 11.4 percent of total energy use; and
- A 17 percent reduction in carbon intensity (carbon emissions per unit of GDP).
The relationship between energy and economic growth matters greatly in China; without a reduction in energy intensity since the late 1970s, the country would need to consume three times the energy it does today to sustain its economic growth. At the center of China’s 11th Five-Year Plan (2006-2010) was a target to decrease the overall energy intensity of the economy by 20 percent. This target was implemented in response to increases in energy intensity experienced between 2002 and 2005, the first increase experienced after several decades of rapidly decreasing energy intensity. To reverse the unexpected increases in energy intensity, the government mobilized a national campaign to promote energy efficiency, targeting in particular the largest and least efficient energy consuming enterprises. The Top 1,000 Program targeted approximately 1,000 companies (consuming about one-third of the country’s energy) for efficiency improvements.
The 12th FYP builds directly on the 11th FYP energy intensity target and its associated programs, setting a new target to reduce energy intensity by an additional 16 percent by 2015. While this may seem less ambitious than the 20 percent reduction targeted in the 11th FYP, it likely represents a much more substantial challenge. It is likely the largest and least efficient enterprises have already undertaken efficiency improvements, leaving smaller, more efficient plants to be targeted in this second round. Under preparation is a new “Top 10,000” program, which is modeled after the Top 1,000 Program but adds an order of magnitude of companies to the mix. But as the number of plants grows, so do the challenges of collecting accurate data and enforcing targets.
The closure of inefficient power and industrial facilities also helped contribute to the decline in energy intensity during the 11th FYP period, with a reported 72.1 GW of thermal capacity closed. Total plant closures are equivalent to 16 percent of the size of the capacity added over the period. An additional 8 GW of coal plants are reportedly to be shut down in 2011 alone with further closures no doubt on tap over the next five years.
While final data are not yet available, the country likely fell short of meeting its 11th FYP energy intensity target of 20 percent, instead achieving in the range of 19.1 percent. There is no doubt, however, that much was learned though efforts to improve efficiency nationwide. Many changes were made to how such national targets are enforced at the local level, including the incorporation of compliance with energy intensity targets into the evaluation for local officials.
The 12th FYP includes a target to increase non-fossil energy sources (including hydro, nuclear and renewable energy) to 11.4 percent of total energy use (up from 8.3 percent in 2010). While not formally enshrined in the 12th FYP, another recent notable announcement is a cap on total energy consumption of 4 billion tons of coal equivalent (tce) in 2015. To meet the cap on energy consumption, annual energy growth would need to slow to an average of 4.24 percent per year, from 5.9 percent between 2009 and 2010. The government is also trying to slow GDP growth rates, targeting 7 percent per year – far below recent growth rates. Lower GDP growth rates make it even more challenging for China to meet energy and carbon intensity targets, since energy and carbon need to grow more slowly than GDP for the country to achieve declining energy and carbon intensity.
In the lead-up to the Copenhagen climate negotiations in the fall of 2009, the Chinese government pledged a 40-45 percent reduction in national carbon intensity from 2005 levels by 2020. To achieve this 2020 target, the 12th FYP sets an interim target of reducing carbon intensity 17 percent from 2010 levels by 2015. Whether this target will result in a deviation from China’s expected carbon emissions over this time period depends on the corresponding GDP growth, but many studies have found that this target will be challenging for China to achieve without additional, aggressive policies to promote low carbon energy development.
Also promised in the 12th FYP is an improved system for monitoring greenhouse gas emissions, which will be needed to assess compliance with the carbon intensity target, and to prepare the national GHG inventories that, under the Cancún Agreements, are to be reported more frequently to the UNFCCC and undergo international assessment.
The 12th FYP establishes the goal of "gradually establish[ing] a carbon trade market," but does not elaborate. A handful of provinces have announced interest in piloting carbon trading schemes. The Tianjin Climate Exchange, partially owned by the founders of the Chicago Climate Exchange, is positioning itself to be the clearinghouse for any future carbon trading program. While some have suggested that Guangdong province may be targeted for a pilot program at the provincial level, other reports speculate that the program would begin within a single sector, such as the power sector, or begin by including only state-owned enterprises, which are often the target of early government policy experiments (as was the case with mandatory market shares for renewable energy placed on the large state-owned power companies). Other likely locations for pilots might include China’s low-carbon cities and provinces.
Implementing a carbon trading scheme in China, even on a small-scale or pilot basis, will not be without significant challenges. Concerns have already been raised from both domestic and foreign-owned enterprises operating in China about how the regulation could affect their bottom lines. But the key challenge is likely technical, resulting from the minimal capacity currently in place to measure and monitor carbon emissions in China.
The 12th FYP also includes many new industrial policies to support clean energy industries and related technologies. Industries targeted include the nuclear, solar, wind and biomass energy technology industries, as well as hybrid and electric vehicles, and energy savings and environmental protection technology industries. These “strategic and emerging” industries are being promoted to replace the “old” strategic industries such as coal and telecom, (often referred to as China’s pillar industries), which are heavily state-owned and have long benefited from government support. This move to rebrand China’s strategic industries likely signals the start of a new wave of industrial policy support for the new strategic industries which may include access to dedicated state industrial funds, increased access to private capital, or industrial policy support through access to preferential loans or R&D funds.
Other targets encourage increased innovative activity, including a target for R&D expenditure to account for 2.2 percent of GDP, and for 3.3 patents per 10,000 people. During the 11th FYP period, an estimated 15.3 percent of government stimulus funding was directed towards innovation, energy conservation, ecological improvements and industrial restructuring.
The old pillar industries
The new strategic and emerging industries
Energy saving and environmental protection
Next generation information technology
High-end manufacturing (e.g. aeronautics, high speed rail)
New energy (nuclear, solar, wind, biomass)
New materials (special and high performance composites)
Clean energy vehicles (PHEVs and electric cars)
Sources: “Decision on speeding up the cultivation and development of emerging strategic industries,” www.gov.cn, September 8, 2010, http://www.gov.cn/ldhd/2010-09/08/content_1698604.htm; HSBC, China’s next 5-year plan: What it means for equity markets, October 2010.
The 12th FYP also includes targets to increase the rate of forest coverage by just over 21 percent and the total forest stock by 12.5 million hectares by 2015. Also mentioned are targets for the construction of 35,000 km of high-speed rail and improvements in subway and light rail coverage, as well as a goal to connect every city with a population greater than 500,000.
The 12th FYP provides a glimpse into the minds of China’s leadership as it lays out a methodological plan for moving the country forward. It includes a strong emphasis on new energy and climate programs and clearly illustrates China’s commitment to increased environmental protection. The Plan itself provides a framework for progress, but leaves the details of implementation to policy makers, with many new policies and programs likely to follow in the coming weeks.
Some of the targets will no doubt prove challenging to implement. The national energy and carbon intensity targets will prove particularly difficult if economic growth rates slow in line with targets put forth in the plan. Implementation of energy conservation and efficiency programs at the facility level will prove increasingly demanding as more and more facilities are incorporated into current programs. The non-fossil energy target relies on extensive increases in nuclear energy capacity, but growth in nuclear plants may slow as efforts to improve safety and regulation will be implemented in the aftermath of the recent Japanese nuclear disaster. If nuclear targets are reduced, the share of renewable energy will need to increase even more than current targets propose.
Overall, China’s Plan represents many ambitious climate and energy goals, and lays out a strategic roadmap for the county to endeavor to pursue over the next five years.
Notes and References
A full version of the plan (in Chinese) is available at http://news.xinhuanet.com/politics/2011-03/16/c_121193916.htm or at http://www.chinacleanenergydb.com/general-strategic-plans/Five-Year-Plans/3-2011China12thFive-YearPlanonNationalEconomicandSocialDevelopment-Chinese.pdf?attredirects=0&d=1.
“Key targets of China's 12th five-year plan,” Xinhua, March 5, 2011. http://www.chinadaily.com.cn/xinhua/2011-03-05/content_1938144.html
 Wen Jiabao. Report on the work of the Government. Delivered at the Fourth Session of the Eleventh China National People’s Congress, March 5, 2011. http://blogs.wsj.com/chinarealtime/2011/03/05/china-npc-2011-reports-full-text/
“China announces 16 pct cut in energy consumption per unit of GDP by 2015,” Gov.cn, March 5, 2011. http://www.gov.cn/english/2011-03/05/content_1816947.htm; “Zhang: ‘Twelfth Five’ push to non-fossil energy to account for 11.4 percent share of primary energy,” people.com.cn, January 6, 2011. http://energy.people.com.cn/GB/13670716.html
Fellman, Joshua. “China to Hold Primary Energy Use to 4.2 Billion Tons in 2015, Xinhua Says.” Bloomberg, October, 20, 2010. http://www.bloomberg.com/news/2010-10-30/china-to-hold-primary-energy-use-to-4-2-billion-tons-in-2015-xinhua-says.html
The Tianjin Climate Exchange (TCX) is a joint venture of China National Petroleum Corporation Assets Management Co. Ltd. (CNPCAM), the Chicago Climate Exchange (CCX) and the City of Tianjin.
In July 2010, NDRC announced the selection of official low carbon pilot provinces and cities, including the provinces of Guangdong, Liaoning, Hubei, Shaanxi and Yunnan, and the cities of Tianjin, Chongqing, Shenzhen, Xiamen, Hangzhou, Nanchang, Guiyang, and Baoding.
“Decision on speeding up the cultivation and development of emerging strategic industries," www.gov.cn, September 8, 2010, http://www.gov.cn/ldhd/2010-09/08/content_1698604.htm
Over 70 percent of SOE assets and profits are concentrated in the “old” magic 7 strategic industries. HSBC, China’s next 5-year plan: What it means for equity markets, October 2010.
HSBC, China’s next 5-year plan: What it means for equity markets, October 2010.
Seligsohn, Deborah and Angel Hsu. “How does China’s 12th Five-Year Plan address energy and the environment?” China FAQs, march 7, 2011. http://www.chinafaqs.org/blog-posts/how-does-chinas-12th-five-year-plan-address-energy-and-environment
Yue, Yang. “China may revise nuclear power target.” Marketwatch.com from Caixin Online, March 29, 2011.
By: Michael Gillenwater and Stephen Seres
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Featuring Daniel Bodansky, Lincoln Professor of Law, Ethics and Sustainability, Arizona State University and Elliot Diringer, Vice President for International Strategies, Pew Center on Global Climate Change
When: Friday, March 25, 2011, 1:30 to 3:00PM
Where: Johns Hopkins University SAIS - Kenney Auditorium, 1740 Massachusetts Avenue NW, Washington D.C., 20036
Daniel Bodansky and Elliot Diringer will present the Pew Center's report The Evolution of Multilateral Regimes: Implications for Climate Change. The report examines why and how most international regimes evolve gradually, rather than through dramatic step-changes. It outlines evolutionary pathways within and outside the UN Framework Convention on Climate Change (UNFCCC) that can promote stronger near-term action while building a sturdier foundation for a future binding agreement.
About the speakers:
Daniel Bodansky is the Lincoln Professor of Law, Ethics and Sustainability at Arizona State University's Sandra Day O'Connor College of Law. Mr. Bodansky served at the US State Department as the Climate Change Coordinator from 1999-2001 and as an attorney-advisor from 1985-1989. Prior to joining the ASU faculty in 2010, he held the Woodruff Chair of International Law at the University of Georgia and was a professor of law at the University of Washington. His recent book, The Art and Craft of International Environmental Law (Harvard Univ. Press 2010) was awarded the 2011 Harold & Margaret Sprout prize from the International Studies Association as the best book this year on international environmental politics.
Elliot Diringer is Vice President for International Strategies at the Pew Center on Global Climate Change. He previously served at the White House as Deputy Press Secretary to President Clinton, and as Senior Policy Advisor and Director of Communications at the Council on Environmental Quality. Before coming to Washington, Mr. Diringer was an environmental journalist at the San Francisco Chronicle and a Nieman Fellow at Harvard University.