Market forces crucial to low-carbon economy

Developing a low-carbon economy is now a key national development strategy in which China has made remarkable progress, the World Bank said in a recent report.

The Chinese government's target of a 20 percent reduction in energy consumption from 2005 to 2010 would reduce annual CO2 emissions by 1.5 billion tons by the end of this year, the most aggressive emission reduction target in the world, five times the 300-million-ton reduction of the European Union's Kyoto commitment, said the report.

While the world's leading coal consumer, China has also become the world leader in renewable energy - now the source of 8 percent of total primary energy, a figured targeted to reach 15 percent by 2020.

China's installed wind energy capacity which has doubled every year since 2005 was the most of any nation globally in new capacity last year.

Planners recognize that a low-carbon economy is needed for long-term economic and social interests, so they are moving to realign that nation's economic structure toward a less energy-intensive economy.

To achieve the emissions reductions proposed under the sustainable energy scenario in the World Bank study, China would need to reduce energy intensity by 4.3 percent annually over the next two decades.

Energy pricing

China has primarily relied on administrative regulations to improve energy efficiency during the 11th Five-Year Plan (2006-10), but market-based mechanisms and energy pricing are also needed.

A more balanced approach that uses the market and financial incentives to improve energy efficiency would help the country achieve its objectives, according to the World Bank.

In particular, market-based pricing reforms are fundamental to an efficient, sustainable, and secure energy sector. An important element to achieve these objectives is energy prices that reflect production costs, environmental external costs and resource scarcity.

The rapid urbanization in China also presents an unrivalled opportunity to build low-carbon cities.

That requires an integrated approach of compact urban design, public transport, clean vehicles, green buildings and smart grids. With rising incomes, it is also important to encourage a sustainable lifestyle through public education.

According to the latest China human development report titled "China and a sustainable future, towards a low-carbon economy and society", China faces "no other choice" but to shift to a low-carbon approach in shaping the country's future social and economic development agenda.

Human development

Commissioned by the United Nations Development Program (UNDP) in partnership with Renmin University of China, the publication asserts that the most strategic option for policymakers is to embark on a low-carbon development path that will preserve and increase its human development achievements.

The report contended that the nation's current growth model will be difficult to sustain for the long term.

"China is at a critical juncture where the 'business as usual' growth model is insufficient in meeting the country's emerging challenges and pressures," said Khalid Malik, UN resident coordinator in China.

"The shift to a low-carbon development pathway is imperative as China balances further economic development with environmental sustainability and the need to respond to the threat of climate change," he said.

"As the country sits at a crossroads in preparing its 12th Five-Year Plan (2011-15), the report is released at a time where its conclusions and recommendations can play a significant role in shaping the nation's rapidly evolving policies on sustainability," said Malik.

The report offers policy options for a country that will see the migration of nearly 400 million rural Chinese into urban areas over the next two decades.

According to the study, this enormous internal movement of communities, larger than the entire population of the United States, will exert huge upward pressure on greenhouse gas emissions.

"If China can fully seize the opportunities at hand and accomplish the report's suggested recommendations, it will be possible to move towards a society which is not only environmentally sustainable, but also provides the conditions for greater job creation, improved resource efficiency and energy security, food security, and better health conditions for its citizens," concluded Malik.

(China Daily 04/30/2010 page12)