Market Forces

Four reasons why China’s 2060 net-zero goal is so important

A shift in ambition, narrative, global cooperation and likely support for mitigation in least-developed countries

Shanghai Bund skyline landmark ,Ecological energy renewable solar panel plant

The announcement by President Xi Jinping at the UN General Assembly last month makes me optimistic.

First, on its own, achievement of this goal will contribute to a reduction in expected future temperature by 0.2 to 0.3 degrees

Second, having a clear and ambitious end goal will shift the narrative within China from incremental slowing of emissions growth and reductions in some sectors to a focus on how emissions can be eliminated entirely (or close to it).

A vision of transformation toward a low-emissions China will complement the vision of a “Beautiful China.” Pollution control efforts are highly complementary with climate mitigation actions – e.g. moving to renewable energy from fossil fuels, restoring ecosystems – and can dramatically improve the wellbeing of the Chinese people. A clear and attractive vision can mobilize a wider community to seek and implement the multitude of small and large changes needed. It will increase confidence in the future of China’s new national ETS, the strengthening of which will almost inevitably need to be part of China’s strategy. That confidence will make the ETS more effective by generating realistic prices and greater certainty for investors.

Third, it changes the climate cooperation ‘game’, significantly.

Economists think of climate cooperation as a game because each player’s (in this case country’s) decisions depends on what they think other players/countries will do – like chess, or rugby. China’s latest ‘move’ responds to others’ earlier moves and anticipates and will influence later ones. Global cooperation on climate change is hard, because of temptations to free-ride. We can use game theory to explore ways to improve humanity’s odds of a good outcome. We know that humans can sometimes cooperate when it’s a repeated ‘game’ – we get many chances to try to cooperate, observe others, reward or sanction and then try again.

And it’s not a binary outcome where we either win or lose.  Any level of cooperation is better than nothing. It might be optimal to aim for no more than 1.5 degrees above pre-industrial temperatures but even if we don’t achieve that, 2 degrees would be better than 2.5 degrees.

Cooperation is easier when some players take leadership, and that’s what China has done. They are not the first emerging economy to set a net-zero target (Bhutan, Chile, Costa Rica, Fiji, the Marshall Islands and South Africa are examples of others), but China’s size makes its announcement a game changer in several ways. The Chinese have shifted the focal point for emerging country contributions to a more ambitious level.

In addition, the rewards to other countries from helping to encourage and sustain China’s efforts rise – if they act in ways that lead China to draw back from this commitment there is more to lose. The costs of mitigation will fall as China learns and shares its new knowledge and technology. Finally, there is less risk that efforts to lower emissions in one country will lead to movement of high emitting-activity to China thereby having no global impact.

Fourth, it means that China, a really large player, will now need to engage even more seriously in helping less developed countries accelerate their mitigation.

Reaching net-zero will be much easier for the Chinese if they can buy high-quality internationally transferable mitigation outcomes (new United Nations Paris Agreement language for international credits). Their engagement in this market could firm up the rules and, critically, mobilize the skills and financial and technical resources that the poorer countries who could credibly sell such credits will need to embark on their own transformational emission reductions journeys.

As China mitigates more aggressively domestically it will develop technology and know-how that it can also export, as it has already on a smaller scale. Some exports will be particularly useful for countries where lower-cost Chinese technology, such as electric buses or cars might be more attractive than expensive European or North American ones. China’s Belt and Road Initiative offers a critical mechanism that can be turned to this purpose. If China can help poor countries develop strong mitigation policies, through strong South-South cooperation, they could transform global cooperation further and strengthen markets for this technology. This would make me even more optimistic.

 

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How China is cleaning up its air pollution faster than the post-Industrial UK

Beijing has seen some of the lowest air pollution levels in recent history this past winter, just as China’s Ministry of Environmental Protection (MEP) – now strengthened and renamed to Ministry of Ecology and Environment (MEE) – has put the final touches on a new, three-year plan to improve air quality. But while the trend is positive, air pollution levels in China are still dire: The MEP calculates an annual average PM2.5 concentration of 43 µg/m3 for China’s cities in 2017, more than 4 times the level of 10 µg/m3 recommended by the WHO. Official measurements for Beijing even showed the capital’s air quality at 58 µg/m3

Still, China is cleaning up its air faster than the United Kingdom did after its Industrial Revolution. Despite this early success, however, China could spark even more efficient improvements by adopting market-based incentives.

Let’s take a look at how both countries fared immediately after each of their industrial booms.

Figure notes: The figure shows annual average concentrations of total suspended particles (TSP), a coarse and now outdated measure of air pollution. The black line shows the average for China, while the grey line shows London. Data sources: TSP concentrations for China through 2003 are based on the China Energy Databook 9.0 based on data provided by State Environmental Protection Administration. From 2004 on, TSP concentrations for China are based on author-collected air pollution index (API) data from the MEP datacenter. I imputed PM10 concentrations based on information on the main pollutant on a given day and the assumption that an API reading below 51 reflects PM10 (see Stoerk 2016 for explanations on the procedure). I then converted the PM10 concentrations into TSP using a conversion factor of 2 following Matus et al. 2012. TSP concentrations for London come from Fouquet 2011, who generously shared his dataset.

 

Air quality in London is far from perfect, but it’s also come a long way from the days when people died in the “Great Smog.” The graphic above brings together the earliest known air pollution data from China, from 1980 to 2012, and from the UK from the Industrial Revolution until 2008. Air pollution levels in the main Chinese cities at the beginning of the 1980s were almost exactly at the level of London at the height of the Industrial Revolution in 1890 (a shocking outlier is Hohhot, the capital of Inner Mongolia, which reached a concentration of Total Suspended Particles of 1,501 µg/m3 in 1987, possibly the highest level of urban air pollution in recorded history).

The difference is in the speed of improvements: Air pollution in China has been decreasing at a similar trajectory as London’s 90 years earlier, but at twice the pace. While extreme air pollution levels in China’s recent history are typical for an industrializing economy, its pace in cleaning up the pollution is fast by historical standards.

China started to seriously control air pollution from 2006 to 2010 by limiting emissions for each province. Relying on satellite data, my research shows that this first attempt was ultimately successful in reducing nationwide SO2 emissions by over 10 percent relative to 2005. Studying compliance over time, however, suggests that reductions in air pollution only happened after the Chinese government created the MEP in 2008. After its creation, among the many changes in environmental policy, the MEP started to gather reliable SO2 emissions data from continuous emissions monitoring systems (CEMS) at the prefecture level and increased the number of enforcement officials by 17 percent (a task that EDF China actively supported).

This early success notwithstanding, China could do better by implementing well-designed market-based solutions, policies that align with the country’s ambition to combine economic prosperity and environmental protection. Or, in the words of President Xi, to combine ‘green mountains and gold mountains’.

For example, a well-designed cap-and-trade program at the province level could have decreased the cost of air pollution abatement from 2006 to 2010 by 25% according to my research. The anticipated launch of a sectoral emissions trading system to limit a portion of China’s greenhouse gas emissions suggests that the Chinese government is looking to embrace lessons learned in air pollution control and wishes to build on its own pilot market-based pollution control programs to bring its environmental policy into the 21st century.

EDF is playing a key role in helping this endeavor through both hands-on policy work and research. The timing is serendipitous: China is at a cross-roads in environmental policy. Evidence based policy making is welcome. And data quality has improved in recent years. Given the right set of policies, countries can control air pollution, and improvements in air quality typically go hand in hand with economic prosperity.

Both China and London have remaining challenges. Despite dramatic improvements, Londoners, like the Chinese, still live with significant air pollution. A recent report on London’s air pollution found the city is not close to meeting WHO standards. Meeting them will be a challenge, in part because of the complexity of the causes (road transport accounts for over half of local contributions). So just as London must keep battling to improve air quality, Beijing will need to do likewise–but at least now each can now learn from the other.

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