Flexibility Required to Meet China’s Mandatory Green Targets Set in the 12th Five-Year Plan

1. Introduction

During the past five years known as the period of the 11th Five-Year (2006–2010) Plan, China made great efforts on energy saving and emission reduction, and obtained great achievements, including a 19.06% drop of per unit GDP energy consumption. One of the major targets of China’s development during the period of the 12th Five-Year (2011–2015) Plan or the next five years, is to lead China’s economy on to the path of sustainable development, with emphasis on clean energy construction, emission reduction promotion, and a drastic reduction of energy intensity as well as carbon intensity. Therefore, a target for carbon reduction (a reduction goal for per unit GDP CO₂ emissions) was added in the 12th Five-Year Plan in addition to the target for energy saving and conventional pollutants emission reduction. The target has been set, but opinions [ Yang et al., 2011 , Wu, 2011  and Liu, 2011 ] still vary on whether it is optimal as well as how it should be comprehended and implemented.

2. A lower energy-saving target conforming with practical economic growth

From the perspective of development stages and urbanization process, the targets set in the 12th Five-Year Plan should be, although not overly, aggressive. In view of the overall development needs, environmental challenges and natural resource endowments, a practical energy-saving target should be set within 2 percentage points of 15%, namely, no lower than 13% in order to keep the momentum and no higher than 17% so as to be feasible. The National People’s Congress of China, which was concluded on March 14, 2011, approved the 12th Five-Year Plan with specific target numbers. The figure for energy saving (reduction of energy consumption per unit of GDP) was set at 16%, which is aggressive and basically conforms to the practical conditions of China’s economic growth. Moreover, the need to control total energy consumption was explicitly pointed out in the 12th Five-Year Plan. With both targets for economic growth and for energy saving given in the 12th Five-Year Plan, total energy consumption will then be accordingly determined. However, since the target of economic growth is anticipatory^① , the total energy consumption target can only be anticipatory, not mandatory.

The targets of the 12th Five-Year Plan seem to be more conservative than those of the previous Five-Year Plan, for perceivable reasons that the targets set in the 11th Five-Year Plan were easier to achieve. However, it did require political determination and financial efforts by setting the high level of environmental targets in the 11th Five-Year Plan: per unit GDP energy consumption was to drop by 20% and chemical oxygen demand (COD) discharge and the volume of sulphur dioxide emissions were required to be 10% lower respectively. The actual outcome was that per unit GDP energy consumption was slightly below the target, while the reduction in COD and sulphur dioxide emissions were 12.45% and 14.29% respectively, which dramatically exceeded the specified value as set in the 11th Five-Year Plan. This shows that conventional pollutants can be reduced as long as we increase investment. The control on per unit GDP energy consumption, however, is not that easy, for more investment also brings more energy consumption. China’s environmental quality has not been able to meet expectations and is still deteriorating on the whole. Thus the 12th Five-Year Plan must further intensify efforts on environmental protection and should not only continue to include the reduction on the absolute quantity of sulfur dioxide and COD as a mandatory target, but also add new pollutants in the list for control, including nitrogen oxide, atmospheric dust, etc. Desulfurization, denitrification and advanced sewage treatment will definitely improve the environment while at the same time result in an increase in energy consumption and carbon emissions.

The extent of energy intensity reduction during the 12th Five-Year Plan period is unlikely to reach the level achieved in the 11th Five-Year Plan, during which many small and inefficient thermal power plants and small steel mills were shut down, thus leaving limited space for more close-ups during the 12th Five-Year Plan period. Moreover, energy efficiency of newly invested technologies in the medium and large-scale enterprises in China is now close to or even higher than^② world advanced level, with some at the cutting edge. Examples include thermal power efficiency and vehicle fuel efficiency from new investments during the period of the 11th Five-Year Plan, higher than those of Japan and the United States respectively. Energy consumption per ton of steel in medium and large-scale steel enterprises is superior to the average level of developed countries. Therefore, the decline in per unit GDP energy consumption for the 12th Five-Year Plan can only and must be lower than that for the 11th Five-Year Plan. In a similar manner, the targets for conventional pollutants such as sulfur dioxide and COD in the 12th Five-Year Plan are lowered to 8% from 10% in the 11th Five-Year Plan, for the large-scale engineering measures taken during the 11th Five-Year Plan are difficult to duplicate^③ . In consideration of both the limit in ability for further emission reduction and the need for environmental protection, the targets are moderately ambitious, i.e., not reachable if higher but not acceptable if lower [ MEPC, 2011 ].

3. The need for keeping the development momentum in the 12th Five-Year Plan with harder to obtain energy saving and carbon reduction

The target for economic growth set in the 12th Five-Year Plan remains relatively high. A linear relationship between GDP and energy consumption growth is determined by the elasticity of energy consumption, which indicates that per unit GDP and carbon emission reduction are linearly connected. Thus the formulation of the 12th Five-Year Plan emission reduction target will definitely be linked to economic growth. The GDP targets set by China’s provinces and municipalities in their respective 12th Five-Year Plans are in general higher than the national target. More developed regions such as Beijing, Shanghai and Zhejiang provinces already have reached a transitional stage from capital intensive to knowledge intensive industrialization, thus their space for physical expansion is limited. Their economic growth targets are set at an annual growth rate between 8% and 9%, lower than their respective numbers in municipal and provincial 11th Five-Year Plans. The central and western regions in China are relatively lagged behind in development, thus most of their growth targets are above 10%. For example, Chongqing sets its rate of annual growth as high as 13.5%. During the period of the 10th Five-Year Plan, the elasticity of energy consumption was around 1.0, which means that one percentage point growth in GDP requires 1 percentage growth in energy consumption. This elasticity was declined to 0.7–0.8 in the 11th Five-Year Plan as a result of intensive efforts. There is a possibility that the elasticity of energy consumption will continue to decline to around 0.6 should economic restructuring be conducted in the 12th Five-Year Plan period. If national average GDP growth rate reaches 10%, then energy consumption growth rate will be around 6%. If GDP growth rate reaches 8%, then energy consumption growth rate will be around 5%. Accordingly, total energy consumption in the 12th Five-Year Plan period will rise rapidly, or else the need for economic growth and social progress cannot be supported.

Moreover, increase in urbanization and living standards will also push up consumption of commercial energy. In the 1980s, the level of urbanization in China was lower than 20%, and more than 80% Chinese population lived in rural areas characterized by self-sufficiency. Traditionally, rural residents use non-commercial bio-mass energy, but urban residents can only use commercial energy because they do not have the conditions and desire to use bio-mass energy. Besides, in the 1980s, residents seldom owned air conditioners and cars. But in 2009, every 100 households in cities and townships owned 107 air conditioners and 11 cars [ NBSC, 2010 ]. At present, China has become the world’s largest automobile market with an annual output at more than 16 million automobiles. Annual production and sales are expected to reach 20 million by the end of the 12th Five-Year Plan period. Air conditioners and cars, the ownership of which is an indicator of higher quality of life, are unable to function without commercial energy.

Carbon emission reduction is faced with many difficulties in the 12th Five-Year Plan period. The more developed eastern region has a large quantity of emission, but their carbon productivity, or output per unit carbon emission, is high, thus emission reduction will be costly and difficult in this region. A mandatory dramatic decrease in emission will not only be unfair but also confronted with practical difficulties. In order to develop their economy, the central and western regions will take over energy intensive industries from the eastern region. People in these regions have no desire for a big drop in emission and there is even a demand for a rise. Thus the implementation of their emission reduction targets will also be considered challenging. As the governance structure in China is characterized by top-down approaches, local governments, in order to complete their tasks, are likely to impose power-rationing again, resulting in power cuts for residential quarters and even hospitals as happened in 2010 when local governments were forced to meet their energy-saving targets.

Strategically, carbon emission reduction should not be implemented by simple administrative control. Instead, flexibility must be allowed for effective and efficient emission reductions. There should be certain relaxation in target enforcement based on specific situations in different regions. For example, high emission reduction targets that cannot be met by certain regions during the 12th Five-Year Plan could be carried over to the 13th Five-Year Plan period to achieve. Inter-regional carbon trading could also be allowed. For example, Beijing can buy carbon credits from Shanxi province if there exist comparative cost advantages between the two regions.

4. Strengthening technological R&D to raise the competitiveness of zero carbon energy

The development of renewable resources is not only conducive to reaching the reduction target but also vital to the target set for the 12th Five-Year Plan to raise the share of non-fossil energy in primary energy consumption. However, attention should be paid to two paradoxes for large-scale utilization of renewable energy resources:

(1) The development of renewable energy resources will definitely increase the consumption of fossil energy because wind and solar energy resources are intermittent by nature. This means that electricity will be generated only when there is wind or sunlight, but production and utilities also need electricity and with even greater demands when the wind or sunlight is absent. To make the most use of wind power and solar photovoltaic, the installed capacity of thermal power must be increased to guarantee a steady and sufficient supply of energy, and this requires more coal power be developed. Moreover, in order to utilize electricity generated by wind, coal generator sets cannot be run fully-loaded and power efficiency rate is then much lower than when the sets are run in full capacity.

(2) Renewable energy resources such as wind power, solar photovoltaic and biomass power generation are costly with current technologies and must be subsidized. The money for such subsidy can only come from relatively cheaper fossil energy. This means that the larger the scale of wind and solar energy development, the more the subsidy is needed and as a result the larger the scale of fossil fuel power installation. At present, commercially unviable technologies require more research and development (R&D) rather than large-scale deployments. A great leap forward does not help and can be counterproductive.

Sufficient attention should also be paid to the “lock-in” effect. At present, renewable energy technologies are under large scale investment and are advancing day by day. But they are yet to be competitive in the market and their energy output cannot meet the needs of modern social and economic development. Large investment in deployment of wind and solar energy when technologies are developing rapidly but yet to be competitive signifies huge wastes, because future solar energy technology may be more efficient, more effective and less expensive than what is being deployed today. Therefore, today’s investment might be abandoned due to high cost and low efficiency and thus be wasted. Other technologies are also confronted with such “lock-in” effect. Electric vehicles, for example, receive financial subsidies of as high as 60,000 RMB per car, even higher than the price of a standard economy car. The infrastructure system is lagging behind with few places for charge-ups, in addition to long duration for battery charges and short mileage range with a fully charged battery (at present around 150 km). Consumers may stop using or seldom use their electric cars after purchase because of inconvenience and poor performance. A theoretical issue is also involved in this case: taxpayers’ money should not be used for subsidizing private consumption.

During the period of the 11th Five-Year Plan, the installed capacity of wind power almost doubled year by year, surpassing that of Germany in 2009 and that of the United States in 2010. China became the largest wind power country in terms of installed capacity in the world, reaching 42 GW. But the amount of electricity generated is negligible, accounting for only 0.5% of China’s total electricity generation while the installed capacity of nuclear power is only 10 GW, with 2% share of the total electricity generated. Moreover, resource endowment of wind power in China is of relatively low quality with only around 1,900 h utilizable annually, much lower than that of Europe (2,300 h) and even more incomparable with that of nuclear power (more than 7,000 h). Besides, connection to power grids has been a key constraint to taking more wind power due to the capacity of power grid to absorb without disturbing stability of power supply. Technical problems are also on the list of barriers to overcome: quality of wind turbines to be further improved, cost for maintenance to be reduced, and output to be increased. Renewable resources in many cases do require subsidies, but it must be made clear that subsidies should go to R&D instead of consumption. Many wastes could be eliminated if numerous subsidies are spent on R&D for market competitiveness rather than deployment of commercially unviable technologies. The development of household biogas in rural China is a good case for illustration. The government has been subsidizing to promote the use of biogas in rural areas since the 1970s, and up to today this policy is still in use. Every year, the central government allocates 1 billion RMB as subsidy and each biogas digester receives 1,000 RMB on average in support from the treasury. But the outcome is: biogas digesters are built but seldom used, and are abandoned in only a few days in many cases. The reasons for such wastes of investments lie mainly in the technological imperfections: reduced or no biogas during cold winter, short service life and high maintenance cost due to equipment damages by impurity of methane, and high labor intensity as well as poor sanitation. As a result, such appropriate technologies are deemed undesirable for rich rural residents. If the large amount of subsidy is used on R&D to solve technical problems and make biogas competitive, rural residents will use them even without subsidies.

5. Responsibility and commitment of energy saving and carbon emission reduction should be made consistent with requirement for basic livelihood and dignity of living

Energy saving and carbon emission reduction target in the 12th Five-Year Plan is consistent with China’s commitment to reducing per unit GDP carbon emission by 40%–45% in 2020 as compared with 2005 level. During the 11th Five-Year Plan period, per unit GDP energy consumption was lowered by 19.06%, indicating that per unit carbon emission was reduced by 20%–21%. If 15% could be accomplished during the period of the 12th Five-Year Plan, then the commitment could be honored smoothly with a 5%–10% decrease during the 13th Five-Year Plan period. Therefore, energy saving target in the 12th Five-Year Plan should be set at around 15%. An overly high target is unadvisable as well as unnecessary. The 12th Five-Year Plan stipulates a 17% decrease in per unit GDP CO₂ emission, which could be accomplished without much difficulty if energy saving target of 16% and the target of the share of non-fossil fuel in primary energy consumption are met. Therefore the accomplishment of energy saving and non-fossil fuel development targets will ensure an achievement of its high-end target of carbon emission reduction, i.e., 45% in 2020.

China made efforts and also harvested successes more than any other country on earth with respect to energy saving and carbon emission reduction during the 11th Five-Year Plan period. Almost no country, developed or developing, denies China’s efforts and achievements. China’s 12th Five-Year Plan has also received world attention. The national targets set in the 12th Five-Year Plan are to be disaggregated for individual provinces, municipalities and key industrial sectors for implementation with mandatory status. These targets are challenging for all the local governments and industries. As a matter of fact, the voluntary targets of carbon reductions proposed by 13 pilot provincial (municipal) governments at the end of 2010^④ are in general lower than the level set in the 12th Five-Year Plan, being at 15% or even lower than 10%. It might be true that carbon reduction target at 17% for the 12th Five-Year Plan period can be highly difficult. Therefore, there is a need to link the targets with development stages and to take economic restructuring into consideration. The impact of the huge earthquake, devastating tsunami and nuclear leakage in Japan in March 2011 and how they are coped with can adequately illustrate the importance of the stage of development. The economic losses of Wenchuan earthquake in Sichuan province, Yushu earthquake in Qinghai province, and Yingjiang earthquake in Yunnan province, which all took place in recent years, were much less than that of Japan, but the number of lives lost were much more. Most buildings in Chinese earthquakes were destroyed while in Japan building damages were minimal. The quality of buildings is also an indicator of quality of living. Basic livelihood and dignity of living should take priority over carbon reduction targets.

As an emerging economy, China has become number one in energy consumption and greenhouse gas emissions and number two in total economic output. This signifies that China should be prepared and has the need to undertake due responsibilities. Moreover, the power of one’s voice at international level has, to some extent, direct links with shouldering responsibilities. However, ambitious targets in energy saving and carbon reduction do not necessarily indicate a high sense of responsibility. On the one hand, in times when international economic patterns are changing, the international community will expect China, an emerging economy, to shoulder responsibilities which might be beyond its actual ability. On the other hand, unrealistic high targets as well as simple and inflexible administrative mandatory measures may seem to signify the determination of and hard efforts on energy saving and carbon reduction at the surface, but the international community does not, to a large extent, acknowledge this. To some extent, this is not an ideological denial to planned economy, but more an issue of concern, as China has stronger voices in international affairs, other countries may feel uneasy that China might impose its domestic reduction method on the world. On the contrary, China’s international image and status will be recognized and improved if we seek truth from facts, act according to our ability, advance step by step, leave room for elasticity and avoid extreme measures.

References

1. Liu, 2011 J. Liu; Reining in China’s energy targets (in Chinese) (2011-03-02) [2011-03-02], Accesed http://www.chinadialogue.net/article/show/single/ch/4138-Reining-in-China-s-energy-targets
2. MEPC, 2011 MEPC (Ministry of Environmental Protection of China); Car restrictions on cities with over one trillion population, carbon emission targets hard to be accomplished (in Chinese) (2011–03–03) [2011–03–10], Accessed http://www.chinanews.com/ny/2011/0313/2902100.shtml
3. NBSC, 2010 NBSC (National Bureau of Statistics of China); China Statistical Yearbook 2010 (in Chinese)  ; China Statistics Press (2010), p. 1032
4. Wu, 2011 C. Wu; Probing China’s intensity figures (in Chinese) (2011-03-11) [2011-03-15], Accessed http://www.chinadialogue.net/article/show/single/ch/4148-Probing-China-s-intensity-fugures
5. Yang et al., 2011 F. Yang, Y. Hou, J. Li; China needs higher targets (in Chinese) (2011-03-03) [2011-03-10], Accessed http://www.chinadialogue.net/article/show/single/ch/4140-China-needs-higher-targets

Notes

①. In the 12th Five-Year Plan, quantitative targets are grouped into anticipatory (indicative) and mandatory categories

②. For instance super-super critical thermal power plants built in the past few years consume some 10% less of coal for each kW of electricity generated as compared to earlier technologies in developed countries

③. Lijun Zhang, vice minister of the Ministry of Environmental Protection, explained the reason for lowering the control targets for sulfur dioxide and COD at the press conference of the fourth session of the Eleventh National People’s Congress of China

④. In August 2010, National Development and Reform Commission of China selected 8 provinces and 5 municipalities for a low carbon development pilot scheme. The pilot provinces (municipalities) prepared action plans in which emission reduction targets were included