Climate Action in China

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“China in the last five years has very consciously moved to slow the rate of its greenhouse gas emissions by curbing its energy intensity, becoming a world leader in renewable energy, and most …

“China in the last five years has very consciously moved to slow the rate of its greenhouse gas emissions by curbing its energy intensity, becoming a world leader in renewable energy, and most recently establishing carbon trading systems in its largest provinces. These actions not only have positive impact on the climate, but are driven by self interest in strengthening energy security, developing a low carbon economy with export opportunities and in showing international leadership.”
-John Connor, CEO of The Climate Institute

This presentation provides a summary of the Climate Bridge report Carbon Markets and Climate Policy in China: China’s pursuit of a clean energy future. Climate Bridge is an international carbon project developer with a portfolio of more than 180 emission reduction projects which has been active in the carbon market in China since 2006.

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  • 1. TheClimateInstitute Climate Action in China 1
  • 2. Climate Action in China October 2012 “China in the last five years has very consciously moved to slow the rate of its greenhouse gas emission growth by curbing its energy intensity, becoming a world leader in renewable energy, and most recently establishing carbon trading systems in its largest provinces. These actions are driven by self-interest, not only regarding concern for climate impacts, but for strengthening energy security, developing a low carbon economy with export opportunities and showing international leadership.” John Connor, CEO of The Climate InstituteThis presentation provides a summary of the Climate Bridge report Carbon Markets and Climate Policy in China: China’spursuit of a clean energy future. Climate Bridge is an international carbon project developer with a portfolio of more than180 emission reduction projects which has been active in the carbon market in China since 2006. Cover image: Michael Hall All others courtesy of Climate Bridge 2
  • 3. Key Points• For self-interested reasons, China has moved to slow the growth rate of its greenhouse emissions. China has already reduced its energy intensity, become a world leader in renewable energy, and is rapidly establishing carbon trading systems. These actions not only have positive impact on the climate, they also drive economic growth, reduce fuel dependency and create export opportunities.• China’s main exposure to the carbon market has been through the Kyoto Protocol’s Clean Development Mechanism (CDM). This positive experience with carbon markets has built capabilities in carbon measurement and auditing and contributed to China choosing to establish its own domestic carbon trading scheme.• China’s ambitious emissions trading pilot schemes collectively represent the world’s second largest emission trading scheme and are expected to lead to a nationwide system in 2015-2016.• China’s scheme dovetails with other global schemes, paving the way for a global climate change agreement coming into force in 2020. 3
  • 4. China’s Recent Climate PolicyChina’s proactive climate change policy has been driven by high-level, often self-interested motivations. Motivations for action: • Strengthening energy security by reducing dependency on foreign fossil fuels • Developing the low carbon economy, growing related exports and creating jobs • Avoiding dangerous climate change. China is particularly vulnerable with 22% of the world’s population and only 7% of its arable land. • Showing international leadership and strengthening international negotiating position 4
  • 5. China’s Recent Climate PolicyHistorically, China’s climate policy has relied upon predominantly command-and-controlmechanisms.Policies:• 1000 enterprises programme – Starting in 2004, targets were set for China’s largest polluting enterprises (who account for 33% of China’s national energy use).• Support for renewable energy – Since 2006, relatively high feed-in tariffs for renewable energy have been in place. Tax holidays and other fiscal incentives are offered to developers.• Restrictions on fossil fuel use – Since 2010, increased resource taxes have been set on fossil fuels. In 2015 there will be a cap placed on coal production.• Backing for strategic emerging new industries – The national Energy Agency has established a development plan that requires direct investment of 5 Trillion RMB ($750BN) in low-carbon projects. 5
  • 6. China’s Recent Climate PolicyHistorically, China’s climate policy has relied upon predominantly command-and-controlmechanisms.Achievements to date:• China reduced energy intensity of GDP by 19% between 2005 and 2010. Energy efficiency improvements in key industries were vital to achieving this target.• 72.1GW worth of small, inefficient coal-fired power plants were closed from 2006-2010. That’s more than the entire capacity of the Australian grid (~50GW).• Renewable energy has had exponential growth over the last 5 years. From having virtually no industry in 2005, China now has the largest installed capacity of wind power in the world and is the world’s largest producer of solar modules. China also leads the world in hydropower installations.• China has become a major exporter of clean technology, selling to both developed and developing countries. In solar energy alone, China exports $35.8 billion worth of products per year, similar to the total value of shoes China exported ($39bn) in 2011. 6
  • 7. History of Carbon Markets in ChinaChina’s main exposure to the carbon market has been through the Kyoto Protocol’sClean Development Mechanism (CDM). This positive experience with carbon marketshas contributed to China choosing to establish its own domestic carbon trading scheme.• More than 2,000 of the 4,200 projects registered under the CDM are situated in China• The CDM has driven spectacular growth in renewable energy. More than 40GW of wind power and 30GW of hydropower capacity have been registered under the Clean Development Mechanism, which combined is larger than the entire Australian national grid.• Emissions from highly potent industrial gases, such as HFC and N20, have been dramatically reduced with CDM finance, representing emission reductions of millions of tonnes of carbon dioxide.• Other innovative technologies have also been supported by the CDM, including ground-breaking coal mine methane, biogas and waste management technologies.• China has established the administrative capability to review and approve carbon offset projects. The Chinese authorities have developed essential tools for operating an emissions trading scheme. 7
  • 8. China’s Carbon Market FutureIn December 2009, China set a target to reduce carbon intensity of its economy by 40-45%by 2020, with one ambitious objective being the gradual establishment of a domestic acarbon market. • Pilot schemes will begin in seven of the country’s most important cities and provinces • Rules will differ between the pilot schemes to allow China to experiment with different emission trading scheme designs • It is estimated that the programme will cover approximately 700 million tonnes of CO2e emissions • There are likely to be price controls such as a floor price in the pilot schemes 5 cities and 2 provinces have been • China is still considering a form of carbon tax, in chosen to host pilot emission trading schemes starting in 2013-14. addition to the emissions trading scheme.Measured by emissions covered, China’s pilot emissions trading schemes will representthe second largest carbon trading effort on Earth by 2014. 8
  • 9. China’s Carbon Market FuturePilot Scheme OverviewLocation Carbon Expected Emissions threshold Approx no. of Offsets accepted? intensity Start Date for entry firms covered targetBeijing 18% 2013 10,000 tonnes of CO2e 600 CCERs (issued by NDRC) set to annually be allowedShanghai 19% 2013 10,000 tonnes of CO2e 200 CCERs, and a local offset annually standard yet to be decidedTianjin 19% 2013 10,000 tons of standard 120 Under consideration coal equivalentChongqing 17% 2013 Six most energy-intensive Unknown Forest-based offsets may be industries. eligibleShenzhen Unknown 2013 Design still to be 800 Under consideration determined. Five alternative plans draftedGuangdong 19.5% 2014 20,000 tonnes of CO2e ~820 Forestry offsets and CCERs annuallyHubei 17% 2014 To include power stations ~100 CCERs likely to be accepted up to and heavy industry 15% of capAustralia (for N/A 2012: tax 25,000 tonnes of CO2e 315 UN registered CERs up to 12.5%comparison) 2015: trading annually of total ETS coverage will be accepted. No industrial gas credits Source: Point Carbon 9
  • 10. The Global PerspectiveThe introduction of China’s scheme is in line with other efforts in the Asia-Pacific.• China’s pilot schemes are scheduled to be launched in 2013-14, with a nationwide ETS is expected to emerge in 2015-16. Australia’s emissions trading scheme will begin in 2015, similar to China’s.• South Korea have legislated for a nationwide trading scheme in 2015, whilst Sao Paolo and Rio De Janeiro will begin regional pilot schemes in 2013.• The United Nations framework on climate change (UNFCCC) process aims to finish negotiation on a global agreement by 2015, which would come into force in 2020.• China’s emissions trading system should eventually link with other schemes, though not until after 2020.  10
  • 11. Global Climate Action MapAll major emitting countries are implementing policies to reduce emissions, drive cleanenergy investment and improve energy efficiency. The Climate Institute has launched a new, interactive map to provide a top line summary of national actions on climate change. The map enables users to see what actions countries have already taken, as well as those that are under development. Users can look up and compare up to three countries at a time, assessing national actions ranging from emissions trading and emissions standards to energy efficiency and land sector policies. Explore the map: www.climateinstitute.org.au/global-climate- action-map.html  11
  • 12. Global Climate Action Map“This map very clearly shows that there is significant if as yet insufficient action on climate change and clean energypolicies around the world. Countries have chosen different paths, targeting different industries, depending on theireconomic makeup and what they perceive as an opportunity for gaining a competitive edge in an increasingly global lowcarbon economy.” John Connor, CEO of The Climate Institute www.climateinstitute.org.au/global-climate-action-map.html  12
  • 13. Conclusion"Reducing emissions in China is critical to preventing global climate change, so it is extremelyencouraging to witness the Chinese authorities setting such ambitious renewable targets. Indeed,Chinas pilot emissions trading schemes will cover twice the emissions of Australias scheme in2014. Business and politicians that assume inaction from China are taking a huge gamble on a highcarbon status quo." Alex Wyatt, CEO of Climate BridgeWhile China’s greenhouse emissions gases rose rapidly over the last decade, it has also beenimplementing ambitious policies to slow the growth of these emissions with a 19.1% emissionsintensity reduction between 2005 and 2010. China has also been positioning itself to be a futureleader in clean technology, and is already the world’s largest producer of renewable energy.The establishment of an emissions trading scheme in China should be viewed in the broader contextof developments in the Asia-Pacific and globally. China’s scheme aligns with other global schemes,paving the way for a global climate change agreement coming into force in 2020.  13
  • 14. More informationVisit www.climateinstitute.org.au/global-climate-action-map.html Or connect with us on Facebook or Twitter for the latest news on global climate action… www.facebook.com/theclimateinstitute www.twitter.com/climateinstitut  14