JH6 - FINAL

IMPERIAL COLLEGE OF SCIENCE, TECHNOLOGY AND MEDICINE
Imperial College Business School
A comprehensive study of the rising demand of automobiles in China and its
implications for the global environment by 2020
By
Anmol Arora, Tanvi Bedre, Soniah Bomer,
Miles Glanfield, Geoffrey Wai, Muhammad Yusoff
A report submitted in partial fulfilment of the requirements for Joint Honours degree
May 2012

i
Contents
1. Executive Summary iii
2. Group Dynamics iv
3. Acknowledgements v
4. Notation & Definitions vi
5. Introduction 1
Defining the Question 1
Projections 2
Current state of the environment 3
Climate Change 3
Depletion of natural resources 4
Regional issues – Acid Rain 5
Environmental impact and importance 5
6. Literature Review 7
Introduction 7
China’s automotive industry 7
Porters Diamond 8
PV population forecasting 12
CO2 emissions forecasting 13
Avoid-Shift-Improve (ASI) 13
Gaps in literature 14
7. Aims and Objectives 15
Aims: 15
Objectives: 16
8. Methodology 17
Introduction 17
Primary Research 17
Secondary Research 20
9. PV Demand Factors 21
Factors increasing demand 21
Factors limiting demand 28
10. Results 31
2020 PV forecast 31
2020 CO2 emissions forecast 34
11. Discussion 37
The PV Life Cycle 37
Global Environmental Impact 44

ii
12. Solutions 45
1. Introduction 45
2. Avoid 47
3. Shift 57
4. Improve 73
5. Power Grid 81
6. Life Cycle 84
7. The EU Directive on Environmental Policy & Export Policies 86
13. Limitations 89
Data Quality 89
Data Availability 89
Time 89
14. Conclusions and Recommendations 91
15. Further Research 93
15.1 Financial Feasibility of the A-S-I Approach: 93
15.2 Explore the environmental solutions in the US 94
15.3 Exploring the similarities between China’s and India 94
16. References 95
17. Bibliography 106
18. Appendix 107
a) Interview protocol 107
b) Interview transcripts 114
c) Meeting minutes 157
d) Data and workings 167
Word Count 21,816
Excluding contents, acknowledgements, appendices & references

iii
1. Executive Summary
Since the introduction of the term ‘BRICs’ by Jim O’Neill in 2001, these emerging
countries have been the subject of major focus in the global arena, with China
leading the pack in economic terms. The balance between economic growth and
environmental sustainability has been an on-going issue, with implications that reach
beyond China’s borders. As a result of strong economic growth and a rise in
disposable income, the number of passenger vehicles in China has been increasing
rapidly.
This paper aims to forecast the total number of passenger vehicles in China by 2020
and its associated impact on the global environment. The effectiveness of current
policies adopted by the Chinese Government are reviewed and additional potential
solutions are proposed under the ‘Avoid-Shift-Improve’ framework.
Extensive interviews with industrial experts, environmentalists and academics made
up the majority of the primary research. Thorough review and analysis of secondary
resources, including journals, policy documents and professional reports from
Standard Chartered Bank and KPMG further supported the research and forecasts.
Quantitative data for modelling was obtained from reference resources including the
World Bank and the IMF.
The results of this study indicate realistic forecasts of the number of PVs and their
associated carbon footprints in 2020, followed by a comprehensive strategy outlying
methods to limit this. The scope for further research is discussed.

iv
2. Group Dynamics
Our dynamic group comprised of six enthusiastic students with a good mix of gender,
culture and background. Work was allocated in a way that aimed to maximise each
individual’s strengths and interests. Most work was conducted in pairs in order to
prevent myopia, build relationships and to ensure accuracy.
Group meetings made up a significant part of our project period. Meetings were
initially held every other day, then daily during the final week. In every hourly
meeting, each member’s progress would be reviewed and analysed. The allocation
of work and progression of the project would be discussed, with key daily and weekly
milestones set in place. After meetings we worked towards our targets, with regular
peer assessment in between.
Good communication between members was identified as crucial to success and in
order to facilitate this, several communicating channels were used, allowing us to
share information and thoughts. We made good use of new technologies and social
networks. Discussion groups were set up in WhatsApp messenger and Facebook to
make sure each member was kept up-to-date with the status of the project. Research
results, academic journals and individual write-ups were shared using the Dropbox
platform. A Gmail account was also set up on behalf our group and was used for
external communication, such as arranging interviews. Finally, a shared calendar
was also used so that key dates and milestones could be seen by all.
In summary, we worked closely and efficiently together as a group and this report
represents a collective contribution from all of us.

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3. Acknowledgements
We would like to thank everyone who gave their time, support and expertise; your
contribution to this project has been invaluable.
First, we would like to thank our project supervisor, Mr Colin Love, who gave sound
advice throughout the duration of the project. We would also like to thank the
academic staff at Imperial College Business School, who have provided us with a
solid education in the past year.
Second, we express our gratitude to those who gave their time to be interviewed, and
who shared their extensive knowledge:
Ajay Gambhir (Grantham Institute)
Taro Ikeba (Stapleton’s Tyre Services)
Dr. Peder Jensen (Head of Energy & Transport Group, EAA)
John Leech (KPMG)
Graeme Maxton (The Insight Bureau)
Simon Pringle (BDO)
Ash Sutcliffe (China Car Times)
Dr. John Wormald (The Insight Bureau)
Finally, we would like to thank Jolanta Leonaite at Imperial College Business School
for coordinating the administrative aspects of our project, and keeping us motivated
throughout.

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4. Notation & Definitions
BMJ British Medical Journal
BRIC Brazil, Russia, India and China
CAAM China Association of Automobile Manufacturers
CAGR Compound Annual Growth Rate
CCCPC Central Committee of the Communist Party of China
CH4 Methane
CNG Compressed Natural Gas
CO Carbon Monoxide
CO2 Carbon Dioxide
CSEP China Sustainable Energy Program
CVA Clean Vehicle Action
EIU Economist Intelligence Unit-Economist Intelligence Unit
EURO 4 Current EU acceptable limits for exhaust emissions for passenger cars
EV Electric Vehicle
FAW First Automobile Works
FCV Fuel Cell Vehicle
FYP Five Year Plan
GDI Gasoline Direct Injection
GDP Gross Domestic Product
GHG Greenhouse Gases
GM General Motors
GREET Greenhouse Gas, Regulated Emissions, & Energy Use in Transportation
HEV Hybrid Electric Vehicle
HWV Highway Vehicle
ICE Internal Combustion Engine
IMF International Monetary Fund
LPG Liquefied Petroleum Gas
MOBILE U.S. EPA vehicle emission factor model
N2O Nitrous Oxide
NEV New Energy Vehicles
NOx Nitrogen Oxides
OECD Organisation for Economic Co-operation and Development
PHEV Plug-in Hybrid Electric Vehicle

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PKT Passenger Kilometres Travelled
PV Passenger Vehicle
R&D Research and Development
SAIC Shanghai Automotive Industry Corp
VISION Department of Energy Model to predict oil consumption
VKT Vehicle Kilometres Travelled
VOC Volatile Organic Compounds
WSJ Wall Street Journal
WTO World Trade Organisation
YOY Year-on-year
ASI Avoid, Shift, Improve Framework
HOV High Occupancy Vehicle
P&R Park and Ride
UNEP United Nations Environment Programme
EEA European Environmental Agency
TOD Transit Oriented Development
SUV Sports Utility Vehicle
ASR Automotive Shredder Residue
ABS Anti-lock Braking System
LCA Life Cycle Assessment
ANL Argonne National Laboratory
PPP Purchasing Power Parity

viii
Consumer Group Lower Bound (US$) Upper Bound (US$)
Poor 0 6,000
Value 6,000 16,000
Mainstream 16,000 34,000
Affluent 34,000 -
ICEV Internal Combustion Engine Vehicle
Conventional vehicle powered by oxidising fossil fuels
HEV Hybrid Electric Vehicle
Combines internal combustion engine with electric propulsion system
Battery is charged using regenerative braking and any excess energy
PHEV Plug-in Hybrid Energy Vehicle
A HEV type that can be plugged in to charge the battery
EV Electric vehicle
A pure electric vehicle that does not burn any fuels
Needs to be plugged in to charge battery
FCEV Fuel Cell Electric Vehicle
Hydrogen and oxygen power an electric motor
Requires electricity to ‘charge’ the fuel cell
Exchange rates between US$ and CNY at time of publication
US$ (US Dollar) CNY (Chinese Yuan Renminbi)
1 6.33
(Mid-market rates: 2012-05-23 16:22 UTC, xe.com)

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5. Introduction
Defining the Question
A comprehensive study of the rising demand of automobiles in China and its
implications for the global environment by 2020
Our project will conduct a thorough analysis on China’s rising vehicle population and
the impact this will have on the environment within the next eight years.
The global environment has been defined as the natural world in which we live and
therefore the implications that can be associated with the change to the global
climate and atmosphere. Climate change and global warming are under extensive
scrutiny at this time. If you tie this together with the fact that the automobile
population in China may reach a colossal amount by 2020, our project is very much
relevant to today’s global issues.
The paper will cover many aspects such as; the demand factors associated with the
rise in automobiles, the environmental consequences associated with this and the
various policies currently implemented in China in order to reduce the environmental
impact.
Based on the thorough analysis of existing policies and new research into possible
solutions to the issue, we will propose our own recommendation as to how this
growing demand can be managed more sustainably.
“Cars represent a whole body of energy”. “They represent a lot of fossil fuel being
burnt and a lot of air quality issues”.
Simon Pringle, BDO

2
Projections
Views by industrial experts and economists on the future prospects of Chinese
automotive industry are largely positive, due to the increasing disposable income of
its people and its huge market size. It should be noted that most agree the
exponential growth China experienced recently is not sustainable and is unlikely to
continue in the long term. An in depth review of the factors affecting Chinas
increasing demand for passenger vehicles can be found in section 9, ‘PV Demand
Factors’.
By forecasting China’s GDP per capita in 2020, we can easily apply this figure to the
aggregate time series model using the Gompertz function, and obtain a rough
estimate of the total vehicle ownership level in the country (Wang et al., 2006). We
used the same PV/total vehicle rate of 70%, which was used in this study. From this,
we estimated PV ownership for China in 2020 will be 14%. Multiplying this with the
forecasted population, we predict that there will be roughly 194.6 million cars running
on the road in China in 2020. This figure fits with predictions made by Standard
Chartered Bank in 2010 (Tang, 2010) and by Graeme Maxton in our interview.
“It’s fairly simple really, rising incomes, reaching a ‘take-off’ level where GDP per
head has a reached the sort of degree where car sales can grow rapidly”
Graeme Maxton, Economist, The Insight Bureau
“The exponential growth is unlikely to continue. You can also factor in the slowing
economy, the demographics – the rate at which people are entering the work
force will turn negative next year. Then there is a lot of reason to say that the
market will not grow as fast in the next 10 years as it has in the last 5.”
John Wormald, Director, autoPolis

3
To estimate the amount of CO2 emissions associated with the increased PV fleet in
2020, we used models based on the works of Maclean and Lave (2003). Different
scenarios built on varying growth in PVs and fuel consumption target rates were
created. Our estimates gave us a rough idea of future CO2 emissions compared to
the current level. Details of the modelling will be discussed in the ‘Results’ section of
this paper.
Current state of the environment
As a result of growth in its economy and disposable income of its people, the number
of vehicles in China has been increasing at a fast pace in recent years. This has
brough huge impact on the local environment, as well as on a global scale.
Increasing emissions of greenhouse gases (GHGs), including CO2, CH4, N2O and
CFCs are said to be the main cause for global warming and are leading to climate
change. Some other impacts such as acid rain are caused by conventional pollutants,
namely CO, NOx, hydrocarbons and SO2 (Faiz, 2003). Increased demand on vehicles
also depletes natural resources, which are of limited supply (Toyota, 2001).
Climate Change
GHGs are the primary source of global warming and CO2 is the predominant GHG.
Carbon, contained in petrol and light oil, is converted into CO2 inside internal
combustion engines. Transport is seen as the biggest cause of the current rise in
CO2 emissions (Toyota, 2001). CO2 emissions contributed from PVs are positively
correlated to the consumption of fossil fuels and this equates to 60-80% of the
transport energy demand. With regards to China, its CO2 emissions are increasing
sharply with the increase in PV population. “Climate change is a symptom not a
cause. It is a symptom of patterns of consumption and exploitation” says Simon
Pringle of BDO. China is the world’s largest CO2 emitter at the moment and if the
growth rate continues, 10 billion tonnes of CO2 are projected to be emitted in 2015

4
(Wang, 2012). “There is no doubt that climate change is happening. The only debate
is what will be the consequential impacts.” he adds.
Depletion of natural resources
Fossil fuels such as crude oil which are used for fuel in vehicles. “Oil will not run out,
it will just become too expensive to use. It will still be there to use in pharmaceuticals
for example but at some point it will become increasingly expensive to use for
transport.” claimed Simon Pringle. This implies an urgent need to develop clean
energy as relying solely on fossil fuels will not be sustainable in the long-run. “China
“We are now told that temperatures are likely to rise by 6o
C over the next 50
years, as the GHG issue is simply not being tackled. This is catastrophic. But to
get China not to go that way, we in the developed world have to do something
really serious about GHG emissions. That means 75-80% reductions and the end
of the automotive industry as we know it”.
This chart shows the increase in transport derived CO2 emissions in the past
decade, the majority of which is down to an increase in passenger vehicle It
indicates the importance of PVs in terms of CO2 emissions, and therefore their
impact on the global environment.
0
100
200
300
400
500
600
1990 1995 2000 2005 2010
CO2Emissions(Mtonnes)
CO2 Emissions in China from Transport between 1990 - 2010

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can’t afford to have an energy security issue and it also can’t afford to have air quality
issues which have negative effects on health.” He concludes.
Regional issues – Acid Rain
The combination of NOx, SO2 and various compounds in the air leads to acid rain
(Toyota, 2001). Both NOx and SO2 are ICEV related air pollutants and are released
as exhaust emissions in cars (Kan et al., 2011). Emissions of NOx contributes to both
acid deposition and tropospheric ozone formation, the latter contributing to smog
formation. Smog can be damaging to health, leading to asthma and other respiratory
illnesses.
Acid rain can have wider implications if prevailing winds carry it across borders. “You
get acid rain in Japan. So there is prevailing wind. Japan so far hasn’t had serious
acid rain problems yet but it probably will.” says Taro Ikeba of KwikFit. NOx emissions
in China increased by 126% between 2000 and 2008, which is correlated to the rapid
rise of vehicles (Zhang et al., 2005). It is therefore imperative to put regulations in
place to combat this.
Other impacts include emissions of particulates, which also contribute to smog and
urban pollution. As the scale of these is relatively low and the effect on the global
environment is limited, they are not further analysed here.
Environmental impact and importance
Emissions from transport have been predicted to rise by 80% between 2007 and
2030 (Woodcock, et al., 2009). Within the transport sector, road transport has the
highest emissions; in 2020, it is estimated that road transport will account for 80% of
the overall emissions from all transport modes. Given that China is going to be the
world’s largest car market, this signifies inevitable adverse impacts on the

6
environment (Hirst, 2011). In order to limit these impacts, significant changes will
need to take place, in addition to the current effort by the Chinese government. This
paper proposes a strategy for this based on the ‘Avoid, Shift, Improve’ framework. As
this paper focuses on changes up to 2020, some solutions will run beyond our time
frame; however there are many short and medium-term options that should be
considered. Detailed discussions of all possible solutions will be in the ‘Solutions’
section of this paper.

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6. Literature Review
Introduction
The literature review was conducted in order to understand the current research
surrounding the growth of the automobile market in China. The aim was to find gaps
within the literature and subsequently strive to close fill them. Using specific key
words focused searches on databases, including EBSCO, The Institute of Transport
Management and Harvard Business Review.
China’s automotive industry
In 2010 China became the leading producer and consumer of PVs. Currently, in
China the automotive industry is an oligopoly of various MNCs, like General Motors,
Volkswagen, & Toyota. In the 1980’s the Chinese Government realised that capital
assistance, state guidance and technological transfer were all required to establish a
globally competitive industry (Long, 2005).
Since China opened its economy, there’s been a large influx of FDI. There has been
a major shift in demand for PVs. As a direct result the Government had undertaken a
blend of the import substitution model and the export oriented model when
determining its policies. This was implemented to develop the national demand for
automobiles and eventually export them (OCED, 2005).
In 1984, Shanghai Automotive Industry Corporation (SAIC) and Volkswagen (VW)
formed the first joint venture (JV). SAIC was owned by the regional government,
which applied many constraints through policy implementation. By 1998, the inward
FDI had branched out to automotive parts and small assemblers, thereby minimising
the number of imports, and maximising the use of the countries resources by locally

8
sourcing auto-parts. This enabled the formation of Shanghai GM, and SAW-Citroen.
Cumulatively these FDIs contributed to 75% of the domestic production of cars
(Wang, 2003).
Before 2000, the leading PV producers were JVs, where the government would place
products, which were not necessarily suited of the market conditions. Post-2000
China changed its policies and granted foreign ventures the permission to produce
small affordable passenger cars, known as “people cars” in order to meet the
demand resulting from a social shift and increase in mainstream consumers (Tang,
2009). With China’s accession into the WTO in 2001, there was decreased protection
of its domestic producers against international competition, due to decreased import
and protectionist tariffs that are attached with WTO membership.
Porters Diamond
As one of China’s ‘pillar industries’ the auto sector is remarkably placed for the
future. Using existing literature, we constructed the Porter’s Diamond framework, in
which all four factors were in favour for the industry. For instance, domestic rivalry
amongst local firms and JVs was planned to stimulate self-enforcing growth (Wu,
2006). The shift to a more social-oriented economy had facilitated the demand
conditions. The liberal policies in the auto-part sector supported the automobile
industry by reducing sourcing costs.

9
Factor Conditions
The Chinese auto manufacturers attract a large pool of skilled workers, due to the
proximity of the manufacturing sites to developed urban areas. Despite increasing
wages of skilled workers in China compared to the EU, USA and Japan, China still
maintains a significant competitive advantage. In 2011, the average wages of skilled
workers in China increased 23% (Wu, 2006).
Through joint ventures and investment from MNCs, technology transfer is on the rise
in the automotive sector. China still depends heavily on foreign technologies (Wu,
2006), however these recent improvements are making them increasingly
competitive. GM is leading the leading force in China in terms of R&D, and both
Toyota and Volvo have set up R&D operations in China.
The Chinese Government has also enabled more capital freedom in this industry,
giving it a preferential advantage over other industries. This is a policy is in
accordance with their vision of making China the global automotive hub.
Factor
Conditions
Demand
Conditions
Firm Strategy,
Structure, and
Rivalry
Related and
Supporting
Industries

10
Demand Conditions
Increasing disposable income is the major force for the increase in demand for PVs.
Currently 82% of the population are value consumers, and only 6% are mainstream
consumers. By 2020 this figure is set to drastically change: 51% of the consumers
will be mainstream while 36% of them will be value consumers. McKinsey & Co
(2011) predicted that discretionary spending on the automobile sector will increase
from 7% in 2010 to 13% in 2020.
Extensive reasoning for the change in demand conditions for PVs in China can be
found later in this report; ‘9. PV demand factors’
The Chinese automobile market is still at an early development stage and is entering
a steady growth period; hence demand for PVs should remain high in the short to
medium term.
The chart above gives a graphic representation of the changes in income
demographics in China within our project horizon. (Atsmon, 2012)

11
Related and Supporting Industries
The dramatic growth in the Chinese automobile industry in recent years attracts
numerous auto-parts suppliers to enter the China market. The shift to relatively liberal
FDI policies in this sector helped the local auto-part suppliers to develop and build an
extensive network with automobiles manufacturer. Meanwhile, this sector is highly
fragmented: they usually have a low level of R&D and production volume, thus failed
to exploit economies of scale (Wu, 2006). Therefore, a vast gap exists between the
Chinese and other global auto-parts suppliers.
Firm Strategy, Structure and Rivalry
Major auto manufacturers and assemblers are attracted to the Chinese market, due
to the country’s future prospect together with its relatively low labour and
manufacturing costs. In China, the larger firms are demanding that their suppliers set
up global operations, so as to create an entire network interlinking various auto
markets at the same time. This is also being done to raise the overall quality of the
car so that it can reach global emission standards and are ready to be exported (Wu,
2006).
Chinese car manufacturers started shifting from competing on price to focus back on
their products by investing in R&D. In addition, they are developing into a global
scale and hoping to export their products to the overseas markets (Wu, 2006). This
facilitates fast management and technology transfer thereby increasing the
competitive advantage of the industry.

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PV population forecasting
Rising disposable income and the desire for greater mobility are the major drivers for
increasing demand for automobiles in China. As a result of this, oil consumption and
CO2 emissions associated with on-road transport in China are increasing rapidly.
In the paper ‘Projection of Chinese Motor Vehicle Growth, Oil Demand, and CO2
Emissions through 2050’ (Wang et al., 2006), the authors tried to use mathematical
models to project the total number of highway vehicles in China in 2050. They used
three potential scenarios of highway vehicle growth (low, medium, high) to make their
predictions of the future based on patterns from other nations. They also used three
fuel economy scenarios; conservative, moderate and aggressive based on current
policies and the prospect of future policies.
‘Aggregate Time Series Models (ATSMs)’ were used as data is not widely accessible
in China, and they require less data than other more sophisticated models. ATSMs
correlate the PV ownership level to a certain economic indicator and plot it using a
sigmoid-shape function. In this case, GDP per capita and the Gompertz function we
chosen.
Our projection of vehicle growth was based on some of the methods used in this
paper (Wang et al., 2006), such as the Gompertz function. We improved their
methodology instead of building one from scratch, as the amount of data accessible
for us in our level is limited and their reliability is questionable. The model was
improved by using more up-to-date data such as GDP per capita, as this paper was
produced six years ago and substantial changes happened since then. We will also
focus on the population of PV by 2020 instead of 2050 in the paper, as a shorter
forecast period will make the projection more realistic.

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CO2 emissions forecasting
Once we obtained the projection of PVs in 2020, we used them to forecast CO2
emission in 2020. We adopted the equation used in ‘Life Cycle Assessment of
Automobile/Fuel Options’ (Maclean & Lave, 2003) as the backbone. In the modelling,
we used the most up-to-date data and several scenarios were set up to account for
the various rates the cars in China are going to achieve the emission standards.
Meanwhile, this equation focuses on the carbon footprints in driving the PVs only. We
improved it by adding extra information and assumptions from the paper ‘Projection
of Chinese Motor Vehicle Growth, Oil Demand, and CO2 Emissions through 2050’.
One example is that we included the carbon footprint in the manufacturing and
delivery processes of cars.
Avoid-Shift-Improve (ASI)
Holger Dalkmann introduced the concept of Avoid-Shift-Improve in 2007, whilst he
was working for the German technical corporation GIZ. The ASI model sets out a
new way managing transport in order to reduce its impact on the environment. Avoid
involves means of avoiding transport. Shift focuses on making changes to journey
efficiency, including changing transport modes. Improve requires technological
change to improve fuel and vehicle efficiency (GIZ, 2012). ASI aims to reduces GHG
emissions, make the transport system more sustainable and to improve the quality of
life of its users. It is important for these factors to be met in order, and avoiding
transport is the most important part to tackle first.

14
Gaps in literature
The first gap in the literature that we aim to fill is providing an updated forecast of
China’s PV fleet and associated emissions in 2020, due to the significant changes
that have recently taken place.
The second gap is that the relatively new ASI model has not yet been applied to
China’s transport sector.
Flow chart summarising the A-S-I approach
Source: GIZ, 2012

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7. Aims and Objectives
Aims:
We will forecast the number of PVs that will be on the road in China in 2020 to the
best of our ability. This estimate will be based on the current number of passenger
vehicles, forecasts of future economic development in China and population
predictions.
Based on our estimation of the total PVs in 2020, we will assess their impact on the
global environment. We will mainly focus on CO2 emissions as it is agreed in the
literature that it is the most important GHG, in terms of aggregate effects. We will
estimate how much CO2 will be emitted by the total fleet of PVs under different
conditions by modelling, then analyse its impact of this.
Finally, we will provide solutions to reduce carbon footprint in China using the “Avoid,
Shift, Improve” framework.

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Objectives:
I) Through the literature review, identify how the rise in PVs affects the current
environment.
II) Examine the various proposed projections for the future trend of PV population in
China and represent findings in a graphical manner.
III) Estimate the future projections for CO2 emissions via secondary data and from
the findings based on our future PV projection.
IV) Breakdown the life cycle of PVs in China and identify the stages where energy is
wasted or where there are adverse impacts to the global environment.
V) Gather information, via primary and secondary research, on the policies that
China is currently utilising.
VI) Analyse the policies and determine whether these will be sufficient to cope with
the rising demand of PVs.
VII) Design effective approaches for China to reduce the environmental impact
caused by the increasing PVs population under the “Avoid, Shift, Improve” framework.
VIII) Identify limitations of the project, and propose areas for future research.

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8. Methodology
Introduction
In order to efficiently conduct our project, a specific methodology was used, based on
the following steps:
1. Initiate a literature review based around our topic.
2. Identify gaps in the literature and set up aims and objectives based around these.
3. Search for relevant experts, government officials to approach for interview.
4. Set-up and conduct interviews.
5. Collect primary & secondary data,
6. Analyse all collected data and formulate suitable recommendations based on this
Primary Research
The main source of primary research was from interviews with relevant professionals
in the automotive industry, environmentalists, academics and those with extensive
knowledge on government policies. Specific questions were constructed beforehand
to be allocated to the relevant interviewee. In order to prevent inefficiencies and time
wasting during the interviews themselves, a list of discussion topics were emailed to
prior to the scheduled meetings. Interviews were semi-structured, enabling specific
questions to be answered whilst leaving room for informal discussion in additional
areas.
As stated in the project protocol, performing surveys was not suitable for this project;
many of the factors are unknown to the general public, and the feasibility of
conducting extensive surveys on consumer views in China is out of ourxs reach. The
general public would not be able to assist in terms of projecting the future PV
population in China or in terms of knowing the implications for the global

18
environment. Surveys could have been circulated in China to obtain qualitative and
quantitative information. Qualitative data could have included the attitudes towards
NEVs and adopting ‘greener’ technologies. Quantitative information would have
encompassed the growth in PVs region-by-region and data on vehicle types, fuel
economies and kilometres travelled on average. However, due to the limitations of
time and access to the Chinese population en masse such surveys could not be
conducted.
The table on the next page shows the list of interviewees with the respective topic
areas covered.

19
For the full list of interview questions and transcripts, see the Appendix.
Name & Profession Biography Focus Topic
Ajay Gambhir
Research Fellow at the
Grantham Institute of
Climate Change
Focus on low-carbon
development pathways of UK
and China. And emission
reduction policies.
Implications to the global environment
as a result of the rising PV population
in China.
Analysis of the alternative low-carbon
technologies available.
Ash Sutcliffe
Editor
China Car Times
Leading Portal to the
Chinese Car industry.
Strategies being developed by
manufacturers to minimise deleterious
effects to the environment.
Graeme Maxton
Economist & author
Fellow of the International
Centre of the Club of
Rome
Expert in projecting trends
and analysing demand
conditions. Writes for The
Economist.
Factors driving the consumer demand
for PVs in China.
Future projections for growth in the PV
population in China.
Opinions on policies, which can aid in
curbing demand in the future.
John Leech
Head of Automotive (UK)
KPMG LLP
Audit and transaction
services within the
automotive and transport
industry.
Future projections for growth in the PV
population
Consumer demand conditions driving
the increase in PVs in China
Dr. John Wormald
Director
autoPOLIS
Author, Speaker &
advisor on the automotive
industry and sustainability
Over 30 years industry
experience.
Advises on global automotive
strategies, climate change,
sustainable development,
new technologies and
policies.
General overview of the implications
to the global environment of the rise in
PV population
Break-down of new technologies and
improvements to existing ones to
ensure greater sustainability in the
automobile industry
General advice in our project area
Dr. Peder Jensen
Head of Energy and
Transport
EEA
Expert in the field of energy
and transport. Has extensive
knowledge regarding policies
which curb emissions and
implications of the rise in
PVs.
General advice in our project area –
including the “Avoid, Shift, Improve”
model.
Implications to the environment of the
rise in PVs in China.
Solutions for China e.g. changing
infrastructure and adoption of EVs.
Simon Pringle
Non-Executive Director of
Cleantech at BDO.
Vice Chair and Founding
Trustee at Carbon
Leapfrog
Expert in the field of
sustainability and the global
environment.
Impact to the global environment of
the rising PV population in China
Recommendations for viable policies
that can be implemented in China
General advice in our project area
Taro Ikeba
Strategy Director
Europacific Capital
Partners
Was a Strategy Director at
Stapleton’s (UK tyre retailer).
Worked on successful
projects e.g. acquisition of
the Kwik-Fit group in the UK.
Extensive knowledge on the
automobile industry in the UK
– especially supporting
industries e.g. tyres.
Overview of the automobile industry in
the UK and China
Implications for the future if growth in
PVs continue

20
Secondary Research
As primary research would not be sufficient to fulfil the aims and objectives, data had
to be collected by other means. Secondary data included a vast amount of sources
including publications, news articles, company reports and government statistics.
Reports from consultancy firms such as KPMG and Standard Chartered bank were
used to project trends for the future population of PVs in China. Other publications
were searched for using academic search engines such as EBSCO. Online library
catalogues were also used to search for research papers. Such sources provided the
basis for the initial literature review where gaps were found, indicating areas of study.
The papers, along with the interviews, provided a framework for the discussion and
enabled the formation of recommendations.
The Internet and various search engines were valuable tools for obtaining news
articles and company reports that were used to model projections and analyse the
Chinese automotive industry. The latter was done using the SWOT and Porters
Diamond frameworks, which were covered in detail in lecture notes.
Other models, such as the ‘Aggregate Time Series Model’ and the mathematical
Gompertz function were obtained via secondary research and utilised for the basis of
our research.

21
9. PV Demand Factors
Factors increasing demand
1. Increasing disposable income
With the considerate economic growth in China in the last 10 years, GDP per capita
(and therefore PPP) has experienced strong year-on-year growth. This has increased
the disposable income of a large group of the Chinese population, enabling far more
to buy and use cars. Some speculators predict that real income growth will continue
at 10% per annum for the short term (Tang, 2010). As discussed previously in the
aggregate time series model, GDP per capita and vehicle penetration rates are
inherently linked, and once a certain threshold is passed, exponential growth ensues.
“I believe double-digit growth shouldn’t be difficult, although growth won’t be as
high as last year”
Chang Xiaocun, Ministry of Commerce’s System Development, China (2010)
Many professional sources, such as the EIU have predicted expansion of the PV
market in China, including significant y-o-y growth.
Source: Economist Intelligence Unit

22
Recent GDP per capita (PPP) data in China
Year GDP per capita (US$)
2009 7,000
2010 7,500
2011 8,400
Key indicators of economic & social development during the 12th FYP
Year 2010 2015 2020*
GDP (trillion Yuan) 39.8 55.8 78.3
Urban disposable income, per capita (Yuan) 19,109 >26,810 >37,590
Disposable income, per capita, rural (Yuan) 5,919 >8,310 >11,655
“It’s fairly simple really, rising incomes, reaching a ‘take-off’ level where GDP per
head has a reached the sort of degree where car sales can grow rapidly”
The table above shows how PPP has increased in China in the last 3 years.
Speculators suggest that this will continue in the short-term, however growth may
not be sustainable in the future.
Source: CIA World Factbook (2012)
This table indicates a number of targets set in the 12th
FYP, up to 2020. Although
they are only projections, this data shows the direction that the Chinese government
wishes to take in the future.
* Predictions for 2020 based on growth rates in the 2010 – 2015 period.
Source: 12th
FYP of the People's Republic of China

23
As shown in the table above, disposable income in rural areas is less than a third of
that of urban areas. This polarity of wealth means demand for PVs differs greatly
between urban and rural areas.
Currently, 82% of the population are value consumers (as described in the notations)
and only 6% are mainstream consumers. A huge change is expected by 2020, with
the mainstream consumer base increasing to 51%, which accounting for population
changes, will be equivalent to 400 million people (Atsmon, 2012). This is expected to
lead to a 13.4% increase in discretionary spending (Atsmon, 2012), and as the
purchase of PVs is seen as a discretionary expense, we would expect this to lead to
further demand in the market.
The chart above gives a graphic representation of the changes in income
demographics in China within our project horizon. (Atsmon, 2012)

24
2. Government fiscal incentives
There have been a number of policies introduced in recent years to stimulate the
domestic market, as well as encourage vehicle ownership. One of the most
pronounced incentives was in place in the year of 2009, in which the tax on small
sedans, those under 1.6L, was reduced from 10% to 5% (Carey, 2009). The year-on-
year growth of sales of passenger vehicles in this period was a staggering 52.3%
(KPMG, 2010), and was well in excess of the regular growth. A year later the tax rose
to 7.5%, which did dent sales, however they still remained well above baseline
(Tang, R. 2010). The government currently has no intention of removing all
incentives, however they slowly will be reduced over time (Russo & Zhao, 2010).
A bar chart representing changes in annual consumption in China. It is
important to note the expected increased relative expenditure in the transport
sector from 3 to 13 units from 2000 to 2020. (Atsmon, 2012)

25
Another factor that boosted growth in 2009 was the changing in financing rules to
lower the cost of automobiles (Tang, 2010). With many consumers having easier
access to credit, combined with reduced tax on cars it was a very opportune time to
purchase a PV. In fact, in 2009, 83% of car sales were to first time buyers (Carey,
2009).
Significant subsidies were also introduced in 2009 to promote the purchase of fuel-
efficient vehicles (Tang, 2010), with greater savings than on those with larger
engines.
In order to encourage those with old PVs to replace them with new ones, the Chinese
Government introduced much larger incentives for recycling old vehicles and
purchasing new ones in exchange in 2010. This has two benefits, firstly the older
PVs which were generally less fuel efficient, and had greater emissions than the new
PVs were removed, and second, it also stimulates the automotive industry. The cash
incentive for this scheme rose from US$440-880 to US$733-2640 in 2010 (KPMG,
2010). The total government investment into these subsidies rose from US$6 billion
to US$10 billion in this period (Xiaojaun, S. 2009). Any incentives or factors that
boost the automotive industry will help to reduce the price of domestic brand PVs,
through economies of scale, competition and other factors. Lower priced PVs will
result in more sales.
3. Cultural
“To me the biggest issue is how do you manage the expectations that they have
created. We have helped to create this, because we have been telling the
Chinese that they can have it all, as we have been trying to sell our products to
them.”

26
With a growing population of mainstream consumers, and the car being seen as a
social marker or status symbol, there are many in China who want to purchase a car
purely for what it represents. The Chinese in Beijing would rather complain about
being stuck in traffic but able to use a car, than having to take the subway (The
Economist, 2012).
We have seen a disproportionate increase in human mobility since 1800 compared to
GDP and population figures; a 1000x increase to 100x and 6x respectively (World
Bank, 2011). In more recent years this demand for mobility has shifted significantly
from use of public transport and sustainable modes to that of private vehicles.
4. Market
The Chinese automobile market is still at an early development stage, and is just
entering growth stage if the market follows that of other nations then there will be a
significant increase in demand (Tang, 2010). China was less hit by the 2007
recession; it had sales growth in 2009 where most others had negative growth
(KPMG, 2010). This has led automakers to have increased confidence in the
Chinese market, for example GM raised its sales forecast from 3% to 5-10% in 2010
(Ying, 2009).
“The automotive industry is growing due to the internal demand in China as China
is increasingly becoming a consumer-led society so more Chinese people are
buying cars”
Taro Ikeba, Strategy Director, Stapleton’s Tyre Services

27
5. Increasing population
Simply put, as the size of a population increases demand will increase, provided
there is not a significant change in other demand conditions. The Chinese population
has increased from 1.26 billion in 2000 to 1.34 billion in 2010 (World Bank, 2012).
6. Second hand market
The Second hand market has historically been very poor, the reasons for this are
suggested later in the report. There does, however, seem to be a change in trend
with regards to purchasing second hand cars; used car sales rose 12.5% in China in
2010 (FT, 2012). Government efforts have been put in place to develop the second
hand market, and to increase consumer confidence within it. With an ageing vehicle
population, and many cars available at a low cost, there could be significant growth in
the second hand market in the future, on top of what is already being seen. As China
is still developing, incomes are still generally very low, and more than half of
consumers cannot afford to buy new (FT, 2012).
7. Improved road network
China’s Ministry of Transport plan to have 100,000km expressway by 2020 (Tang, R.
2010). This, combined with other improvements to highways will make driving PVs a
more attractive proposition to many potential first-time buyers.
8. Rise in consumer confidence
Unlike the West, considerate economic growth, and recovery of the nations stock and
property markets have led consumers to be confident about the future. Consumers
have more faith in their economy, and feel more comfortable investing in relatively
high value assets.

28
Factors limiting demand
1. Polarity of wealth
As mentioned in our interview with Graeme Maxton, the wealth disparity is still high in
China, so aggregate figures such as GDP per capita can be misleading. The majority
of wealth is focused around urban areas, so demand in rural regions will be far less.
2. Cultural
Unlike in the West, where the ratio of used:new cars sales can be as high as 4:1,
most Chinese consumers buy new, as there is a stigma attached to owning used
cars (FT, 2012).
China also has greater buyer-seller trust issues than most parts of the world, and the
auto market is one of the worst for this, due to the risks of unsafe automobiles being
high. Although this cultural element is losing traction, it is still an important hurdle to
overcome in order to allow the second hand market to take off.
“There is one group of economists who say when you look at the income
distribution in China, at a certain point, car sales will hit a wall… …there are not
1.3 billion people who can afford a car, and the gap between rich and poor is
great.”
“Another group say that the market will stall because of oil, the price of oil will
continue to rise, so it will become unattractive for people to have a car, or they will
need to share, so the market will reach a plateau.”
“The exponential growth is unlikely to continue. You can also factor in the slowing
economy, the demographics – the rate at which people are entering the work
force will turn negative next year. Then there is a lot of reason to say that the
market will not grow as fast in the next 10 years as it has in the last 5.”
“I believe the available market will be constrained by an ageing population,
environmental factors, the price of oil and income distribution.”

29
3. Rising fuel costs
The global oil supply is becoming an increasingly important factor in the cost of
automobile use. As the price of crude oil increases, so does the price of gasoline,
which directly impacts the consumer. The chart below shows changes in Brent Crude
Oil prices over the last 3 years. Today’s prices are close to double that of January
2012. In order to combat this reason for reduced demand, vehicle efficiency will have
to increase, but this can only go so far. A transition to NEVs or EVs would largely
remove the issue of oil prices (Business Week, 2012), but this is not feasible at this
moment in time, and the issue of finding a sustainable power source for these
vehicles will remain for some time.
“Within China, when you have a certain level of wealth you want to show it off.
You have to buy bling, and you have to buy new bling, so you have to buy a Rolex
or a Mercedes and it must be new. There is almost no market for second hand
cars for example. Nobody wants a second hand car because it is filled with
somebody else’s bad (or good) fate. There is a cultural element to the evolution of
the market.”
0
20
40
60
80
100
120
140
US$ / Barrel
Date
Brent (Europe) Crude Oil Prices: 2008 - 2011
An illustration of the increasing oil, and therefore gasoline prices in the past 3
years.
Source: U.S. Energy Information Administration

30
In 2012, retailers will increase the retail price of gasoline by 6-7%, the largest
increase in 33 months (FT, 2012). This increase has been introduced to try to reduce
the losses of refiners. Fuel increases have a direct impact on demand, as rising costs
are likely to deter consumers from purchasing a vehicle for the first time.
4. Economic
As China still has a manufacturing-based industry, it is unlikely that GDP per capita
will ever rise to levels seen in the West (The Economist, 2012). The level of growth
experienced in recent years may continue into the next decade, however it is
unsustainable based on their developmental model.
“The trouble with electric vehicle technology is that it is not ready, people have
been talking about it being ready for the past 20 years but it still isn’t. The
technology is fundamentally not fit for purpose yet.”
“…the Chinese are working very hard on this [EVs]; they see it as a way to reduce
their oil import bill and as a way of leapfrogging western technology. In a
government report that I read recently, they predicted that EVs would make up no
more than 2% of sales by 2020.”
“Nobody in his or her right mind is going to choose an EV over a petrol vehicle
because of the difference in performance. It is as much a barrier of our
understanding of physics and chemistry as it is in terms of the market.”

31
10. Results
2020 PV forecast
The methods we used to forecast the PV fleet in 2020 are described in full in the
literature review section, with all working and associated data in the appendix.
1. Using the Gompertz function
The Gompertz function used in the forecast is a mathematical model, which accounts
for the factors of initial ownership, the ultimate saturation level, GDP per capita and
the parameters alpha and beta that determine the shape of the curve. Three growth
scenarios (high, medium and low) were simulated in the Argonne report and the
average figure of passenger cars in China in 2020 is around 90 million (Wang et al.,
2006).
2. Improving the forecast by updating the data
We used more recent data to improve on previous projections and make them more
up-to-date. Currently, China’s GDP per capita is aroud US$5414 (IMF, 2012) and
having a PV ownership level of roughly 3% (Tang, 2010). By using the PV ownership
versus GDP per capita diagram (on p.19 of the Argonne report), we can obtain an
estimated PV ownership level at any time with a given GDP per capita. We expect
that China will more or less follow the Asian pattern that is represented by Japan and
Korea. We would not expect China’s ownership to follow the path of the United
States as China has a much higher population density. In the United States, the
population density is about 32/km2
, while in China its density is 140 (UNdata, 2010).
This means that on average the distances between people are closer in China and
thus, the demands for transportation is relatively lower. Also, the real crude oil prices
in the last decade are roughly 5 times more expensive than they were in the 1940’s
when the vehicle population in the US boomed (Forbes, 2009). As it’s a common

32
belief that crude oil will run out soon in the future, the extreme PV growth models of
developed nations such as the US are unlikely to be replicated ever again.
3. GDP growth forecast:
According to the report ‘China 2030’ produced by the World Bank, the forecasted
average growth rate during 2011-2015 and 2016-2020 are 8.6% and 7% respectively
(Rosen, 2012). Therefore, the forecasted GDP of China in 2020 is US$11,658,542
million.
The projected 2020 population in China is projected to be 1,390 million (United
Nations, 2010)
Therefore, we can make a simple calculation and have the value of GDP per capita
and thus an estimate of the PV ownership.
GDP per capita = GDP (US$ million)
GDP per capita = 11,658,542.9 / 1390 = US$8387
GDP per capita (US$)

33
At this level of GDP per capita, the vehicle ownership rate would be around 20%
under the Asian pattern. In accordance with the Argonne report, the proportion of
cars out of total stock of Highway Vehicles is 70%. Therefore, passenger vehicle
ownership will be 14%. Standard Chartered expect that China’s PV ownership level
will catch up with Thailand (6%) in the medium term and South Korea (27%) in the
longer term (Tang, 2010). Our result fits with their forecast as it lies between Thailand
and South Korea’s ownership levels.
Number of PVs = forecasted population x PV ownership (%)
Number of PVs = 1390 million x 14% = 194.6 million

34
2020 CO2 emissions forecast
After obtaining a projected number of passenger vehicles for 2020, we can now
estimate the implications on the environment by this fleet of vehicles. To do so, we
will do a model to project the carbon dioxide emitted base on the equation in the
paper Life Cycle Assessment of Automobile/Fuel Options (Maclean & Lave 2003)
and revised it that was specified in the literature review. The revised equation:
1. Total VKT is the total vehicle kilometres travelled of all the PVs. It is being
calculated by multiplying the total number of PVs with the average VKT. From our
projection, the number of PVs in 2020 in China would be about 194.6 million units
and the estimate of VKT in 2020 was found to be 15,000km (Wang et al., 2007).
Another lower growth situation where the fleet of PVs is 150 million units was also
simulated.
2. Fuel consumption is the amount of fuel needed for 100km (L/100km). The fuel
consumption rates we used here are the requirements set by the Chinese
government (Wang et al., 2010). The rate of 7L/100 km was set as a target to meet
by 2015, while 5L/100km was set to meet by 2020. In the optimistic scenario, we
expect China to meet 5L/100km by 2020. In a more conservative scenario, we expect
China to only meet its 2015 target by 2020.
3. The amount of CO2 produced per litre fuel varies from one fuel to another. For
petrol and gasoline, which are the main fuel source for cars in China, the amounts
are both 2.3kg of CO2 per litre (Timeforchange.org, 2007)
Emission of CO2 = Total VKT x fuel consumption x amount of CO2 per litre fuel

35
Scenario 1 shows the CO2 emissions in 2010. Columns 2 & 3 reflect the CO2
emission under high growth rate of PVs with different attitudes on meeting the fuel
consumption requirements set by the Chinese Government. While columns 4 & 5
reflect the emission levels under low growth rate of PVs.
Make into table as per excel sheet.
We have made several assumptions in our modelling:
• First, we assumed that all carbon contained in the fuel will all be converted into
carbon dioxide after being consumed.
• Secondly, the fuel consumption rate of the vehicles ranged from 5L to 7L per
100km, as these are just government targets.
• Thirdly, the optimistic target for 2020 is 5L/100km while in reality it may not reach
that level. Therefore, we also constructed a more conservative scenario in which
we assumed China only reached their 2015 target, which is 7L/100km.
• Finally, to account for the carbon dioxide emission in the manufacturing and
delivery processes, researchers suggest it would be 20% more of the emission in
operation. As the average age for passenger vehicles is about 10 years, therefore
we divided the 20% of the CO2 emission in 2020 by 10 to obtain the exact CO2
emission accounted for the manufacturing process in 2020.
The basis of our findings under our predicted scenarios has been compiled into a bar
chart on the following page.

36
147
336
470
259
362
3
7
9
5
7
0 100 200 300 400 500
1
2
3
4
5
ECO2 (million tonnes)
Scenario
CO2 Emissions Under Different Growth and Policy
Adoption Conditions
ECO2 p.a. (Manufacture) ECO2 p.a. (Usage)

37
11. Discussion
The PV Life Cycle
Automobiles impact the environment in all stages of their life but LCA (life-cycle
assessment) studies have shown that the majority of environmental impacts come
from the usage stage of the vehicle (Toyota, 2001).
LCA is a method to define and reduce the environmental damage from a product, in
this case, PVs. This is done by identifying and quantifying energy, material usage
and waste discharges and assessing the impact on the environment. In doing so,
opportunities for environmental improvements can be evaluated over the whole life
cycle (Hu, Z. et al., 2004).
The type of engine, the type of fuel required and the way that the vehicle is used and
maintained (driven by consumer habits) are the main factors in determining the
extent of the environmental impact. However, preventative measures can be taken
which begin at the design stage and this should reduce the environmental impact in
each successive stage.
The stages include the material processing, manufacturing, usage, maintenance and
re-use.
Material Processing: Among all industries, the automotive industry is thought to be
the most resource-intensive. There are various environmental considerations that
are associated with this industry including the release of toxic substances, using non-
“10-15% of GHGs come “from the production of the metals and resources
required to build the car”.
Peder Jensen, Head of Energy and Transport, European Environment Agency

38
renewable materials, the high-energy content of materials, the transport of the
materials and the packaging. (Carli, 1998)
The paper by (Maclean, H., Lave, L., 2003) states 2 stages – the vehicle design and
development and the material extraction. The former determines the material
composition of the PV and its fuel economy, safety and emissions. The material
extraction considers the materials that make up the automobile, which then must be
extracted and processed. There are potential issues regarding the environment due
to the quantities of non-renewable resources required. The toxicity of some of the
materials is prominent upon release. For example, platinum is used to improve the
efficiency of the catalyst but these metals are toxic upon release.
Manufacturing: Vehicle manufacturing involves the processing of materials into the
components and then their consequent assembly into the finished vehicle (Maclean,
H., Lave, L., 2003). In 1992, the emissions from motor vehicles, car bodies, vehicle
parts and accessories waste accounted for 62% of all releases and transfers from the
whole transportation equipment. About half of this 62% occurred due to painting and
coating.
Vehicle Use: This part of the life cycle has three main stages: fuel cycle, vehicle
operation and vehicle service. The fuel cycle includes the production, transportation,
conversion, storage and delivery of the fuel to the vehicle. Peder Jensen states that
fuel “takes around 10% of the energy of the final product for extraction, refinement
and transport”. The vehicle operation consists of the energy required to drive the
automobile and the various exhaust and emissions given off during the whole lifetime
Environmentally conscious manufacturing design could consider alternative
production techniques, fewer production steps, low and clean energy consumption
and less production waste.
Carli, 1998

39
of the PV. It can also include the infrastructure required to support the vehicle such
as car-park facilities and roads. The vehicle service includes the maintenance and
repair of the PV over its lifetime (Maclean, H., Lave, L., 2003).
There are potential environmental risks with the increasing levels of greenhouse gas
(GHG) emissions. In 2003, the global transportation sector was responsible for
almost a quarter of worldwide CO2 emissions. The primary air pollutant from the use
of non-renewable resources includes CO (carbon monoxide), NOx (nitrogen oxides),
SO2 (sulphur dioxide), VOC (volatile organic compounds), lead and particulate matter
(Maclean, H., Lave, L., 2003).
Environmental design for utilisation should consider lower energy consumption,
cleaner energy source, cleaner consumables, higher reliability and durability. There
should be instructions for the consumers in order to limit the energy consumption and
emission in this stage.
Also, we may consider the use of alternative fuels for internal combustion energy
such as LPG (liquid petroleum gas), natural gas (NG) and alcohol and hydrogen.
Also consider the use of alternative vehicles such as electric, hybrid and fuel cell
vehicles (Carli, 1998), which will further be discussed in our solutions section.
Maintenance: Often, waste management of used tyres is not handled properly and
therefore leads to adverse impacts to the environment. (N.B. Interview with Taro
Ikeba: Tyres are made up of a steel and rubber part where they first need to be
separated using magnets and then shredded. The metal goes into scrap and the
rubber can be re-used e.g. in playgrounds). (OECD, 2006) expects that the greatest

40
increase in tyre production by 2020 will occur in the ‘Asian newly industrialised
economies’. It also expects China’s rubber market share to increase further due to its
proximity to cheap labour and the major natural rubber suppliers.
Consider easy maintenance and repair, strong product-user relationships and
education and inspection of the maintenance services. (Carli, 1998)
Recycling/Re-use (ELV – End-of-life Vehicles): When the vehicle reaches the end
of its lifetime, there is an “end-of-life” stage, which comprises of dismantling,
shredding, disposal and recovery of certain metals and fluids (Maclean, H., Lave, L.,
2003). It is difficult to increase the amount of recycled plastic because of the different
plastic resins used. Increase the amount of recycled tires. Substitute mercury or
mercury compounds, for example in the electric switches, ABS (anti-lock braking
system) and virtual image instruments panel. (Carli, 1998)
Automobile manufacturers are motivated to minimise their costs of producing the
vehicle while consumers are motivated to minimise their costs in owning their vehicle.
Therefore, it is difficult for both the parties to pay attention to the environmental
impacts and sustainability issues (Maclean, H., Lave, L., 2003).

41
Simplified diagram of automobile life cycle (Maclean, H. & Lave, L., 2003)
15%
83%
2%
Manufacturing
In-use
End-of-life
Proportion of energy consumption assuming approximately 1000MJ/Vehicle,
adapted from Poon, L. (2009)

42
CO2 is measured because this gas is the largest contributor to global warming out of
all the GHG. The GHG emissions from manufacturing amount to 10000kg of CO2. Of
this, only 412kg results from the automobile industry. Therefore, the suppliers are
more responsible for CO2 emissions for this stage. Vehicle operation emits 73% of
the total 100, 230kg of CO2.
Approximately 75% of the car is recycled while the remaining share, the Automobile
Shredding Residue (ASR) is disposed of. The amount of ASR is expected to increase
and the potential toxicity of ASR puts the ELV on the environmental policy agenda.
The main parties involved in the recycling of ELV are scrap yards and retailers,
operators of shredding plants, steel and non-ferrous metals industries and the local
authorities for the disposal of ASR (Bellmann, K., Khare, A., 2000). However, this is
GHG emissions from the stages of the ALC. Written values next to bars refer to
emissions from industry (or vehicle in case of vehicle operation)”, (Maclean, H.,
Lave, L., 2003).

43
not enough and the entire car industry needs to be interested and involved in
improving the recyclability of cars.
There are 2 main ways in which the quantity and toxicity of the ASR can be reduced:
1. “Design cars for recycling” – this lies in the hands of car manufacturers.
2. Developing advanced dismantling systems.
15-20% of life-cycle energy requirements come from the production, maintenance
and disposal. The remaining 80-85% is related to the fuel consumption for car driving
(Wee, V.B., et al., 2000). Some of the energy becomes available again if the car is
recycled. The percentage of energy re-claimed by recycling is expected to increase
in the future.

44
Global Environmental Impact
In our prediction, there will be around 260-470 million tonnes of CO2 emitted by PVs
in China in 2020. Compare to the level in 2010, this is about 1.8 to 3.2 times more.
So how this increase in CO2 is going to affect the environment in a global scale?
The most obvious and well-known effect is global warming. Radiation from the sum
keeps the surface of our planet at a desirable temperature for human and animals to
live. An increasing concentration of the GHGs in the atmosphere reduces the
radiation escaping from the atmosphere and therefore, it will be trapped on the
earth’s surface. CO2 is known as a major GHG, some said that CO2 alone contributes
to 26% of the greenhouse effect (Carboncalculator, 2005). As already discussed in
the introduction section, global warming brings climatic and eco-system changes to
the world. Also, sea level will rise and extreme weather will happen more often.
Meanwhile, there are some scientists who doubted that if the rise in general
temperature in this century was caused by the increasing greenhouse effect. They
propose that the general increase in temperature is caused by a periodic warm
period instead (Vardiman, 2000).

45
12. Solutions
1. Introduction
We have focused mainly on solutions for cities, as this is where there has been the
most profound increase in transport demand, and trends indicate that the urban
population will increase significantly by 2020 (see table). In 2005, vehicular
emissions led to 70% of urban air pollution (Jiang, Y. 2010).
Table showing changes in urban population over time
Year 1993 2008 2020*
Urban Population 332 million 607 million 900 million
% of Total Population 28% 46% 60%
In this section we will first use the Avoid-Shift-Improve model with regards to
reducing emissions from private vehicles. Next we will identify solutions to reduce
environmental damage from the manufacture of PVs, and finally we will comment on
the power grid and the implications it has on changes in transport.
“The first thing we want to try to do is to avoid transport if it is not really needed.
Next, for whatever can’t be avoided, try to shift it towards more environmentally
friendly modes of transports, get people in public transport. The last step is to
improve the transport system, use less resource consuming the methods.”
* 2020 figure is estimation.
Source: Urban Transportation in China: Current State of Reform and Future Trends

46
Flow chart summarising the A-S-I approach (GIZ, 2012)

47
2. Avoid
2.1 Introduction: The first part of our strategy to reduce the environmental impact of
PVs is to avoid using them altogether. There are both push and pull factors involved;
push factors add pains to driving, and pull factors make avoiding driving private
vehicles more attractive. The reasons for an increased demand for PVs have been
discussed earlier in this report. We will identify the various push and pull factors
associated with avoiding use of PVs and transport in general and suggest strategies
to promote avoidance.
Chinese consumers feel like they all have the right to own and drive PVs, and
managing the expectations of the public is a very tough task. Other than wanting
mobility, for many owning a car is a status symbol, with many purchasing luxury
SUVs because of what they represent rather than the performance, this market is set
to grow 20% by 2020 (Atsmon, Y et al, 2012). Some would argue that the West are
at fault for the expectations in China, with their lifestyles being pushed on Chinese
consumers in order for them to buy their products.
The Chinese central government has the authority to impose policies within a short
period of time, allowing for fast implementation. An example of this was restricting the
amount of cars entering Beijing during the Olympics at certain times; an estimated
1.15 million cars were banned from roads as a last-ditch smog reduction effort on
“We have allowed in China, as with much of the developing world, a perception
that they can have the same standard of living, the same mobility that we have in
Europe and the US and they can’t, it’s just not going to be possible in terms of the
planet, oil resources and road space. We have let something out that we need to
bring back under control.”

48
alternate days, based on whether the number plates ended in an odd or even digit.
This made up almost half the total car population in the city at the time, 3.30 million
(Watts, J. 2008). These measures were extended for 12 months after the Olympics,
and more stringent measures were introduced targeting vehicles with high emissions.
In this period, 20% of the private vehicles were barred, reducing daily emissions by
10%, equivalent to 375 tonnes CO2 per day (Walker, P. 2009). A fine of 100 Yuan
(14US$) was imposed if you were caught driving on your banned days (Walker, P.,
2008). This is a very effective yet extreme way to reduce pollution and only works in
a short-term period, otherwise all the drivers and those involved in the car industry
will be hugely affected. It requires good communication in order to be managed
successfully. Many were felt frustrated by this move, and that it was a violation of
their rights.
2.2 Better city planning (Pull): City planning is a long-term solution aiming to
reduce traffic and emissions. It requires long-term vision from the governors and
people and must allow adaptation to future changes. People should walk instead of
driving for 5-10 minutes, as multiple short journeys are more polluting than a single
long journey; most of the pollution is produced when the engine is heating up (Enfield,
2010).
By replacing wide roads with a denser network of mixed-use narrower streets,
walking distances will be reduced, as well as smoothening traffic flow to ensure
pedestrian safety. Adding benches and green areas to streets will improve the
environment and comfort of pedestrians. Better street design and increased walking
improve people’s health and promote community cohesion (CSEP, 2011). Planning
should include measures that promote bicycle use, such as cycle lanes, car free
streets and bicycle parking (Watts, J., 2006).

49
2.2.1 TOD: China is currently researching transit-oriented development (TOD) for
their city planning. It is appropriate for China because of the low rate of per-capita
ownership of land and resources, compared to the rest of the world, compounded by
the fact that the Government is prioritising the development of public transport. TOD
is an American borne concept that refers to “high density and mixed use land
development centring around a transit station” (Chen, 2010). It is claimed that this
will assist urban growth towards better accessibility, mobility and non-motorised
environment (Mu & Jong, 2012). TOD strives to achieve a community where, it is
friendly to its pedestrians and centrally located to the bus or rail station. A TOD city
comprises of multiple TOD communities, an example of which is depicted below.
An example of a TOD community (Jiang and Han, 2009). This diagram shows how
parts of the community are focussed around a transport node

50
In large cities such as Beijing and Nanjing, it is important to build a TOD, followed by
a transit oriented corridor and eventually a transit oriented metropolis, as suggested
by Chen (2010) in the figure below. The smaller cities should concentrate on bus
related TOD, because of their lower population density as compared to large cities
and reduced funding.
2.2.2 Multi-Centre City Layout: A challenging, but good form of spatial transition
may be to move cities into new urban clusters. For instance, one of the main causes
of congestion in Beijing is its single-centric layout (Yang & Gakenheimer, 2007). Is
not sustainable in the long term, and due to the common location of both offices and
other commercial regions there is an 11 hour rush hour period in Beijing (Zhao &
Tian 2004). Development of further ring roads will not be sustainable in the near
future.
Proposed transit oriented corridor for Ninjing (Chen, 2010)

51
Developing cities in China are considering the multi-centre layout in order to prepare
for an increased volume of traffic in the future. The local Government of Foshan,
decided to relocate some of its commercial activities to lesser-crowded areas.
Actions such as these are pivotal for urban city expansion. This research has been
obtained from American urban city planning where it was found that a multi-centre
layout generated higher transport efficiencies (Yang, 2005). We would suggest that
all developing cities try to adopt this layout if it can be conducted effectively.
2.3 Minimisation of car usage (Push): Fiscal measures, such as increasing the
costs of parking and driving are common. For example, in Hamburg and Zurich,
parking is restricted in popular destinations in the city, which are served by public
transport (CSEP, 2011). The cost of parking at peak times and areas should be
increased.
Levying congestion charges on drivers who enter the city centre was adopted in
London and it seems to be effective, as 85% of people entering London have now
switched to public transport after its implementation (CSEP, 2011). These schemes
raise revenue, reduce congestion and use of PVs. The cost of the charge should be
correlated with the emissions produced, in order to deter use of more polluting
vehicles.
China tried to implement congestion charges in Beijing and Shanghai in 2002,
however it failed because of opposition from the public and insubstantial technology
for implementation (Hudong, 2007). Issues like poor traffic management and public
transport should be tackled first, but it is becoming a viable option (BBC, 2011). Due
to the high proportion of state-owned cars on the road, revenues might be limited
(China.org.cn, 2009).

52
According to Mr Sutcliffe, of China Car Times, “non-Shanghai license plate cars will
be banned from elevated highway at the peak hours of a day.” He suggested that a
temporary pass for the non-Shanghai license plates drivers based on a congestion
toll should be introduced.
To conclude, all these extra charges on parking and driving will only be effective if
enough alternatives are offered with a significant improvement in quality. These
alternatives will be discussed throughout this section.
2.4 Minimization of car ownership (Push): By increasing the price of licence plates,
the costs of driving rise. Plates have been auctioned in Shanghai since 1994,
however it was not effective in reducing the number of vehicles on the road
(China.org.cn, 2010). A license plate can cost more than the vehicle itself; currently
they sell for more than US$9000. As affluence is increasing, non-financial measures
may need to be considered.
China currently offers subsidies on oil and gas prices to ease pressure of inflation
and to promote domestic economic growth. In March 2012, China’s National
Development and Reform Commission raised the benchmark prices for both gasoline
and diesel, in order to catch up with global prices, while inflation pressure was
relatively mild (WSJ, 2012). China could consider removing its subsidies on fuel
prices, or even taxing fuel in order to discourage people from owning and driving a
car, although this is unlikely as higher fuel prices will certainly bring negative effects
on the economy and inflation.

53
2.5 Bicycles (Pull): In the past 30 years, we have seen a transition from heavy
bicycle use to modern transportation, and trying to revert this has been difficult.
Those who organise bicycle schemes in China face financial issues, as well as health
issues for their users in terms of traffic and pollution. Cycling is a great alternative to
using private vehicles; it takes up less road and parking space, has zero emissions
and provided local air quality is good, there are health benefits. Bicycle schemes are
only an appropriate solution in cities, due to the high population densities and
relatively low travel distances required. It also is a cheaper alternative to driving,
although in some cases is more time consuming.
Changes in modal share of bicycles in Beijing, over time
Year 1986 2000 2005 2008
Modal Share 62.7% 38.5% 30.3% 20%
Chinese bicycle programs are developing at a much faster rate than in the US, in
Hangzhou and Shanghai there are over 60,000 and 19,000 public bikes respectively;
the largest programme in the US provides only 1,100 bikes (Liu, C. 2011). The
Chinese have also introduced innovations such as adding child seats to encourage
family use, and providing free accident insurance (Liu, C. 2011). In the last three
years in Hangzhou, the daily use of each public bike has increased from one to five
“Maybe we don’t actually want any cars in the cities. If you go back 20-30 years
there were millions of bicycles in Beijing. Nowadays it is suicide to ride a bicycle in
Beijing because of the emissions and congestion. Maybe it is something that they
should try to go back to, because in many ways it is a very good transport means;
reduced space, less resources and good exercise.”
Source: Practices and Policies of Green Urban Transport in China

54
users. In 2011, the City of Zhongshan introduced 4,000 public bicycles that are free
for one hour per day, and online tools to find nearby docking stations.
Shanghai's bike-share program has 210,000 members, and the demand currently
outstrips supply by a considerable margin, which is a promising sign for the future of
bicycle use.
Schemes in most cities receive government support, however some are currently
running independently. Significant subsidies will be required to encourage firms to
introduce these schemes, and to reduce the overall cost to the consumer, in order to
wean them off of private vehicles. Cooperation between local authorities and
businesses is essential for success.
One of the major barriers to use perceived by consumers is the health risks
associated with congested roads and pollution. In many cities it is still very unsafe to
ride bicycles, as cities have been designed to cater to PVs. As suggested before, city
planning should encourage use of the 50,000 public bikes that are set to be
introduced in Shanghai by 2015 (Liu, C. 2011).
"Many Chinese cities are doing bike share at a much, much bigger scale than any
U.S. or European cities,"
Dani Simons, Institute for Transportation and Development Policy in NY
“I can ride it home instead of walking for 20 minutes. Riding the public bike is very
convenient. But I can't always use it. There are too few bikes and too many people
who want them."
Chen Xiaochen, Citizen of Shanghai

55
2.6 Fiscal Incentives (Pull): Fiscal incentives could be used, however they have
had a mixed reception. In California a plan was introduced to subsidise those who
used alternative forms of transport to their workplace. Despite this, after three years
the shift of commuter mode to non-vehicular was only 1%. As mentioned before, the
situation in China is very different to that of the US, so trials may be successful in a
certain cities (Ogilvie, D. 2004).
2.7 Health Benefits (Pull): Ogilvie, D. (2004) suggests that targeted behavioural
change is the best way to carry out modal shift (see table). In some cases, they
resulted in a shift of up to 5% of all trips within a city’s population. It aims to “change
people’s travel behaviour by offering an intervention only to a motivated subgroup of
the population or by offering information and advice tailored to people’s particular
requirements, or both.” An example of success was noted in Glasgow, with the ‘Walk
In to Work Out’ self-help package. After 6 months, the intervention group reported an
increase in mean time spent walking to work each week 1.93 times greater than in
people in the control group (Ogilvie, D. 2004). It showed significant net increases in
sample mean scores on the mental health, vitality, and general health subscales of
the SF-36 survey after six months. If these health benefits can be communicated
effectively to urban populations, then the rate of uptake of walking and cycling may
increase.
With obesity rates on the rise in China, it is becoming a major health concern (WHO,
2009). The WHO estimate that obesity rates are greater than 20% in some cities, so
“…previously, policymakers in Guangzhou hardly bothered to consider cycling
space during urban planning. But in recent years, the city has had car lanes
eroded by bike-sharing programs. And that is having an impact.”
Liu Shaokun, Institute for Transportation and Development Policy in Guangzhou

56
cycling schemes would have the added benefit of tackling obesity, although some
may question whether the obese demographic would use the service.
2.8 Lifestyle (Pull): A final point to mention is how changes in lifestyle can
potentially lead to avoidance of transport, however many are less direct than
previous examples. One suggestion is to encourage consumers to use online
shopping for groceries. A round trip of 20 households from a delivery company is far
more efficient than 20 households driving to the supermarket. It should be noted that
this is only appropriate if it replaces driving to shop, rather than walking.
2.9 Summary: As there is a lack of concrete research into avoidance measures in
China, we suggest applying schemes that have been successful elsewhere. The core
improvement must be in planning, in order to discourage the use of PVs and
enhance the qualities of walking and bicycle use. The infrastructure for bicycles must
be in place to meet increasing demand, and available in most major cities. Fiscal
measures such as increasing parking charges and licence plate prices are likely to
have a limited effect with increasing affluence, however we feel that a congestion
charge scheme would be appropriate, especially if it takes emissions into account.
Government and local business need to communicate the value to the consumer in
order for significant modal shift to take place. The avoidance strategy is limited, so
appropriate alternatives must be provided; these will be discussed in the next
section.

57
3. Shift
3.1 Introduction: This next part of our strategy highlights ways in which the use of
polluting private vehicles can be shifted to an alternate means that has a reduced
environmental impact. We will discuss why the alternatives are advantageous, and
ways to implement them successfully, via various push and pull factors. In order to
achieve success, it is crucial that policymakers work with consumers to better
understand their demands, as well as private enterprises such as automobile
manufacturers and transit network operators. Our focus in this section will be on
alternative private vehicles and public transport.
3.2 Private Vehicle Alternatives
3.2.1 More efficient ICEVs: In general, smaller displacement engines have greater
fuel efficiency and reduced emissions. The power of an engine is directly proportional
to the engine displacement, and the relationship between power and CO2 emissions
can be seen in the graph below.
Graph showing the relationship between engine power (kw) and related CO2
emissions (g/km) (FIEL, 2009)

58
From this data it is clear that reducing the average engine size, and therefore power
of the PV fleet would help to curb CO2 emissions. From January 1st
2012, the tax on
medium (2.0L – 2.5L) and large (2.5L+) displacement vehicles was increased
substantially. The aim of this is was to encourage consumers to purchase smaller
displacement vehicles instead. The table below summarises some tax policy
changes that promote sales of small engine PVs, and discourage purchase of larger
engine PVs.
Consumption Tax Changes (September 1
st
2008)*
Engine Displacement Initial Rate Modified Rate
< 1.0L 3% 1%
1.0L – 3.0L 10% 10%
3.0L – 4.0L 15% 25%
> 4.0L 20% 40%
Purchase Tax (January 1
st
2009)**
Engine Displacement Initial Rate Modified Rate
<1.6L 10% 5%
In 2010, China also began issuing subsidies for manufacturers; they receive US$465
on vehicles that have an engine capacity <1.6L or a fuel efficiency of at least 34 mpg
(Inside Line, 2011).
3.2.2 Newer cars: Policies are also in place to encourage old PVs to be switched
with newer, more efficient ones. As stated earlier in the project, fiscal incentives for
recycling older cars to purchase new ones were increased by 33% in 2010 (KPMG,
* The Chinese Ministry of Finance and State Administration of Taxation, 2008
** Reuters, 2009

59
2010). It allows less efficient cars to be taken off of the road, with more eco-friendly
cars as replacements. It is important that greener alternatives are offered as the
replacement. The vehicle turnover rate should not be reduced too significantly as this
will increase the impact of manufacturing.
3.2.3 NEVs: A shift towards NEVs has a number of advantages over conventional
ICEVs. It limits the nations dependency on oil based fuels, reduces urban pollution
and may have lower CO2 emissions per mile. The Government has allocated US$7.4
billion (Sun, 2012) to be invested in the commercialisation of EVs, HEVs and PHEVs
between 2011 and 2020.
3.2.3.1 HEVs: The first alternative NEV is the hybrid electric vehicle. We suggest that
HEVs are key place to start in terms of alternatives, as they are an intermediate
between NEVs and ICEVs. This provides more flexibility to the consumer, as they are
not completely reliant on the infrastructure for full electric vehicles. Currently,
HEVs/PHEVs only account for a very small proportion of the total vehicle population;
it was approximately 1/10,000 in 2010 (Yao et al. 2011). This is partly due to the high
initial cost in comparison to ICEVs, and that the payback period for these cars may
therefore well be longer than consumers in China are willing to accept. For instance a
BMW X6 HEV costs US$25,000 more than its ICEV version. Customer acceptance is
a huge challenge for China; a recent survey showed that 50% of Chinese consumers
were willing to be the first movers in purchasing or leasing green vehicles (Deloitte,
2012), however it cost is currently the main barrier to this.
“Lots of people say they are potential first movers on electric vehicles – provided
they cost no more than conventional ones…”

60
3.2.3.2 EVs: Currently, fully electric vehicles are not ready for commercialisation due
to their high prices and complete reliance on charging infrastructure. Despite having
operating costs up to 4 times less than gasoline vehicles, the high battery cost can
make the vehicle price of EVs up to 2 times that of an ICEV equivalent (PRTM,
2011). The improvements required to this sector are discussed in the subsequent
section. EVs are currently poorly commercialised relative to HEVs and produce up to
7-18% more emissions (Huo et al. 2010, Ou et al. 2010). China envisions to have
500,000 new energy vehicles by 2015 and a further 4,500,000 more by 2020. For this
they need multiple charging stations. On the 30th
of January, 2012 China opened its
largest charging station in Beijing, which has the ability to charge over 10 types of
EVs and have battery swapping machines. By 2020, the aim is to have 2350
charging stations with 220,000 charging spots in accordance with the FYP.
Thus far only 12 of the 250 charging and swapping stations have been completed
and only 274 charging posts established have been established in Beijing alone.
There still needs to be a rapid expansion, which requires a very high investment
capital (Xinhua, 2012). A major shortcoming of these charging stations is that they
lack a national standard i.e. different companies have different connectors which
hinders the efficient usage of the posts. A national standard must be set in the near
future.
We think that by 2020 there will be many commercialised EVs on the market,
companies such as BMW are already launching competitive EVs, like the BMWi
series (2011). BMW will be promoting the series in Shanghai this year, in order to
communicate “what the premium mobility of tomorrow is all about” (BMW, 2012) as
well as their use of sustainable materials and energy. Provided that the infrastructural
developments and costs fall by 2020, EVs will be a viable alternative vehicle to

61
ICEVs. We support the direction taken by BMW, and as other manufacturers follow
suit, the progression towards EVs is in motion.
3.2.3.3 Biodiesel: One of the main advantages of biodiesel is that most modern cars
require little modification for its use as a fuel, and it is also less polluting per km. This
fuel source does take some load of off China’s oil demand, however may add risk to
the nations food security, depending on how the fuel is sourced. Currently, biodiesel
is added as a fuel mix rather than a 1:1 substitute, so it cannot entirely eradicate the
oil requirement. Use of bacterial sources as opposed to crops will reduce the use of
farmland for energy.
Biodiesel cannot be used to entirely reduce dependence on oil. We suggest that
scrubland should be utilised for production of biodiesel, however until more efficient
bacterial production techniques are available, biodiesel will have a negligible impact.
It is currently only a short-term solution and electrification of PVs should be the
strategic direction in the long term.
3.2.4 Establish a second hand market for NEVs: By developing the second hand
market for NEVs, first time buyers will have more confidence that their investment will
not sunk, as they have the option to sell later on. It also makes NEVs more
accessible to less affluent consumers. By offering trade-in bonuses at dealerships,
people would be encouraged to sell their NEV rather than scrapping it.
“The only place that you start using these fuels effectively is Brazil, as it has a
unique set of factors because of its climate and land availability. It is simply not
possible to convert a large proportion of vehicles in China into biofuels.”

62
3.2.4 Summary: In order to promote HEVs, and eventually full-electric vehicles,
targeted marketing campaigns should be used to communicate the long-term value
to the consumer, including the reduced operating costs and emissions. Taxis and
buses should be switched to NEVs in order to raise awareness of these technologies.
Local governments may want to further subsidise the high up front cost of HEVs and
EVs in order to make them more attractive to consumers. Infrastructural
developments need to take place in order to make fully EVs a viable option, which
are discussed in our improve section.

63
3.3 Public Transport
3.3.1 Introduction: If the use of PVs is going to be discouraged effectively in China,
it is of paramount importance that sufficient alternatives are put in place. Public
transport should be built as a backbone during city planning, with the option to
expand in the future.
In Beijing the modal share of public transport has fallen from 70% in 1970 to 24% in
2000 (Zhao, J. 2004). Many highlight the long travel times and inconvenience as
barriers to its use, as well as the induction of the car-growth strategy in the 70’s, with
the Chinese becoming more and more dependent on PVs and taxis. The municipal
government realised in the 90’s that the car-growth strategy had failed, and despite
heavy investment in infrastructure, severe traffic congestion, increased travel times
and worse air qualities exist today (UNEP, 2010). Since then, a stronger stance has
been taken on public transport, with both local and central government seeing it as
the primary strategic choice for urban transportation in China (Huapu, L. 2009). In
Dalian, the public transport modal share is 43%, through use of buses, taxis, trams
and a metro system (Huapu, L. 2009). In general, the demand for public transport in
cities is increasing; due to rising fuel costs and other associated costs of owning a
private vehicle such as registration.
“Giving priority to public transport development is not only an effective measure to
relieve urban congestion, improve living environment and promote sustainable
development, but also a requirement for a people-oriented and harmonious
society”
(Huapu, L. 2009).

64
Source: Trading Economics (2012)

65
Peder Jensen, of the EEA states, “In urban areas where there is a high demand for
transport it makes more sense to develop public transport. Make the public transport
take the main load, and leave individual vehicles in suburbs and outside the cities.”
The integration of rural and urban public transport is becoming a more important
issue too. Radical restructuring and communication between urban and rural areas is
becoming more common, and is being promoted by all levels of government in
China. All urban planning should consider public transport as a backbone, and leave
room for improvement in the future as introducing innovation in fields such as rail can
have high lead times, and will be constrained by road networks (Hirst, N. 2011).
Municipal governments should look to secure funding through diversified sources
such as the private sector, in order to reduce risk and total costs of financing.
It is important to target public transport to appropriate demographics for greater
effect, for example in Hong Kong, 90% of public transport users are commuters or
shoppers, so work around appropriate groups first (Zhao, J. 2004).
Public transport in China generally lags behind that of Europe; in Beijing the travel
distance by bus takes 24.3 minutes longer than the equivalent car journey (on
average), despite being 4.5km shorter (Huaqiang, L. 2010). The quality will need to
improve vastly if public transport is to become a significant alternative to private
vehicles in the future. Convenience is another key factor, such as the use of
smartcards like Transport for London’s Oyster Cards.
“If you live in a city, you have all the infrastructure such as public transport that
make sense because of the high population density there. Yes you’ve got all these
side effects but in terms of the impact on the environment, it is a lot more efficient.
In China, you’ve got all this urbanisation and people from rural areas coming into
a city, which in itself is not that, bad. “
Taro Ikeba, Strategy Director, Stapleton’s Tyre Services

66
In a study published by The Climate Group (2010), 6 key success criteria were set in
order to improve the state of public transport in China, as well as suggestions as to
how they can be achieved:
• Set lower carbon development targets
• Adopt a more comprehensive and integrated planning approach
• Improve engagement with stakeholders
• Influence consumer behaviour
• Participate in international cooperation to build capacity and understanding
• Develop new financing mechanisms in order to provide greater incentives
We believe that aiming for these targets will help China to achieve the full benefit of
the following solutions
3.3.2 Metro (Rapid Transit): Metro systems move masses of people at the same
time and reduce their dependency on private vehicles. Thus, it is an effective means
of transport to reduce fuel consumption and carbon footprint. An efficient metro
system is essential for a city’s urban development in an economical and sustainable
sense, good examples of which are Hong Kong and London. In contrast, a less

67
carefully planned and developed metro system will lead to high car ownership and
congestion problems, for example in Los Angeles and Bangkok (Anderson, R. et al.,
2009)
The main carbon footprint of the metro is the electricity consumed in its operation,
however they generally provide far greater carbon emission savings than use of
private vehicles. It is difficult to exactly quantify the savings, due to lack of data and
the complexity of this task (Anderson, R. et al., 2009).
Currently, metro systems are running in 15 major cities in China with 15 more under
planned. Beijing and Shanghai have the 2 largest network of metro system in the
country; annual passenger rides in both cities exceeded 2 billion in 2011 (Qianlong,
2012; Stats-sh, 2012). Between 2013 and 2020, both cities are going to extend their
network for 273 and 567 km respectively and total operating mileage in the duo will
be close to 2000 km (Researchinchina, 2009). From all these statistics, we can see
that metro is going to be the dominant means of public transport in the future with a
growing ridership and capacity network.
In summary, the metro is an effective way to reduce carbon emissions and the
Chinese government is heading to the right direction.
3.3.3 BRT (Bus Rapid Transit): Considered to be an important innovation in
transportation, providing the capacity and economic development potential of rail at
around 1/10th
the cost (Sperling and Clausen, 2002). BRT can achieve lower average
travel times, lower emissions and reduced congestion by making the most of
exclusive rights of way, fast loading / unloading and collecting fares off board (Zhao,
J. 2004). BRT has been successfully implemented in multiple cities in the USA, and
an example of success in a developing nation is in Curitiba, Brazil. It has been

68
recognised as a cost-effective possibility, and has the potential to be implemented in
many Chinese cities by 2020. We suggest that all existing bus networks move
towards the BRT system.
3.3.4 Park & Ride: Following substantial growth in urban public transport options,
cities like Beijing are beginning to build park and ride structures in their subway
terminals. P&R can extend public transport into suburban areas, but may require
heavy subsidies. There are some issues with P&R in Chinese cities, where land use
is mixed and residential densities tend to be high anyway – non-motorised options
could easily be more efficient than private cars (Wang, R. 2010). Overall, P&R limits
use of PVs but does not completely remove it and people are still dependent on
private vehicles to get to the P&R stations. Another issue is that P&R encourages
short distance driving in densely populated cities, which will increase congestion and
emissions. We would recommend that cities are careful when considering this option
to ensure appropriate locations are chosen, in order to avoid additional traffic issues.
3.3.5 Carpooling: Ridesharing, also known as Pinche has enjoyed significant
success in many motorised nations such as the USA. In China, it has recently gained
public popularity, as well as attention from policymakers. Ridesharing involves
commute trips within cities, and sometimes long distance trips, among people from
different households. It has been identified as a solution to limit congestion and
pollution; its use spiked in Beijing during the 2008 Olympics due to the licence plate
restrictions on vehicles entering the city. In Shanghai, 88% drivers were willing to
share rides (Cao, 2005) and in Wuhan, 66% felt the need to carpool (Changjiang
Daily, 2009). Carpooling has helped owners to share the cost of travel, which are
becoming more pronounced with rising fuel costs. Internet-based carpooling websites
have facilitated the process making it more accessible and convenient.

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