1. China’s Policies on Climate Change: a Perspective of Development Ji ZOU Renmin University of China The Harvard Alumni Association and the Harvard Clubs of Asia Global Series: China / Asia, Harvard and the World Pudong Shangri-La, Shanghai, March 28~30, 2008

2. Outline Development strategies: goals, path, and constraints Demand: investment, consumption, and net export Energy use and GHG emissions Response measures Obstacles and challenges Conclusion

3. Development Strategy: Goals 1 GDP: Re-doubling the amount of GDP per capita in 2000 by 2020 (with 7.2% annual growth rate in average) Industrialization: lowering share of agriculture, raising share of manufacture and service with higher technological competitiveness and value- added Urbanization: higher share of urban population (from 45% in 2005 to 60% in 2020 and 75% in 2050) to and adequate urban infrastructure (tap water, sanitary system, energy, transport, housing, other public facilities, etc)

4. Development Strategy: Goals 2 Full employment – a socioeconomic matter: surplus labor forces, weak social security system, and increasing income gap Economic stabilization: inflation, increasing cost of labor, energy and environment Trade – export or domestic market-oriented? Environmental and energy conditions of accessing to market; flows-in/out of goods, resources, capitals, and technologies for whom?

5. Development strategy: path Contribution of factor input growth and efficiency improvement to the gross-growth rate Kaya Equation:

6. 6 It’s a matter of development paths: Conventional v.s. Innovative (SD) GDP per capita GHGEmission 1. Install low carbon technologies 2. Human resources 3. Policies and measures Conventional path Innovative SD path Limits of GHGs emission 4. Financial resources 0 How to make this shift? Inputs:

7. Development Strategy: Constraints Accumulative capital in early stage of development: from farmers/agriculture and the environment/natural resources via low price of labors and primary products Huge amount of surplus labors (~130 million) and lack of qualified human resources Growth pattern: the growth relies on high rate of investment (up to ~40%) and low efficiency of factor input

8. Energy Use and GHG Emission in China

9. China’s Energy Use （ Mtoe ） Source ： BP Statistical Review of World Energy June 2007

10. Alternative Projections of China’s Primary Energy Demand in Future IEA, 20072015 4073 Mtce 2030 5456 Mtce ERI, 20072020 3000 Mtce 2030 3857 Mtce DRC, 20042020 3280 Mtce Wang, 20072020 3974 Mtce 2030 6028 Mtce

11. Energy intensive Demand: Investment, consumption, and net export

12. Industry used about 71% of the total energy in 2005 and 2006; Such six sectors as (1) ferrous and (2) nonferrous metal, (3) raw chemical materials and chemical products, (4) non- metallic and (5) metallic mineral products, and (6) petroleum refining, coking, and nuclear fuel, account for 72% of the industrial energy use, more than 50% of the total.

13. A large gap exists in energy efficiency in these sectors between China and international standard.

14. Estimation of China’s Recent GHG Emission (Mt-CO2) IEA ： 5101 in 2005 WRI ： 5204.8 in 2004 CDIAC ： 5010 in 2004 China ： 5600 in 2004

15. Alternative Projections of China’s GHG Emissions in Future IEA 200720158,631 Mt-CO2 2,354 Mt-c 203011,447 Mt-CO2 3,122 Mt-c ERI 200720206,563 Mt-CO2 1,790 Mt-c 20308,617 Mt-CO2 2,350 Mt-c DRC 200420207,231 Mt-CO2 1,972 Mt-c Wang, 200720208,177 Mt-CO2 2,230 Mt-c 203010,630 Mt-CO2 2,899 Mt-c

16. Scenarios of Primary Energy Demand in China (BAU) -RUC

17. Scenarios of Primary Energy Demand in China (with policies) - RUC

18. Scenarios of CO2 Emission from Fossil Fuel (BAU) - RUC

19. Coefficients for both BAU and Policy Scenarios - RUC IndicatorsBAUWith Policies Energy Use （ 100 Mtce ） 2020 ： 44 2030 ： 51 2050 ： 58 2020 ： 39 2030 ： 45 2050 ： 50 Growth Rate of Energy Use % 2005-20 ： 5.1 2020-50 ： 0.9 2005-20 ： 4.2 2020-50 ： 0.8 Elasticity of Energy Use 2005-20 ： 0.65 2020-50 ： 0.22 2005-20 ： 0.54 2020-50 ： 0.20 CO2 emission (t-C) 2020 ： 32.7 2050: 36 2020: 26.8 2050: 28.6

20. Response Measures

21. Near-term (5~10 years) Public awareness improvement: low carbon economy, new lifestyle Development of policy implementation system Infrastructure investment with high-efficient technologies (power, transportation, and buildings) to prevent from Lock-in Effects Efficiency improvement in high-energy-intensive sectors LUUCF for keeping and increasing carbon sink Capacity building for R&D of low-carbon technologies and policy enforcement, and development of human resources

22. Long-term (20~30 years) Mature policy and institutional system (standards/norms, Cap-and-Trade, and environmental taxation; monitoring and verifiability, etc) Much higher R&D investment and companies become a major driven force Mature financial mechanism linking capital markets: Public-Private-Partnership Commercialized ESTs in major sectors at international level

23. Technology change will be a key What’s technology? (a system) What’s transfer of technology? (in place and effective) What’s development of technology? What’s diffusion and deployment of technology? What conditions and infrastructure are needed? What awareness we need to develop to address the contradiction between the protection of climate change as global public goods and IPR as private goods? How can we coordinate this?

24. Preliminary identification of barriers of technology transfer barriers from provider side –Political will and politician and entrepreneur’s awareness on global public goods –Technology export ban –Market forces: e.g. monopoly tendency by technology owners –Very high expectation for revenue –Inadequacy of economic incentives from public policies

25. Preliminary identification of barriers of technology transfer Barriers from receiver side –Awareness –Knowledge and information –human resources –Financial resources –Lack of monitoring and enforcement of technological norms and regulations –Lack of economic incentives: taxation, clarification of PR, including IPR –Divided institutional arrangement Infrastructure Barriers –Transportation and telecommunication –Enabling legal basis and policies

26. Risks and Challenges Awareness and lifestyle High pressure of population and employment call for high growth rate and lead to massive inputs of resources Rural population and infrastructure: incremental energy use Lock-in by low efficient technologies in infrastructure (transport, power, and buildings) Human resources for next several decades Managing increasing financial resources

27. Conclusion China’s energy use and GHG emission will continue to increase, but may be in a more sustainable manner Awareness and policy infrastructure should go in advance of the implementation of policy instruments as a learning process Recent focuses should be on specific sectors and technologies International cooperation is needed, incl. an innovative, PPP-based financial mechanism to support R&D, transfer, and deployment of CSTs

28. Thank you for your attention! zouji@ruc.edu.cn zouji@ruc.edu.cn