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    Emission Impossible

  by Andy Xie - December 2007

  Phototgraph by: Chinafotopress

The 2007 Nobel Peace Prize was awarded to Al Gore and the United Nations Intergovernmental Panel on Climate Change (IPCC) ¡°for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.¡± I believe that environmentalism is in the process of becoming the dominant ideology of the 21st century. Furthermore, global warming, and in particular the problem of carbon dioxide (CO2) emissions, will define China¡¯s relationship with the international community.

The Kyoto Protocol will expire in 2012. Despite its obvious shortcomings ¡ª particularly the US Senate¡¯s refusal to ratify it ¡ª its presence has given politicians an excuse to avoid pursuing new initiatives. The European Union has indicated that it would not abide by the treaty afterwards. The Kyoto Protocol¡¯s expiration will almost certainly trigger another wave of international efforts to establish a binding international agreement to control CO2 emissions. Any new agreement will likely include China and India, which as developing countries were not bound by the Kyoto Protocol. Moreover, China¡¯s coal-powered development will likely come under increasing international scrutiny. China needs to make significant adjustments to its development model early, within the next five to 10 years, in order to avoid a shock to its economy from complying with a possible new international treaty on CO2 emissions.

Global CO2 emissions from the burning of fossil fuels may reach 4.6 tons per person in 2007. Rich countries like Australia, Canada and the United States are at 20 tons per person due to their car-centric lifestyle. Britain, Germany and Japan are equally rich but emit half as much because of their reliance on public transportation. France stands out at a low 6.6 tons due to its extensive use of nuclear power. China¡¯s emissions level is about the same as the global average, but China¡¯s per capita income is one third of the global average and is growing three times as fast. If one takes into account China¡¯s vast population, any extrapolation of the current trend would make China the biggest source of CO2 emissions by far.

China¡¯s current high level of CO2 emissions is due firstly to its export-led development model, and secondly, to its reliance on coal as its primary energy source. China¡¯s exports may reach USD 1.2 trillion in 2007, making it the third-largest trading nation in the world. If the current trend continues, China could become the largest exporter in the world in the next five years. While exporting is important for China because it generates jobs and income, it also means that China is blamed for the resulting emissions. Of course, the blame comes from the same countries that are outsourcing their high-polluting production to China.

High oil prices have encouraged more coal use in recent years. China¡¯s CO2 emissions may have increased due to rising oil prices. The United States may shift to coal also, as American politicians have been suggestively pointing out that the US¡¯s coal reserves are as vast as Saudi Arabia¡¯s oil reserves.

China¡¯s strongest reasoning right now for not reducing emissions is that its per capita emission is still only half of the Organization for Economic Cooperation and Development (OECD) level. This defense will stop working in fifteen years. China¡¯s emissions per capita could reach the OECD level by then. As China¡¯s population is bigger than the OECD nations combined, a new global agreement on CO2 emissions is unlikely to be based on per capita emission. Hence, China may have fewer than 15 years before CO2 becomes a binding constraint on economic development.

Restricting CO2 emissions may be good for China anyway. Fossil fuels are very expensive now. Finding alternatives or decreasing their consumption can make the economy more efficient, and could make up for China¡¯s lack of natural resources. Its current development path is pushing China towards emissions levels on par with Australia, Canada or the US. The potential impact on the global ecosystem could be catastrophic. In the interests of fairness, negotiations should demand that countries like the US also bring their levels down to the global average.

There are all sorts of ways to incentivize lowering CO2 emissions. A carbon tax ¡ª imposing taxes on coal, oil and other fossil fuels ¡ª would work best. Japan and Europe consume much less oil per capita than the US because they impose high gasoline taxes. A carbon tax works to both reduce consumption and encourage the search for alternatives.

Economic incentives, however, may not always work. Nuclear energy, for example, is a promising clean energy option but it cannot become big without major changes to government policy. Nuclear power plants have high fixed costs and require a national strategy for nuclear waste storage. If the French government had not supported the industry decades ago, France would not be so clean today. The Chinese government is only just embarking on a nuclear power program. Unfortunately, it takes time to gear up, so nuclear power will make up only a few percentage points of China¡¯s energy consumption over the next two decades. 

Besides nuclear power, there are two policy options China can pursue to reduce future CO2 emissions without significantly slowing down its economy. First, China should restrict export industries that keep too much of the pollution within China¡¯s borders. The steel industry, for example, consumes a great deal of coal. Instead of exporting, China could encourage steel imports. Maybe China should also consider a carbon tax on its exports first. Such a move would substantially improve China¡¯s international image.

Second, China must urbanize efficiently; it must both minimize wastefulness during the building process and the resulting cities must also support an efficient and environment-friendly lifestyle. One thing that saddens me in China¡¯s development is that it has not developed a good urbanization strategy. China could learn from the past experiences of all the countries before it and build the most efficient and livable cities in the world. But urbanization has instead become all about profiting from property development. There is nothing wrong with profit. A good city should be profitable to build. However, if every step in urban development is driven by a desire to profit from property development, it can lead a city down a bad path.

Since the big cities in America, Europe, and Japan were built, many new technologies have come along to support more efficient urban organization. But in most of China¡¯s growing cities, development is chaotic. Frequent changes in leadership give regional leaders an incentive to pursue quick, visible and flashy developments that could hamper future development. Urbanization is the most important part of China¡¯s modernization. The inefficient use of resources in development can only go on for so long. When development is completed, the waste stops. But an inefficient city could maintain a high level of energy consumption permanently. Perhaps China should establish a Ministry of Urban Development to regulate and coordinate urbanization.

Trade still dominates China¡¯s economic dialogue with other countries, but environmental concerns are rapidly increasing in importance. It is possible that soon they could replace trade as the dominant issues defining China¡¯s international relationships. Now is the time to prepare for the change.

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