By Deborah Seligsohn and Angel Hsu
As its negotiators head to Durban, South Africa for the next round of the UNFCCC climate negotiations, China can point to significant progress in domestic climate policy since the Cancun negotiations a year ago. March, 2011 saw the adoption of China’s 12th Five-Year Plan, binding domestically China’s first phase of its Copenhagen and Cancun commitments to reduce its carbon intensity 40 to 45 percent by 2020. In this first year of the new Five Year Plan, China also adopted a number of specific climate-related implementation measures (For a more exhaustive list, see China’s just published White Paper on its climate change activities).
- Assigning specific targets to the provinces to achieve the energy and environmental 12th Five Year Plan goals. The Plan released in March contained the national targets – a 17 percent reduction in carbon intensity from 2010 levels by 2015; and reductions in SO2 and NOx, as well as in chemical oxygen demand (COD) and ammonia nitrogen water pollution. These have now been broken down by locality, and the wealthier and more industrial municipalities and provinces in eastern China – Tianjin, Shanghai, Jiangsu, Guangdong, and Zhejiang – have been given the most ambitious carbon intensity goals. To achieve the carbon intensity and energy efficiency goals, successful energy efficiency programs from the last plan have been expanded – the Top 1,000 enterprises program was expanded to include 10,000 enterprises – and new approaches are being added.
- Launching pilot carbon-trading schemes. The National Development and Reform Commission (NDRC) also announced in July that it will launch six pilot carbon-trading schemes by 2013. Details have not yet emerged, and it is quite likely that the various pilots will be different to allow the national government to compare. Originally it looked like these trading schemes would all involve the intensity target, but there is a possibility that at least some could be based on a total energy cap. The possibility of setting a national cap on total energy consumption was suggested early this year, but then didn’t emerge with the 12th Five Year Plan. However, we’ve now heard it is likely early in the new year.
- Ramping up its ambition on solar and wind power implementation. China already had ambitious targets in the 12th Five Year Plan, with targets of 70 GW for new wind installation and 5 GW for total solar installation. Not only does China continue to be pursuing these goals, but it is seriously considering increasing its target for solar energy to as high as 20 GW by 2015, which is a substantial increase given its current 2 GW capacity. The expansion in July of a nationwide feed-in tariff (FiT) policy to include solar photovoltaics (PV) to encourage the domestic market has helped to increase the number of new solar PV projects, with the non-residential PV project pipeline standing at 14 GW at the end of September. In the wake of the Fukushima-Daiichi nuclear disaster, nuclear development may have slowed somewhat, causing energy officials to look for greater growth in other non-fossil sectors to continue to work toward the 12th Five-Year Plan goal of 11.4 percent non-fossil energy in primary energy consumption by 2015.
- Implementing the new nitrous oxides (NOx) targets in the 12th Five Year Plan. Starting this year China has a national goal for reducing nitrous oxides, with new rules for power plants, cement kilns, industrial boilers, and vehicles. The primary impetus for NOx is air pollution control, but NOx is also a greenhouse gas. Thus these controls are in addition to China’s Copenhagen and Cancun commitment to control CO2.
- Raising resource taxes on oil, gas, and coal. After first piloting a shift from a production-based to a sales-based tax on crude oil and natural gas products in Xinjiang and then an additional 11 provinces in December, 2010, the Ministry of Finance approved a nationwide resource tax at five to 10 percent of sales nationwide in early November this year. A volume-based tax will continue for coal. These resource taxes further energy and climate goals by raising prices, although they do not act as a pure carbon tax, since the taxes are not tied specifically to carbon content.
These policies comprise significant implementation of China’s Cancun and Copenhagen commitments, and there are signs that Chinese negotiators have been working constructively for a positive outcome at Durban, which in the just-published White Paper the government says is its aim. In other contexts, China has run into more friction. China and the European Union are at odds over the European Union’s plans to include aviation emissions in its trading program – which would tax flights originating and landing in the EU-27 countries – China challenged the EU by threatening to file a suit in court. While the US is also challenging the EU aviation taxes, in other arenas the two countries have disagreements. This year has seen a number of green energy-related trade disputes, most recently an anti-dumping case over solar panels. On the other hand, China recently joined the US and other APEC nations in committing to work to reduce tariffs on environmental goods and services.