At the end of the Asia-Pacific Economic Cooperation (APEC) conference in Beijing, U.S. President Barack Obama and China’s President Xi Jinping inked what is considered to be an historic agreement on reducing global warming.
Ambitious Targets
Per the Beijing deal, the U.S. promises to emit 26% to 28% less carbon in 2025 than it did in 2005. This is double the pace of carbon cuts the U.S. had already pledged to reach by 2020.
Meanwhile, the world’s largest polluter, China, pledged to attain peak carbon emissions by the year 2030 or earlier if possible. The country has also set a daunting goal of boosting the share of non-fossil fuels to 20% of the country’s energy mix by 2030.
The fact that China has come around to make a commitment for emission control is really commendable. But let us not forget that the country also plans to keep increasing pollution for 15 more years.
Chinese Bleak House: Pollution Crisis
Although Beijing’s attempt is widely praised, the deal does not set a target level of pollution for 2030 and does not specify whether China would lower emissions after that period or simply level them off.
As per the U.S. Energy Information Administration (EIA), China is the largest producer and consumer of coal in the world and accounts for almost half of the world's coal consumption. At the end of 2013, 9.8% of China’s energy sources were not linked to fossil fuels, and the government plans to extend it to 15% by 2020.
Moreover, to achieve its lofty 2030 target, China needs to add clean and nuclear energy at an enormous scale. For this the country needs 800 to 1,000 gigawatts (GWs) more of power generation capacity from renewable sources over the next 15 years — an astonishing number given that the country now has a total of just 1,250 GWs of capacity from all sources, mostly coal-fired. More specifically, this is more than all the coal-fired power plants that are presently in operation and close to the total electricity generating capacity of the U.S., as per a Greenpeace researcher.
"China will need to adjust its economic structure, limit its use of coal and scale up non-fossil energy supply," said Ranping Song, who leads the World Resources Institute's China Climate and Energy Program.
Given the hurdles faced by the Chinese economy, the question arises whether the country will be able to deliver on its commitment. More so because the new goals require massive alterations to China's coal-addicted economy, as 80% of the country's electricity is generated from coal. The Chinese economy, which is growing at a little more than 7%, builds a new coal plant in every 8 to 10 days.
Not surprisingly China makes up about 30% of the world’s emissions. Unbridled industrial goal has surely come at a price – as per U.S. government estimates China will likely double its emissions by 2040.
China has also reintroduced tariffs on coal imports to safeguard the interest of domestic coal producers. China levied a 3% tariff on coking coal and a 6% tariff on thermal coal imports.
Greening Steps
While the Western world has come down heavily on China for adding to the world’s greenhouse gas burden, it's fair to say that the country has taken steps to boost its renewable energy sources. China has stepped up its efforts for manufacturing more solar panels and wind turbines than any other country. It has also built dams to produce hydropower.
The country is also the world’s prime manufacturer of solar panels and is also fast emerging as the leading market for solar photovoltaic (PV) energy. The Chinese government announced new policies as well as subsidies to encourage local governments to promote more solar installations on home and business rooftops, and ground mounted plant.
Leading Chinese solar stocks like Yingli Green Energy Holding Co. Ltd. (NYSE:YGE), JA Solar Holdings Co., Ltd. (NASDAQ:JASO) and JinkoSolar Holding Co., Ltd. (NYSE:JKS) are making the most of the favorable government stimulus.
Cities including Beijing are not unlike the coal-burning London of Dickensian times. Hence, the central government is now considering a nationwide cap on coal use. Coal-plant construction has dropped from over 90 GWs in 2006 to 36.5 GWs in 2013, according to the World Resources Institute. According to Greenpeace energy analysts in China, the amount of coal burned in the first three quarters of 2014 was 1%–2% lower than a year earlier.
But are these efforts though praiseworthy in their own right adequate to meet the energy demand of a heavily industrial country like China?
Chinese Censorship
China has made a massive effort to clear Beijing’s smoggy air for the APEC summit this week, banning the burning of funeral offerings, closing factories and restaurants, and forcing cars off the road. However, they failed to free Beijing’s skies before the APEC. They took an innovative approach – blocking smog data.
After failing to rid Beijing’s skies of pollution, Internet apps displaying readings of air pollution started excluding a U.S. Embassy feed. Wang Jun, co-founder of the Air Quality Index app for Apple Inc.’s iOS, said authorities told him to stick to the city’s data.
The broad censorship of data makes it very difficult for assessing the true picture. China has historically kept a tight control on the flow of information both in the traditional media and on the Internet to preempt any rebellion and ward off foreign interference.
U.S. Efforts Hit Resistance
Back home, Obama faces stiff opposition on climate issues from Republicans in Congress. The Republicans contend that the climate change deal will hurt the U.S. economy, middle-class families and struggling miners. The struggling U.S. coal industry has been looking eastward to nations like China and India to revive their dwindling prospects. Coal companies like Peabody Energy Corp. (NYSE:BTU) among others are likely to survive in spite of the pro-environment drive on expanding their operations in Australia and Asia.
The U.S. needs to double the pace of carbon pollution reduction to 2.3% to 2.8% per year between 2020 and 2025 from the present level of 1.2% per year from 2005 to 2020. This will undoubtedly hurt the domestic coal industry.
Is There a Last Word?
The world’s two largest carbon polluters have set themselves ambitious emission reduction targets. Though it will prompt other countries to participate in this venture, China needs to convert from a low-cost manufacturing export-driven economy into a higher value-added economy to meet this ambitious goal. They also need to appear more transparent as to their policy goals in combating pollution.