China's State Council recently announced its work plan for energy-savings and major pollutant emissions reductions through 2015 ("Energy Conservation and Emissions Reduction Comprehensive Work Plan for the 12th Five-Year Plan (2011-2015) Period"). This key guiding document for realizing China's energy and environment goals sets mandatory energy intensity and major pollutant emissions targets for provinces and highlights a number of key policies to achieve them.
The main numerical targets released in the work plan were the provincial level energy intensity targets for 2015. Nationally, energy intensity should fall by 16% and carbon intensity by 17% as detailed in the 12th Five-Year Plan. Province by province, we now know how that 16% is going to add up:
Energy intensity reduction targets in China's 12th Five-Year Plan (2011-2015)
Similar provincial targets for the four criteria pollutants (sulfur dioxide, nitrogen oxide, chemical oxygen demand and ammonium nitrogen) are included. We expect the State Council to issue another separate official document to do carbon intensity index allocation and quota setting.
I've written many times about the significance of setting binding targets for China in defining national priorities and mobilizing necessary financial resources. This round of energy and environment-related targets reflects the Chinese government's determination to rebalance its economic structure towards more energy-efficient growth. We also saw this when the Chinese government toned down the 12th FYP annual economic growth target to 7%.
Yet as we all know, China's actual economic growth rates have always exceeded targeted growth rates: average GDP growth in the 11th Five Year Plan was 11%, even though the targeted growth rate was 7.5%. It will take all the specific policies in the work plan – such as public finance incentives, taxation policies and financial support measures – in order for this transformation to happen on the ground.
China has good reason for acting. There is a huge market in energy-savings and emissions reductions industries in China. This market is projected to grow from about 1.71 trillion RMB ($268 billion) in 2009 to over 3 trillion RMB ($470 billion) by 2015. An analysis by Worldwatch Institute recently found up to 4.5 million green jobs in three of China's biggest low-carbon sectors by 2020 – energy, transportation, and forestry.
Last but not least, the work plan reiterates China's plans to carry out carbon trading pilots. Although the work plan only discusses voluntary emissions trading mechanisms, cap and trade pilots and other market mechanisms are being actively discussed elsewhere. We hope that they are eventually incorporated into the climate change law that China is preparing to draft.
These carbon and energy targets together with continued strengthening and improvement in clean energy incentive policies (such as the recent nationwide solar PV feed-in-tariff) are helping China to make progress on its long-term climate and clean energy priorities.
(This post was co-authored with Wang Peng, Alvin Lin and Michael Davidson.)
