The recent development of climate policy in China: Progress in 12 th Five Year Plan

1. The recent development of climate policy in China: Progress in 12th Five Year Plan Fei TENG Institute of Energy, Environment and Economy, Tsinghua University

2. Outlines • Understanding China’s 40%-45% targets; • How to achieve this? • Institutions supporting policies; • From 11th FYP to 12th FYP: policy shift from command and control to market based mechanism; • Air quality: a new driver for mitigation;

3. UNDERSTANDING CHINA’S 40-45% TARGET

4. Booming Economy in China • Robust in last 30 years: AAGR of 9.89% since 1978 • Accelerate since access into the WTO in 2001 • Driven by investment and export, rapid Industrialization and Urbanization

5. Primary Energy Demand in China • Expand in last 30 years: AAGR of 5.6% since 1978 • Soar in the 10th FYP from 2000 to 2005，recover from 2008 • Energy intensity reduction target was issued in the 11th FYP, first time as a mandatory target

6. Integrate Energy Conservation in China’s Economic and Social development plan • To reduce energy intensity of GDP by • 20% from 2005 to 2010 • 16% from 2010 to 2015 • To prioritize in overall energy strategy • To embodied in local development plans • To facilitate change in development mode • Mandatory targets to evaluate local performance

7. China’s Mitigation Actions • China will endeavor to lower its carbon dioxidide emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level; • China will increase the share of non-fossil fuels in primary energy consumption to around 15% by 2020; • China will increase forest coverage by 40 million hectares and forest stock volume by 1.3 billion cubic meters by 2020 from the 2005 levels; • These autonomouse mitigation actions are voluntary in nature and will be implemented in accordance with the principles and provisions of the UNFCCC, in particular Article 4, para 7;

8. Why 40-45% ? 单位产品能耗 单位GDP能源强度 重工业产品比重 Perspective from past trend • From 1990to 2005，GDP energy intensity reduce by 47%, with an annual rate of 4.1％. • From 2005to 2008年，GDP energy intensity reduce by 10.1％，with an annual rate of 3.5%. • Based on annual reduction rate of 3.5%，GDP carbon intensity will reduce by 40-45%.

9. Why 40-45% ? • Energy elasticity and GDP growth: 2005～2020 From perspective of energy elasticity • From 2005to 2008，average GDP growth rate is 11.2％，energy intensity decrease by 10.1％，energy elasticity is 0.65

10. HOW TO ACHIEVE: ALLOCATION AND MRV

11. Provincial targets under 11th FYP ---Diverse status and projections

12. Provincial energy intensities

13. Provincial energy intensities and per capita GDP

14. Local GDP and growth rate • No clear relationship between GDP/energy consumption/energy intensity • Robust and volatile economic growth • 70% of economic output and energy consumption concentrate in around 11 provinces Local primary energy consumption

15. Challenges in sector benchmarking

16. Comprehensive evaluation analysis index

17. Outcomes • Scenarios for different national targets

18. Policy Implications • Local proposals and pledges • Several rounds of discussions • Issued by the central government in National Energy Conservation Plan for 12th FYP

19. Big provinces, in terms of economic size or energy consumption amount have higher energy conservation targets • Developed provinces in coastal area • Structural change should be underscored in local plans • Provinces highly dependent on energy intensive industries • Priorities could be varied according to local context • Less developed provinces have lower targets • Western provinces, border regions and ethnic provinces should be given special focus • Provinces adopt similar methodology to further allocate target into municipal and factory levels

20. INSTITUTIONS SUPPORTING POLICIES

21. A brief history on climate governance in China (1990-present)

22. A brief history on climate governance in China (1990-present) • Evolving and responding to both international and national progress on climate change. • Improving level of importance of governing institutions. • Enhancing support from permanent and dedicated government bodies.

23. Present Climate Governance Structure in China National Leading Group to Address Climate Change 15 Ministries and Commissions directly under the State Council MFA (Ministry of Foreign Affair); NDRC (National Development and Reform Commission); MOE (Ministry of Education); MOST (Ministry of Science and Technology); MIIT (Ministry of Industry and Information Technology); MCA (Ministry of Civil Affairs); MOF (Ministry of Finance); MLR (Ministry of Land and Resources); MEP (Ministry of Environment Protection); MHURD (Ministry of Housing and Urban-Rural Development); MOT (Ministry of Transportation); MWR (Ministry of Water Resources); MOA (Ministry of Agriculture); MOC (Ministry of Commerce); NHFPC (National Health and Family Planning Commission) 1 Special organization directly under the State Council State-Owned Assets Supervision and Administration Commission 5 Organizations directly under the State Council General Administration of Taxation; General Administration of Quality Supervision, Inspection and Quarantine; NBS (National Bureau of Statistics); SFA (Sate Forestry Administration); Government Offices Administration of the State Council 1 Administrative office under the State Council Legislative Affairs Office of the State Council 2 Institutions directly under the State Council CAS (China Academy of Science); CMA (China Meteorological Administration) 4 State Bureaus administered by Ministries or Commissions NEA (National Energy Agency); CAAC (Civil Aviation Administration of China); SRA (State Railway Administration); SOA (State Oceanic Administration) Local Leading Group to Address Climate Change Local DRC and local bureau of corresponding ministries Department of Climate Change, Under NDRC 5 divisions on international negotiations, domestic policies and compliance, international cooperation, strategy and planning, general office

24. Allocation of Responsibilities

25. Key documents in Climate Change 2005 2010 2015 2020 Five Years Plans 11th Five Years Plans 12th Five Years Plans Work Plan for Greenhouse Gas Emission Control National Plan on Climate Change (2013-2020) (draft) Action Plans National Climate Change work programme White paper: China’s policies and actions on climate change (2008-2012) Annually Reporting Scientific Assessment 1st 2nd 3rd National Assessment

26. Interaction between Science and Policies Advise National Leading Group to Address Climate Change National Expert Committee on Climate Change Set up in 2007, 35 senior experts in various area National Center for Climate Change Strategy and International Cooperation(NCSC) Set up in 2011， 40 researchers Support NDRC Support National Assessment Report on Climate Change First report 2006, second 2011, third (initiated in year 2013) Ministry of Science and Technology

27. FROM COMMAND AND CONTROL TO MARKET BASED MECHANISM

28. Work Plan during the 12th FYP (2011-2015): Implementing Actions • The Twelfth Five-Year Plan for National Economic and Social Development of the People's Republic of China passed by Peoples' Congress at March 13 2011; • Work Plan for Greenhouse Gas Emission Control during the 12th Five-Year Plan Period issued by State Council at Dec 1 2011 • Major Targets: • Reducing carbon dioxide emissions per unit of GDP by 17% by 2015 from 2010 level. • Controling the emissions of greenhouse gases including methane, nitrous oxide, HFCs, perfluocarbon and sulfur hexafluoride from non-energy activities. • Improving climate change policy system and mechanisms, establishing systems for the statistical accounting of greenhouse gas emissions. • Establishing carbon emission trading market gradutely. Conducting low carbon pilot projects. Enhancing the ability to control greenhouse gas emissions.

29. Implementing Mitigation Actions • Accelerating the adjustment of industrial structure: Increase the proportion of value added from services and strategic emerging industries to GDP to approximately 47% and 8% respectively; • Promoting energy conservation: achieve energy conservation capacity of 300 million tce, reduce GDP energy intensity by 16%; • Developing low carbon energy: the proportion of non-fossil energy consumption to primary energy consumption shall reach 11.4%; • Increasing carbon sinks: increae 12.5 million hectares of forests, the forest coverage to 21.66%,forest stock volume by 600 million cubic meters. Piloting CCS demostration projects; • Conctrolling GHGs from non-energy activities:Control GHGs from industrial producton process, agriculture and waste treatment; • Strenghening replacement of emission intensive products: programs to replace cement, steel, lime, calcium carbide and other emission intensive products

30. Scaling Up Policies and Measures • Low carbon development pilot programmes:Low carbon provicnes and cities pilots (5 provicnes+8 cities); low carbon parks pilot (low carbon emerging industries); low carbon communities pilots (low carbon building and lifestyle); low carbon products (standards, labeling, verification, low carbon consumption); • GHGs statistical and accounting system:Establishing comprehensive GHGs statistics system; invlolved in evaluation system of local government performance; GHG inventory at local level, key sectors and enterprises; • Emission trading schemes:Establishing voluntary emission trading scheme; Conducting emission trading pilot programmes (two provinces+five cities); Enhancing supporting system for emission trading (MRV, registry, third party, regulation etc)

31. Pilot project at local level Overall roadmap of China’s ETS

32. Pilot project at local level • Why these regions? • Level of economic development • Relatively development • Strong economic power • Large carbon emission volume • Potential market volume • Large cap • Many market players • Trading volume 天津市Tianjin 北京市Beijing 湖北省Hubei 上海市Shanghai 重庆市Chongqing 广东省Guangdong 深圳市 Shenzhen

33. Pilot project at local level Key index of pilot project provinces

34. Pilot project at local level → CO2 emission share: 18.64% GDP share: 25.66% →

35. Pilot project at local level • Beijing– published “Proposal on the regulatory framework for the pilot emission trading scheme” • Trade subject: enterprises with stationary source emission • GHGs included: CO2 • Trade system: under construction, prior to local exchange

36. Pilot project at local level

37. Emissions of power industry Source：Second national communication Energy related emissions account for about 77% of China’s total emissions, energy production and conversion account for 45% of the energy related emission.Electricity emissions accounted for about 30% of China’s total emissions , or about 2.4 billion tons of CO2 emissions in 2008.

38. Emissions of power industry Source：author calculated Source：IEA ERI (2012)

39. Emission reduction pathways of power industry Source：Australia Government (2011)

40. Emission reduction pathways of power industry Power plants Dispatch agency Electricity consumers

41. Generation Hours Energy Saving Dispatch Barriers for Cost pass through A Traditional Dispatch B Energy consumption Low High Regulated wholesale and retail price; Dispatch based on equal generation hour principle;

42. Challenges and Problems • Lack of legislation • Except for Shenzhen • Impact to industries, especially to power industries • Allocation • Rule of fair and transparent to be achieved • Allocation to new entrance • Unified emission trading system be established • Interaction with other policies (e.g. regulatory reform in power sector)

43. AIR QUALITY: A NEW DRIVER FOR MORE MITIGATION

47. Air quality become binding • Air quality (especially PMs) is not only an environmental issue but a political issue in China; • A major part of PMs come from combustion of fossil fuels (e.g. 65% in Beijing, 43% from coal and 22% from transportation); • Air quality become more binding than energy saving and energy security; • Cap coal consumption become hot debated in China;

48. Looking forward • China’s mitigation targets are driven by a combination of various factors: international pressure, domestic pressure in energy and environment;