Latest Articles by Pan Jiahua

Towards a global climate regime

Jiahua Pan, Ying Chen — Wed, 10 Dec 2008 06:18:00 +0000

How much carbon developed and developing nations will be allowed to emit in the coming years is a hotly contended issue. Pan Jiahua and Chen Ying discuss one possible solution.

The key to negotiations on a post-2012 international climate regime is the equitable allocation of emissions-reduction obligations with respect to the circumstances of individual nations. To date, a number of proposals have been made to achieve this model, but very few of these have taken into account the situation and requirements of developing nations.

To better embody equitable principles and protect the interests of developing nations, a research group at the Chinese Academy of Social Sciences led by Pan Jiahua set forth in 2002 a set of aims based on human development principles. These principles included the allocation of emissions rights giving priority to basic human needs; promoting low-carbon development; and restricting excessive and wasteful consumption. The group’s report was distributed at the United Nations Framework Convention on Climate Change’s (UNFCCC) eighth meeting of the Conference of Parties (COP8) in New Delhi. Since then, improvements have been made to the concepts, methodology and quantitative analysis of the proposal’s structural framework. The latest advances were presented in the side events at the COP9 in 2003 and the COP12 in 2006, and received a positive response internationally.

Recently, attempts have been made to develop a new proposal for the equitable and quantitative allocation of carbon entitlements and to discuss key features of the international climate regime, such as financial institutions. Taken together, these efforts will allow the building of a complete international climate regime – the Carbon Budget Proposal (CBP) – for the post-2012 era.

There are several aspects included in the equitable principles of the Carbon Budget Project:

*Greenhouse-gas emission rights are a human right that ensures survival and development. Equality means ensuring equality between individuals, not between nations.

*The crux of promoting equality between individuals is to ensure the rights of the current generation. Controlling population growth is a policy option to promote sustainable development and slow climate change.

*Given the wealth accumulated during development, which was accompanied by greenhouse-gas emissions, equality today includes equity acquired in historical, current and future development.

*Giving priority to basic needs means that the allocation of emission entitlements should reflect differences in natural environments.

CBP research shows that if only carbon dioxide (CO2) emissions from fossil fuel are considered and emissions peak in 2015 and fall to 50% of 2005 levels by 2050, the annual per-capita carbon budget for 1900 to 2050 will be 2.33 tonnes of CO2. Initial carbon budget allocations for each country are made in direct proportion to its base-year population, with adjustments made for natural factors such as climate, geography and natural resources. For example, Russia and Canada have cold climates, Australia and Canada are sparsely populated and South Africa and China have relatively high carbon emissions from energy consumption.

However, if all these countries are taken together, the changes to the initial carbon budget are limited – between -20% and 78%. But the historical emissions of developed nations have not only left their own budgets massively overdrawn, but have infringed on the rights of other nations to produce emissions. Developing nations, despite often being historically under budget and therefore having the right to grow and to create emissions, have no choice but to transfer their carbon budgets to developed nations in order to cover the historical excesses of developed nations and ensure basic future needs.

Budget transfers are expected to be in the region of 455.7 gigatonnes of CO2. At the current cost of US$13 per tonne, this trade will be worth US$59 trillion– far beyond the amount already provided to developing countries in financial assistance to combat climate change.

Even if there are carbon budget transfers to ensure the basic needs of developed nations, high per-capita emissions mean that regardless of strict measures and targets, future accumulative emissions will still be over budget. Approximately 60% of the excess can be offset via the carbon market or overseas emission reductions. However, the budget will still be overshot and punishment via progressive carbon taxes will be necessary, with the excess being carried over to the next round of commitments.

The CBP has no special advantages for China. In fact, it will be a constraint on the country’s development. China’s initial carbon budget will be 458.8 gigatonnes of CO2. The combination of natural elements such as climate and natural resources will result in a slight increase in the carbon budget, while geographical elements will result in a decrease in the budget.

Overall, the impact of these adjustments will be small and China will be left with a final carbon budget of 452.2 gigatonnes of CO2. With historical emissions amounting to 88.7 gigatonnes, the country will be left with 365.5 gigatonnes for the future. If China strives for low-carbon development and its emissions peak at 55% over 2005 levels in 2030, and are then reduced to 45% of 2005 levels by 2050, the entire carbon budget will be consumed. Only if further cuts are made will China have surplus emissions entitlements to sell and will not need to purchase any.

Given China’s status as the world’s factory, the energy used in the production of exports gives rise to 30% of total emissions, and this is unlikely to change before 2030. China therefore faces a long struggle to reduce emissions.

The Carbon Budget Project has a sound scientific basis and combines basic needs with the achievement of global sustainable development. The project also provides a comprehensive proposal for a post-2012 international climate regime that will be of great value in the breaking of the current deadlock in climate negotiations.

Professor Pan Jiahua is director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences. His global
research interests include environmental economics and development, urban sustainable development and sustainable economics.

Chen Ying is affiliated with the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences. Her research interests include sustainable development, environmental economics and global environmental issues.

Other scientists also assisted in the preparation of this article.

Homepage photo by zaXzine

Tough challenges for China (1)

Jiahua Pan — Thu, 18 Jun 2009 10:32:00 +0000

China’s struggle to save energy and reduce emissions is shaped by the fluctuations of the world economy, writes Pan Jiahua, in the first section of a two-part article.

The financial crisis has spread from the United States to the world. China, as a part of the world economy, has seen a major impact on its economic growth – and its energy-saving and emissions-reduction measures.

Historically, such crises have had a large negative impact on economic development and resulted in reduced energy consumption and pollution. China has set lofty goals for economic development, energy-saving and emissions-reduction; the measures in the eleventh Five-Year Plan have been strictly implemented, though the actual results over the past three years have been unsatisfactory. Although the economy has slowed since August 2008 and energy use has fallen rapidly, with energy-saving and emissions-reduction no longer such a problem, the effect is only temporary. As the economy recovers, both energy use and emissions will rebound. In the long term, economic growth is inevitable and China faces energy-saving and emissions-reduction challenges. China cannot lower its guard.

Since the Industrial Revolution, economic expansion and the burning of fossil fuels have caused massive increases in pollution. But economic cycles and crises cause fluctuations in that economic growth, and hence in energy use and pollution.

The changes in per capita greenhouse-gas emissions for certain nations since the mid-nineteenth century can be seen in Figure 1. Due to the quality of data from the nineteenth century means some historical details are lost, but from the early twentieth century records improve and the data becomes more accurate. Therefore, the data can teach us several lessons.

Figure 1: A historical comparison (1855-2004) of greenhouse-gas emissions per capita in various countries
Source: Pan Jiahua and Zheng Yan (2009)

First, a recession leads to a large fall in energy demand and thus greenhouse-gas emissions. Energy consumption plummeted in Germany and Japan at the end of the Second World War, with emissions dropping by around 80%. The end of the Soviet Union and collapse of the Russian economy caused energy consumption to drop 40% in 1990. In the “Three Years of Natural Disasters” after the Great Leap Forward in China, energy consumption decreased and emissions fell significantly. Energy crises in 1973 and 1986 also reduced energy demand and emissions in major economies. The Great Depression also saw energy use and emissions fall by one third.

Second, the more globalised a nation is, the greater the impact of a global crisis. Developing nations, which are less integrated into the global economy, suffer less than the early industrialisers, such as the United States and countries in Europe.

Third, although per capita emissions fluctuate with the economy, the overall trend is upwards. When a crisis has passed, emissions quickly rebound and hit new highs.

Fourth, per capita emissions are almost in direct correlation with development. As the level of development increases, so do emissions per head. Europe and the United States have higher per capita emissions than developing nations, such as China and India.

Fifth, when development reaches a certain level, growth in per capita emissions slows, stabilises and even falls. Per capita emissions in Japan and the United Kingdom have been stable for almost two decades, while Germany has seen 30 years of negative growth.

So, why does an economic crisis lead to energy-saving and emissions-reduction? Table 1 illustrates the changes in China’s energy consumption during the Asian Financial Crisis of 1997. Figure 1 shows how China’s per capita emissions peaked in 1997, falling until 2001, when there was a quick recovery. Analysing the data in Table 1 explains why: first, the financial crisis caused a fall in demand for energy. Growth in energy demand fell from 8.3% in 1995, to 4.1% in 1996 and 0.2% in 1997. At its lowest point, total energy demand had fallen by 9.3%, which led to a drop in pollution. Second, looking at energy structures shows that coal, the most polluting source of energy, was hit hardest. Negative growth started in 1997, with a fall of 15.7% by 1999. Cleaner sources of energy – oil, natural gas and hydropower, for instance – were virtually unaffected. Thus energy became cleaner overall, and pollution fell. Third, when market conditions worsened, low-technology, small, inefficient and uncompetitive enterprises failed first; larger, more advanced and more efficient firms were better placed to weather the storm. This lead to an overall increase in energy-efficiency and a reduction in pollution.

Table 1 Growth in energy consumption during the Asian Financial Crisis (1997-2000)

	Coal	Oil	Gas	Primary energy	Total energy consumption
1995	8.3%	8.0%	2.2%	9.9%	8.3%
1996	2.8%	9.9%	12.1%	0.3%	4.1%
1997	-3.0%	10.3%	12.7%	2.8%	0.2%
1998	-7.8%	1.1%	2.9%	5.6%	-4.9%
1999	-15.7%	6.5%	8.0%	-2.7%	-9.3%
2000	-5.2%	7.9%	7.9%	9.9%	-0.3%
2001	10.5%	2.5%	11.5%	24.1%	9.4%
2002	19.5%	7.4%	7.7%	6.8

Source: China Energy Data Report 2004, LBNL, ERI/NDRC, 2006.

During a crisis, economic activity shrinks, demand falls and total energy demand follows suit. Thus a cleaner energy structure ensues. However, the demand for energy across different sectors changes in different ways: household consumption may change slightly, but not much, and the service industry is not affected badly. The largest impact is in the manufacturing industry, particularly raw materials and heavy industry. And while household and service sector energy comes largely from oil, natural gas and electricity, industry – particularly heavy industry – tends to rely on cheaper, polluting sources of energy, such as coal. Therefore, during a crisis the total energy demand falls and energy overall becomes cleaner.

NEXT: Can China meet its energy-saving targets?

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences

Homepage photo by Bert van Dijk

Tough challenges for China (2)

Jiahua Pan — Thu, 18 Jun 2009 06:52:00 +0000

Despite the economic outlook, China should not abandon its commitments to save energy and reduce emissions, argues Pan Jiahua, in the second half of a two-part article.

The toughest targets in China’s eleventh Five-Year Plan relate to energy-saving and emissions-reduction. Rapid economic growth in 2006 and 2007 meant leaps in energy consumption and a rise in pollution levels, but then the financial crisis hit China in the second half of 2008. By the fourth quarter, the declining economy had relieved some of the pressure to reach energy-saving and emissions-reduction targets.

The Five-Year Plan, released in 2006, contains quantifiable and binding targets for energy-saving and emissions-reduction: by 2010, energy consumption per unit of GDP (energy intensity) should have fallen by 20% on 2005 levels; absolute levels of SO2 and Chemical Oxygen Demand (COD) should have been reduced by 10%. These are tough targets, and there is an ongoing debate as to whether they were set too high.

However, the financial crisis means that energy consumption in China has been hit. Pollution has fallen, much as it did during the Asian Financial Crisis of 1997. According to the China Electricity Council, the demand for electricity dropped in September 2008: electricity generation fell by 3.4%. That trend continued, with a 4% fall in October. Excluding holiday periods, this was the first drop of its kind since 1999.

The financial crisis also caused China’s energy intensity to fall 4.59% in 2008, while COD and sulphur dioxide emissions fell 4.42% and 5.95% respectively, exceeding annual goals. In the past three years, energy intensity has fallen 10.08%, COD and sulphur dioxide emissions by 6.61% and 8.95% respectively.

The financial crisis has done China a favour, but it will pass – unlike the long-term challenges. In fact, the need to reduce greenhouse-gas emissions will only increase.

China’s current targets will now be reached easily, but longer-term aims will not be achieved so readily. Energy-saving and emissions-reduction are not the same as greenhouse-gas curbs. Energy-saving does reduce pollution, but atmospheric pollutants such as sulphur dioxide and particulate matter can be removed using technical fixes – with scrubbers, for example. Greenhouse gases can be captured and stored, but the methods for doing so are not yet commercially viable. Moreover, conventional pollutants, such as sulphur dioxide, do not increase much once per capita GDP reaches around US$10,000, but greenhouse-gas emissions are on the increase in countries with a per capita GDP of US$30,000.

Figure 2: Per capita greenhouse-gas emissions and per capita GDP (1960-2004)

Source: Pan Jiahua and Zheng Yan (2009)
X Axis: Per capita carbon dioxide emissions
Y Axis: Per capita GDP (US$ intl2000)
Right-hand key: Canada, France, Germany, Italy, United Kingdom, United States, Japan, Australia, Korea, Indonesia, Mexico, South Africa, India, China.

Figure 2 illustrates the relationship between income levels and greenhouse-gas emissions in 14 major economies between 1960 and 2004. Several features can be identified: first, income and emissions are related. Emissions increase sharply when per capita GDP is below US$10,000, but they start to slow over the US$15,000 level. Some nations, such as France and Germany, have seen their greenhouse-gas emissions fall despite increases in income. Greenhouse-gas emissions generally still increase with income, however. Second, countries with similar levels of income can have very different levels of emissions. North American countries and Australia have similar levels of income to European nations and Japan, but twice their greenhouse-gas emissions. On the surface, this appears to be because of differing availability of resources, but it is actually because of differing policy orientations. Europe and Japan emphasise public transport and energy efficiency and levy energy and climate taxes; the cost of fuel in Europe is around twice that of the United States. This shows that different methods of production and lifestyles can have a major impact on emissions. Third, developing nations, such as China and India, still have low incomes and low emissions per capita. Per capita emissions in South Africa, South Korea and Mexico are approaching European levels, despite their lower incomes. Therefore, if developing nations do not move towards low-carbon development, large quantities of greenhouse-gases will be emitted and pose a threat to the global climate. Similarly, developed nations need to reduce emissions and help the developing world to make low-carbon development choices.

Emissions in developed nations are slowing or even falling, while those in developing nations are growing, as incomes increase. So, what does the future hold? The International Energy Agency has calculated actual emissions for major countries from 1990 to 2006, and made predictions for 2030. Emissions in the developed economies have remained almost unchanged, with negative growth in Russia and other transitional economies. But there have been major increases in developing economies – around two-fold over the 16-year period. In China’s case, emissions have increased around 150%. If compulsory emissions reductions are not enforced by 2030, developed nations would maintain emissions at a stable level; emissions would fall in some countries, such as Japan. In contrast, emissions in developing nations will double, with India’s emissions possibly increasing threefold. By 2030, developing nations would account for the majority of emissions, with China potentially matching the combined emissions of the European Union and the United States.

In the long term, the financial crisis will not relieve the pressure on China to reduce emissions. China’s energy comes mainly from coal. Nuclear energy requires major investment and takes time to come onstream. Wind and solar power are not yet commercially competitive. Cleaning up China’s power will be a long and arduous task. Improvements in energy efficiency can mean maintaining the same output for a reduced energy input, but income increases will improve the quality of life, and private vehicles will become more common. These improvements, along with expanding populations, are a major source of increasing emissions for any developing nation. Developed nations have less room to improve quality of life, and they have stable or shrinking populations. In developed countries, cleaner and more efficient energy use will result in absolute falls in emissions, since they have seen stable or slightly falling emissions even without emissions reduction measures.

The economic crisis has taken some of the pressure off China, but only for a short while. China needs to deal with the current crisis, but also to make long-term plans for economic recovery and ongoing development – choosing a low-carbon path with improved energy efficiency and a better energy infrastructure, developing clean energy and preventing greenhouse-gas emissions from becoming a barrier to China’s economic growth.

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences

Homepage photo by LHOON

Balancing the carbon budget

Jiahua Pan, Ying Chen, Chenxi Li — Mon, 14 Dec 2009 16:03:00 +0000

As the talks heat up in Copenhagen, Pan Jiahua, Chen Ying and Li Chenxi argue that formulating emissions targets will require an overhaul of the current climate regime.

United Nations climate-change talks are underway in Copenhagen, but significant differences remain between participants – and continue to cast a shadow over the proceedings – notably on the issues of emissions targets and funding. Therefore, we should ask ourselves if, in fact, global climate mechanisms require fundamental reform. How can we fairly allocate the world’s limited emissions budget, both protecting the environment and ensuring that everyone’s basic development needs are met?

The Chinese Academy of Social Sciences’ Research Centre for Sustainable Development (the authors of this article are members) unveiled their Carbon Budget Proposal (CBP) at climate negotiations last year in Poznan, Poland. The research centre has since explored related international mechanisms, including those for balancing and financing carbon budgets, as well as issues of markets and compliance. The aim has been to put the principle of justice into the CBP.

The CBP assumes that global emissions will peak by 2020, with a fall of 50% on 2005 levels by 2050. Using 2005 population levels as a benchmark, it calculates a carbon budget of 2.33 tonnes of CO2 per person per year from 1900 to 2050.

Starting from the principle of equality of average accumulated emissions, this budget fairly apportions carbon between the nations of the world – that is, the initial carbon budget allocation will be in direct proportion to the population in the base year.

If a carbon budget for 1900 to 2050 were allocated to each country, initial calculations show that most Annex I (industrialised) nations are already heavily in arrears, on average by a factor of two. Some countries are more overdrawn: the United Kingdom by 2.7 times, the United States by 3.2 times. A small number of non-Annex I (developing) nations, such as oil exporters, also run a carbon deficit, but to a lesser degree.

The majority of non-Annex I nations enjoy a surplus in their carbon budget: for example, China has to date used 28% of its carbon budget, India only 10%. A few Annex I countries, such as Turkey and Spain, also have a small surplus.

Overall, the overdrawn nations have a total carbon deficit of 509.82 billion tonnes of carbon dioxide, compared with a 986.95 billion-tonne surplus for those nations under their allowance. A binding carbon budget would need a mechanism to deal with these imbalances in carbon emissions, a budget balancing process that would require three stages.

First, the system would need to allow domestic transfers to repay historical carbon arrears. Countries with historical arrears would offset that debt with future carbon budgets. This would allow some nations, such as Italy and Romania, to balance their historical carbon budgets.

Second, international carbon budget transfers could be used to repay historical arrears. Nations unable to pay off historical arrears during the first stage would need carbon budget transfers from the surplus of non-Annex I nations. This would involve the transfer of around 389.07 billion tonnes of carbon dioxide.

Third, international carbon budget transfers would be used to meet basic needs. Nations left without an adequate carbon budget to meet their basic needs would need carbon budget transfers from the surplus of non-Annex I nations. This would involve the transfer of around 120.75 billion tonnes of carbon dioxide.

These three stages would see each nation balance its carbon budget and historical emissions – and obtain the carbon allocation it needs for the future. The carbon budget allocation ratio between Annex I and non-Annex I nations will change significantly, from 19.5:80.5, to 40.9:59.1.

Developed nations still would have annual per capita emissions above the standard 2.33 tonnes of carbon dioxide: 7.63 tonnes for the United States, 6.74 tonnes in the UK, 6.59 tons in Germany and 5.43 tons in Canada. Meanwhile, the developing nations supplying carbon allocations would have an annual per capita average of only 1.61 tonnes. The large historical emissions of industrialised nations have infringed on the ability of developing countries to emit as much carbon dioxide in the course of their development.

Funding is also a crucial issue in the current negotiations. Poor nations propose that rich countries transfer around 0.5% to 1.5% of GDP to support responses to climate change in the developing world – but there has not yet been a positive response to this proposal.

The CBP suggests that international carbon budget transfers would become the basis for financing, with the cost of transfers varying across different periods of time. As humanity’s awareness of climate change alters, so should the price of carbon.

During the first stage, from 1900 to 1989, climate change was not an issue in international politics – although historical emissions still have an impact. The emitters were unaware of the harm they would cause, but the damage done cannot be entirely ignored. So a low price should be set, to be paid voluntarily. If we assume US$5 per tonne of carbon dioxide, then these carbon budget transfers would be worth around US$1.5721 trillion.

The second stage runs from 1990 to 2004, when climate change became a global issue. As international law made clear that greenhouse gases were harmful, a high and compulsory price should be set: assuming the current Certified Emission Reduction (CER) average of US$10 per tonne of carbon, these carbon budget transfers would be worth around USD 1.0705 trillion.

During the third period, from 2005 to 2050, carbon budget transfers would be made to ensure basic needs were met – so a low, but compulsory, price will be set. Assuming US$5 per tonne of carbon dioxide, these carbon budget transfers would be worth around US$607.16 billion.

In total, this financial mechanism would raise an estimated US$4.1498 trillion.

The balancing and financial mechanisms of the carbon budget affect the overall interests of developing nations, and should be resolved through international political negotiations, rather than a distributed market mechanism. Arrangements for the management, allocation and use of the funds would need to be determined through international political negotiations.

According to the CBP, each nation has a duty to keep its emissions within its budget – an approach compatible with existing emission quotas and trading mechanisms. If actual emissions are above the quota, emissions rights can be purchased on international markets. Nations which produce a carbon surplus can profit by selling those emission rights.

Currently the CBP considers implementation up to 2050, but actual implementation would need to be in stages. Nations would provide national allocation plans for commitment periods (of one decade, for example), both to ensure that buying nations achieve their commitments for the period, and that selling nations do not oversell. Initial calculations show that the CBP would require an international carbon market worth nearly US$50 billion.

Ensuring that the implementation of carbon budgets and trading is measurable, reportable and verifiable will require further mechanisms. For example, each nation might establish a carbon account showing its carbon budget, the use of that budget, purchases, sales and reserves. These accounts would be clear and transparent, and there would be regular analysis and evaluation of compliance and the international transfer of funds and technology.

Compliance mechanisms will be required for nations who fail to implement their legal obligations under international agreements. These are an important part of international climate-change mechanisms. The CBP includes both incentives and penalty mechanisms. The penalty mechanism would use a progressive carbon tax to increase the financial burden on nations that exceed emission quotas, and also deduct the excess emissions from the next commitment period’s carbon budget. The actual tax rate and the collection, management and use of the funds raised all need to be determined through international political negotiations.

Overall, the CBP uses a mechanism design to expound on the operation of a just and sustainable international climate-change mechanism. Based on a fair initial allocation of carbon budgets, it solves the issue of the historical arrears of developed nations and provides a number of methods by which they can meet future needs, and also provides a new route to raising the funds needed to deal with climate change while ensuring the global climate budget remains balanced.

The CBP has gradually become a consensus among Chinese academics, and has received a positive international reception. The German Advisory Council on Global Change has proposed its own version, known as the carbon budget approach. The proposal is an important step towards revolutionising the post-Copenhagen climate regime.

Plus – the chinadialogue team are reporting every day from the climate talks in Copenhagen on our unique, bilingual blog: “the daily planet”.

Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences.

Chen Ying is affiliated with the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences.

Li Chenxi is a post-graduate student of the economics of sustainable development at the Chinese Academy of Social Sciences.

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