Latest Articles by Julian L Wong

Getting out of the shade (1)

Julian L. Wong — Wed, 13 May 2009 07:54:00 +0000

The economic crisis has put pressure on China’s solar power industry. In the first section of a three-part article, Julian L. Wong argues that the government can take advantage of the situation to accelerate the use of domestic solar resources.

In recent years, China has emerged as the world’s largest manufacturer of solar photovoltaic (PV) panels. Driven largely by strong demand in Europe, almost all of the solar panels manufactured in China have been exported to overseas markets. However, the current global financial crisis, coupled with recently dampened financial incentives for solar power in some parts of Europe, has significantly contracted overseas markets. The solar manufacturing industry in China is, as a result, under intense pressure to fend off what appears to be a bursting “bubble.” By promoting China’s domestic solar market, however, the Chinese government is presented with a unique opportunity to sustain the domestic solar industry, create more jobs, and enhance energy and environmental security. To be spurred into action, however, China’s planners must appreciate the true value proposition of solar, understand the present bottlenecks limiting solar deployment, and respond with appropriate policy actions to overcome these hurdles so as to create a vibrant domestic solar market.

Few issues keep China’s national planners awake more than energy and environmental security. According to Cambridge Energy Research Associates, China obtained 80% of its electricity generation from coal in 2007. As the strains of a coal-based energy structure are being felt, China faces an enormous economic, environmental and social balancing act. China’s planners feel the necessity to take advantage of China’s plentiful coal resources to ensure a supply of affordable and reliable power for its citizens, so as to maintain economic and social order. However, the geographic mismatch between China’s coal resources concentrated in the central and western regions, and where power is most used along the eastern coast creates long, unwieldy supply chains that are susceptible to disruptions, such as natural disasters. Logistical challenges posed by finite rail capacity mean that China relies heavily on coal imports to supply coal to certain parts of the country, particularly the southeast. Although China boasts a third of the world’s coal reserves, it became a net importer of coal for the first time in 2007.

The use of coal is plagued with unaccounted social costs and fuel price volatility. The health and environmental impacts of coal use are significant. In 2007 alone, some 3,786 coal miners died in mining accidents.The extraction, processing, transportation and combustion of coal produces significant water, air and solid residue pollution, with all its public health implications. With China soon, if not already, surpassing the United States as the largest emitter of greenhouse gases, and with the Kyoto climate treaty up for renegotiation, there is strong international pressure on China to actively reduce its emissions, to which coal-fired power is a major contributor. The proposition of coal as a cheap and reliable source of power is quickly losing influence, undermined by the combined economic risks from rising social costs and unpredictable coal prices, which have nearly halved since peaking at about 1,000 yuan (US$147) per tonne in mid-2008.

The need to diversify and clean up China’s power sources is not lost on the central government. It has undertaken a variety of measures, from the prioritisation of energy efficiency to the promotion of clean alternative energy development through the passage of the Renewable Energy Law in 2006. Solar energy represents a promising energy alternative that directly addresses many of the shortcomings of coal-fired power. China’s solar resources are abundant, averaging four kilowatt hours per square metre of radiation in most areas, representing a similar resource level to that of the United States and much more than that of Japan and Europe. However, while there has been enormous global investment interest in developing solar technologies over the past three years, limited government support and the recent sharp financial downturn has created uncertainties in the prospects for the mass deployment of solar energy systems in China. Yet, there may be a silver lining.

Amid the global financial downturn, three trends are causing solar PV module prices to decline steeply, leaving an opening for aggressive government action to promote the deployment of solar domestically.

First, the price of polysilicon feedstock, which is the key raw material in the predominant type of solar panels in the PV market, has declined significantly from a high of over US$400 per kilogram in mid-2008 to about $100 per kilogram by the end of the same year. The increased supply from newly completed polysilicon production plants planned for in the solar boom years of 2006 and 2007, together with the softening of overseas demand for solar panels and the expanding market share of non-silicon-based PV material, are expected to keep polysilicon prices depressed in 2009. Second, there has been a sharp decrease in solar module demand in western markets due to the global recession and a reduction in incentives for solar energy in key markets such as Germany and, especially, Spain. Worldwide revenue from the shipment of solar PV panels is projected to decrease by 20% in 2009 compared to the year before. Third, until the recent crimping of overseas markets, solar manufacturers were on a trajectory to expand production capacity and improve economies of scale. With the combined effect of reduced input costs, weakened demand and increased supply, solar module manufacturers are already reportedly slashing module prices by 30% to 40%. Meanwhile, facing a growing oversupply, many smaller Chinese solar manufacturers are struggling to remain in business.

In these uncertain times, government support is vital for the development and deployment of solar power. Currently, the domestic solar PV market is essentially non-existent. In 2007, more than 95% of the solar modules manufactured in China were exported.At the end of the same year, a mere 100 megawatts (MW) of solar power were installed (of which only 5 MW were of the distributed, roof-top sort), compared to about 6,000 MW of wind and 513,000 MW of coal. The root of government inaction in China and internationally is that when viewed in narrow economic terms, solar energy seems much more expensive than coal. In the face of China’s enormous environmental, energy and climate-change challenges, solar energy’s advantage as a clean and abundant energy source is widely recognised, but far less discussed are the efficiencies and other benefits over centralised coal power generation that solar can bring if used as a distributed energy resource. None of the foregoing “positive externalities” are currently valued into the price of solar.

Given the entrenched nature of China’s fossil fuel infrastructure, it is unrealistic for solar energy to significantly displace coal as the dominant electricity fuel source in the near or medium term, but the government can take advantage of the current unique financial situation to adopt measures that will significantly accelerate the utilization of domestic solar resources. There is a compelling national security case for developing China’s domestic solar market, but reaching this conclusion requires a better understanding of the true value of solar energy, economic or otherwise, of what makes it competitive or even superior to its fossil fuel counterparts.

Julian L. Wong is an energy analyst based in Washington, DC. He recently completed a Fulbright Fellowship at Tsinghua University in Beijing on renewable energy policy and is the author of The Green Leap Forward (www.greenleapforward.com), a blog on China's energy and environmental issues.

NEXT: Redefining national security

This article first appeared in the Winter 2008 edition of China Security magazine. A full version of the article with references and graphics can be accessed here.

Homepage image by TopTechWriter.US

Getting out of the shade (2)

Julian L. Wong — Wed, 13 May 2009 02:40:00 +0000

In the second segment of a three-part article, Julian L. Wong argues that solar energy should be viewed as a crucial part of China’s national security strategy.

Framing the case for solar in terms of national security will create a stronger impetus for government action in promoting solar energy. In making this case, conventional notions of national security need to be broadened to encompass energy security, economic security, social security and environmental security.

Although there are various sorts of commercially available solar technologies, this article will focus on distributed solar photovoltaic (PV) systems that are typically associated with roof-top installations, rather than large utility scale solar farms because of the former’s unique supply-chain advantages. The abundant nature of solar resources means that distributed solar PV systems have a significantly shorter supply chain than fossil energy systems. Short supply chains are advantageous because they translate to reduced transportation and infrastructure build outs, which directly improve environmental and economic performance, and maximise benefits to the local economy. With distributed solar, the supply chain is virtually nonexistent; solar power is converted by the solar panel into electricity that is fed through just a few metres of cable before being used.

A distributed energy system, such as a network of rooftop PV, is a more resilient energy system than a centralised one because it consists of numerous, relatively small modules, each able to function independently of each other and each with a low individual cost of failure – meaning the disruption of one or few
nodes within the network of the distributed renewable energy system will not bring down the entire system.Centralised energy systems, such as coal-fired power plants, are the opposite, consisting of one or a few large, centralised units that are more vulnerable to high-cost failure. As the ice storms of early 2008 in southern China demonstrated, centralised coal-fired plants are highly vulnerable to bottlenecks along their long supply chains; the high-cost failure manifested itself in 17 provinces, municipalities or autonomous regions that experienced power failures or reduced power supply as a result. Distributed solar energy systems, on the other hand, are placed very close to the end-use, thereby dramatically reducing the supply chain and potential points of vulnerability. Where solar systems are grid-connected and feed in excess energy generation to the grid, solar systems can also enhance the resilience of the grid.

Another aspect of security is reliability. While renewable energy resources have been dismissed for intermittency, the causes of variations in solar resources (e.g. diurnal cycles, cloudiness, etc.) are well understood and fairly predictable. Centralised large-scale power, on the other hand, is intermittent for reasons that are far less predictable. Occurrences such as extreme weather conditions or terrorist strikes are more likely to disrupt entire energy systems based on centralised production than distributed production, as it is less likely all the nodes of a distributed network will be impacted. Moreover, technological advances in energy storage, sun tracking and shade mitigation are extending the use of solar power throughout the day. The result is that the lifecycle costs for solar power are more certain than for centralised fossil fuel plants, whose fuel costs remain subject to volatile market forces.

In the wake of the global financial downturn, developing new energy sources domestically offers compelling economic security propositions in diversifying economies that have been heavily dependent on low value-added exports. The rapid emergence of China as the world’s leading manufacturer of solar PV panels has made meaningful contributions to China’s economy, providing 10,000 jobs as of 2007 that are expected to increase tenfold to 100,000 by 2020. However, since over 95% of domestically produced solar panels are exported, the multiplier effects of building a robust domestic solar PV market, which would create a hitherto nonexistent ecosystem of parts manufacturing and installation expertise, have not been realised. If China wants to head off a steep decline in economic growth in these turbulent times, developing a domestic solar market provides some interesting possibilities.

Finally, the social and environmental advantages of solar should not be underestimated, especially for a government whose legitimacy rests heavily on maintaining the social fabric. At the end of 2006, some 11 million rural dwellers lacked access to any electricity. Off-grid solar panels represent the most practical and economic choice for the reduction of the energy poverty gap in many remote rural areas that are currently off-grid and the focus of rural electrification, one of the government's most important social programmes.Policymakers must also recognise the public health costs that the entire supply chain of coal power production imposes, including the health and lives threatened in coal mining, as well as the harmful emissions of sulphur dioxide and nitrous oxide emissions. A recent study [pdf] concluded that the negative environmental, public health and other social costs of China’s coal industry (excluding climate change impacts) add up to 1.7 trillion yuan (US$249 billion) per year.

Even with a 40% drop in solar module prices, and assuming installation costs remain roughly unchanged, installed solar PV power would cost, on a per kilowatt-hour basis, some eight times as much as coal-fired electricity. Framed in such narrow economic terms, this gap is a mental barrier for policymakers to create robust financial incentives for the adoption of solar power. It has been suggested that the central government should wait for the expected demand from the United States, which has recently passed strong financial incentives to promote solar adoption, to further scale up solar module production in China and further drive down module prices. Indeed, it seems that China’s current policy for solar, as outlined in the 11th Five-Year Plan for Renewable Energy, adopts this wait-and-see approach in the form of cautiously modest targets for installed solar capacity by 2010. The 2010 target of 300 MW of total installed solar capacity, which includes non-distributed and non-PV solar (i.e. solar thermoelectric generators), pales in comparison to the 874 MW of PV installed in the United States by the end of 2007, or the 12,300 MW of wind installed in China by the end of 2008. But such a cautious approach, which reflects a psychological hang up on the price disparity between solar and fossil fuels, misses entirely the aforementioned national security proposition of solar.

Source: Julia Wu, et al., “China’s 11th Five-Year Plan: Wind and Utility-Scale PV Targets are Up, but RPS is Gone,” New Energy Finance, April 11, 2008.

More crucially, the true cost of deferring the replacement of coal power with clean solar power is often missed by policymakers, and certainly by the private sector. Such cost cannot be measured solely in economic terms, but must also include the increased difficulty in mitigating greenhouse gas emissions. Experts are in general agreement that a 60% to 80% reduction in greenhouse gas emissions is needed by 2050 compared to 1990 levels in order to stabilise climate change. Because coal power infrastructure has a lifecycle of 40 to 50 years, we are really talking about energy investment decisions that have to be made today. Each megawatt of solar power deferred today is an additional megawatt of coal power that will spew greenhouse gases for the next 40 or 50 years.

Even if the aforementioned benefits seem too intangible to value, there are three additional economic considerations. First, solar PV power, while not generally cost competitive with “base load” grid-based electricity, is in many regions cost competitive with “peak load” power, which is turned on when power demand reaches the highest point during the day.Peak load power is the most expensive type of power for utilities to produce and usually occurs at, or overlaps partially with, the hottest time of the day when the sun shines brightest and power consumption is at its highest. Solar power is the ideal strategy for “peak shaving.”

Second, decentralized energy systems eliminate the need for expensive, inefficient and resource-intensive transmission-and-distribution infrastructure. The State Grid of China, which is already under financial pressure after an 80% drop in profits in 2008, plans to spend a whopping 1.16 trillion yuan (US$170 billion) over the next two years on grid construction. Not only are network losses experienced in transmission and distribution estimated to range between 8% and 9%, but the construction of every 100 kilometres of power lines of a 500-kilovolts grid project reportedly requires 5,000 tonnes of steel, 2,000 tonnes of aluminum and 7,000 cubic metres of cement. While the need for expensive transmission and distribution capital outlays cannot be eliminated in each and every case, stand-alone distributed PV systems are a highly economical choice in remote rural areas that lack grid access. The recently announced utility-scale solar farms in Qinghai’s Qaidam Basin (1 gigawatt (GW) installed capacity) and Yunnan’s Kunming city (166 MW) are a step in the right direction towards a low carbon economy, but the reliance of these projects on T&D infrastructure means that they are clearly not the final destination that distributed energy solutions such as PV represent.

Third, the simultaneous use of solar panels for applications other than power generation can improve its economics. For instance, the installation of rooftop solar panels can reduce a building's air conditioning load by shading the roof. There are also so-called building-integrated photovoltaic (BIPV) applications, where the PV panels are not installed on top of the facade of a building, but as the facade of the building, eliminating the need for conventional building materials.Furthermore, when such BIPV installation is wrapped into the mortgage of a new building, additional financing becomes unnecessary and the PV system can be financed using some of the cheapest available forms of long-term finance. BIPV’s improved economics represents a major opportunity for China, where McKinsey projects that some 40 billion square metres of floor space in five million buildings will be built by 2025.

Finally, the modular nature of solar PV means that it can be installed in stages, panel by panel, or solar farm by solar farm, allowing electricity production to begin shortly after construction commences but before it is finished, thus greatly enhancing the economics of solar power. This is in contrast to large centralised power plants, which take years to build and cannot generate power until construction is completed. The opportunity cost associated with the lag time of planning to construction in large-scale fossil fuel plants is rarely taken into account in the economic analysis when comparing relative costs of different energy options. When coupled with decentralization, modularity also means that the generation capacity of solar systems is scalable and more likely to match demand, reducing instances of overcapacity and hence inefficiency that are now being experienced in China's coal power sector.

While it is beyond the scope of this article to quantify to what extent the foregoing considerations reduce the cost of solar PV power over coal-fired power through an “apples-to-apples” comparison, one authoritative study [pdf] estimates that the financial benefits of employing a distributed energy system can exceed those of a centralized system by as much as a factor of 10. If accurate, this would offset the cost difference between solar and coal-fired power.

Julian L. Wong is an energy analyst based in Washington, DC. He recently completed a Fulbright Fellowship at Tsinghua University in Beijing on renewable energy policy and is the author of The Green Leap Forward (www.greenleapforward.com), a blog on China's energy and environmental issues.

NEXT: Recognising solar’s bottlenecks

This article first appeared in the Winter 2008 edition of China Security magazine. A full version of the article with references and graphics can be accessed here.

Homepage image by Matthijs Koster

Getting out of the shade (3)

Julian L. Wong — Wed, 13 May 2009 01:47:00 +0000

In the final section of a three-part article, Julian L. Wong discusses how China can jump-start the solar industry by reorienting toward a domestic market.

There will certainly be challenges to deploying a scaled-up solar programme in China. The true value economics of solar may be difficult to convey to the average end-user. While PV installations offer the advantage of upfront cost certainty due to zero fuel costs and minimal operating and maintenance costs, it is also true that the upfront costs are significant. Given the choice between heavily subsidised retail rates of electricity and making a hefty upfront investment in a solar installation that will only pay itself back in 20 years or more, it is easy to guess which option usually wins out.

Reorienting China’s solar industry towards the domestic market will require broadened competencies across the solar value chain compared to one geared towards exports. Solar panels are just one of various components that make up an installed solar PV system. Non-panel components, also called “balance of system” (BOS) components, include devices such as batteries, controllers, inverters and monitoring devices. Due to the export focus of the Chinese solar industry, there has been far less emphasis on building production capacity on BOS components. For instance, it is reported that at current rates of solar PV use, most of the controllers and inverters needed for stand-alone and medium-scale grid-connected solar systems are domestically sourced, while a larger portion of controllers and inverters for larger-scale grid-connected solar systems are imported. Should the domestic solar market be significantly expanded, current domestic BOS production capacity will not be sufficient.

Deploying distributed solar PV will also require a skilled workforce to market, sell, install and maintain PV installations. A warning shot has been sounded by China’s wind power industry, where a boom in wind farm development domestically has led to a shortage of skilled labor to maintain the wind facilities. Similarly, the installation of PV, especially of the distributed sort, is a relatively labour-intensive process, which requires technical competence. All the financial incentives and appropriate technologies will be of little use if there is no one to physically deploy the solar systems. That said, there are measures that the government can take to address these concerns as it seeks to promote the domestic solar market.

The time to jump-start China’s domestic solar market is now. Given the financial malaise in the United States, it is by no means certain that US demand will pick up soon despite its recent enactment of financial incentives for solar. Rather than depending on foreign markets to drive down the production costs of solar, China can do it by itself. A coordinated scaled-up investment programme in developing solar resources at this time is not only consistent with the public government statements that environmental protection and new energy technologies should be a focus of the recently announced four trillion yuan economic stimulus package, but would also take advantage of the current historically-low prices of solar PV panels. Such a programme would involve a mixture of internalising the externalities of fossil-based power; providing financial incentives to recognise the non-financial benefits of clean, distributed solar power; and the development of technical capacity to create a domestic solar market.

[Encouragingly, since the first publication of this article, China has begun its journey out of the shade: China's Ministry of Finance and the Ministry of Housing and Urban-Rural Development has launched a solar roofs programme to subsidise qualifying PV systems at 20 yuan (US$3) per watt, while some provinces, particularly Jiangsu, are poised to offer significant financial incentives to increase local capacity in PV manufacturing and deployment.]

One of the more direct ways for solar energy to move towards “grid parity” is to accelerate retail electricity price reform. The recent massive infusion of funds by the government into the “big five” power generation companies to stem their record losses in 2008 reflect the fact that retail power, which is fixed by the government, is priced below its cost of production.The reforming of energy prices towards more market-based mechanisms has become a theme in recent energy policy documents, and has already made its effect felt with the upward adjustment of retail electricity rates last July, and reports that further increases may be imminent. The sooner prices are made to reflect even just their current costs of production (let alone negative externalities), the quicker solar power can compete with coal-fired power on a level playing field. As a longer term goal, the complex task of varying electricity rates throughout the day according to demand levels should be undertaken so as to more effectively harness the “peak shaving” value of solar power.

The government should also implement comprehensive feed-in tariffs, which would require grid companies to purchase solar power at preferential tariff rates and which have been proven in Germany and elsewhere in Europe to be the most effective policy instruments in promoting renewable energy utilization. The premium that these tariff rates represent over the tariff of conventional fossil fuel electricity should be fixed, but also gradually decreased over a period of 10 or 20 years. These premiums should be paid by the grid company to the solar power producers and passed down and shared across all end-users, in accordance with the landmark Renewable Energy Law that was enacted in 2006 but has hitherto received selective implementation. Such a system also directly rewards production of solar power rather than merely installed capacity, which says nothing about how much electricity is actually generated. A related mechanism, net metering, should be implemented to allow smaller scale users to offset their electricity bills by feeding back any excess solar power not used back into the grid.

Another way to ramp up demand for solar is through government procurement. The initiation of mass deployments of solar panels in central and provincial government facilities and commercial facilities of large state-owned enterprises creates a strong market signal for the scaling up of PV deployment and subsequent lowering of costs. The government can also act as a lever for demand by accelerating its rural electrification program through the purchase and deployment of solar systems where they are feasible, and require its state-owned utility companies to take advantage of their relationships with end-users to roll out distributed solar programs.

With respect to end-users, financial innovation can positively alter the cost perceptions of solar. Third-party financing arrangements – whereby a third-party financier purchases, installs and continues to own the solar panels, but sells the solar-generated electricity to the facility owner just like a utility – relieves the facility owner of prohibitive upfront costs of installing and owning the solar panels. Due to the nascent development of consumer credit, such third-party financing institutions should target commercial and industrial entities, rather than the residential sector, and perhaps with the support of provincial and municipal governments, which have energy efficiency and renewable energy goals to meet.

Meanwhile, policies should be made to develop the necessary capacity and technical expertise for all steps of the PV value chain, especially the manufacturing of peripheral components, and for downstream solar activities such as systems integration, installation and after-sales services, such as performance monitoring, system repairs and upgrades. Another area of attention is the upgrading of the electrical grid so that it can accept interconnections from distributed solar systems. This will require significant investments in education and infrastructure, but also lead to significant positive externalities such as job creation and spill-over benefits to other electrical engineering sectors.

A group of major Chinese PV manufacturers recently submitted an industry white paper to the government expressing optimism that solar power can achieve price parity with conventional fossil fuel power as early as 2012. This will not happen, however, without the weight of more aggressive government policies, which China’s planners should adopt in order to seize current opportunities and enhance national security. The national security proposition of solar energy is rooted in the unique economic and non-economic benefits of its distributed nature and shorter supply chain. Clean, distributed solar power can enhance the resilience of China's power supply; produce clean power in urban and rural areas alike; and provide high-skilled jobs. Instead of shipping China-made solar modules to distant western markets, deploying them domestically would further enhance the benefits of shorter supply chains. The unique confluence of lower productions costs and decreased overseas demand means the cost of going solar is lower than ever and makes it an opportune time to make a policy push for domestic solar deployment.

Julian L. Wong is an energy analyst based in Washington, DC. He recently completed a Fulbright Fellowship at Tsinghua University in Beijing on renewable energy policy and is the author of The Green Leap Forward (www.greenleapforward.com), a blog on China's energy and environmental issues.

This article first appeared in the Winter 2008 edition of China Security magazine. A full version of the article with references and graphics can be accessed here.

Homepage image by Swamibu

Hu speaks — what next?

Julian L. Wong, Isabel Hilton — Thu, 24 Sep 2009 09:26:00 +0000

How did the experts respond to Hu Jintao’s speech on climate change? Julian L Wong sees China sending a strong message. Isabel Hilton writes that obstacles remain on the road to Copenhagen.

“China is sending a strong message” – Julian L Wong

President Hu Jintao of China announced that China will build on existing domestic climate change policies as embodied in its National Climate Change Programme and current Five Year Plan to step up its efforts on energy efficiency, development of low-carbon energy such as renewables and nuclear, and increase of forestry cover.

Most noteworthy was president Hu’s introduction of a new goal to reduce carbon dioxide emissions per unit of gross domestic product from 2005 levels by 2020 by a “notable margin.” No specific numbers were provided, but this should not be surprising as such a far-reaching national policy must undergo various necessary legislative steps before it can become domestically binding. However, China’s willingness to translate its existing domestic energy conservation goals, often discussed in terms of amount of energy consumed, into a metric that is consistent with the language of international climate policy, i.e. carbon emissions, is the clearest signal yet that China is willing to take on responsibilities that are commensurate with its resources and global emissions impact.

This policy has at least three important implications. First, it would undoubtedly set China on a path to slow down its carbon emissions growth. How quickly such a deceleration leads to a peaking of China’s total emissions depends on the specific carbon intensity targets, but senior Chinese officials have recently given public assurance of China’s desire to peak its emissions “as early as possible.”

Second, a shift of focus from energy intensity to carbon intensity will help accelerate China’s transition to a low-carbon economy. The current energy intensity standard does not distinguish between energy derived from high-carbon fossil fuels and low-carbon renewables or nuclear. By framing China’s efficiency goals in terms of carbon emissions, low-carbon sources of energy will be favoured. A carbon intensity policy would thus not only encourage more efficient use of fossil fuels, as the current energy intensity goal does, but also amplify China’s already ambitious targets on renewable energy deployment.

Third, the policy implicitly commits China to measure, report and verify (MRV) carbon emissions on an ongoing basis. It remains to be seen whether this process will meet the standards transparency that the international community seeks. But contrary to popular wisdom, fairly sophisticated mechanisms for MRV already exist for many of China’s major energy and environmental policies, as a recent study from the World Resources Institute reveals.

The significance of president Hu’s announcements are best understood in the context of other very recent Chinese policy developments. In August, China’s State Council, led by premier Wen Jiabao, set the objective of incorporating climate change considerations into the medium- and long-term development strategies and plans of the Chinese government at every level. Later the same month, the standing committee of the National People’s Congress, essentially the inner circle of China’s main legislative body, adopted a resolution on climate change action that explicitly calls for the strengthening of domestic climate legislation while giving assurance that it will be a constructive player in the international climate process.

Taken together, China is sending a strong message that it is serious about tackling climate change and is shaping a comprehensive approach that begins to meet the expectations that the international community has of China. This should serve not only as an indication to the developed countries of China’s good faith on climate action, but also as a catalyst to other developing countries to formulate their own robust low-carbon strategies.

-- Julian L Wong is senior policy analyst at the Center for American Progress, a policy think-tank based in Washington, DC He is also a founding member of the Beijing Energy Network and blogs on The Green Leap Forward, a site dedicated to discussing China’s energy and environmental issues.

“Formidable obstacles remain” – Isabel Hilton

President Hu Jintao’s speech has been received as a positive signal in this week’s frantic efforts to save the UN climate-change conference in Copenhagen, though rather less on delivery than was promised in advance. Despite warm mood music in New York from India, China and the United States, formidable obstacles remain to a serious agreement in December.

Many of the obstacles are built in to the nature of the process itself: it is conducted in the culture of a global trade negotiation, in which each negotiator enters the room with a mission to maximise his country’s gain and minimise what he gives away. The result in trade negotiations is usually the lowest common denominator. This is not enough in the context of climate change. Even worse, if there is no deal in December, we risk a stalled process, like the Doha round.

Each leader’s message in New York this week is addressed in several directions: to his domestic audience, but also to the domestic audience of his counterparts. Each speech must try to straddle the gap of opposing expectations – simultaneously to convince a domestic audience that not too much is being given away, while convincing the domestic audiences elsewhere that much is being offered.

Has president Hu’s message convinced US opponents of president Barack Obama’s climate bill to allow it to pass the senate? Have Obama’s climate promises persuaded sceptical Indian or European voters that the world’s richest country is carrying its fair share of the effort? Has China been convinced that the Annex I countries are serious about technology transfer? In each of these cases, the answer is no. This is one small step on the road to Copenhagen. The destination still seems worryingly distant.

-- Isabel Hilton is editor of chinadialogue

Homepage image: UN Photo/Eskinder Debebe

A birthday wish list

Julian L. Wong — Thu, 01 Oct 2009 06:12:00 +0000

The 60-year history of the People’s Republic saw a move from an era of revolution to one of pragmatism. The country’s low-carbon future, writes Julian L Wong, requires both approaches.

This week marks the 60th anniversary of the People’s Republic of China. The first 30-year phase was one of revolution, marked by one bloody internal purge after another, but the next 30-year phase was one of pragmatism, which underpinned economic and social reform leading to unrivalled rates of economic growth.

China now finds itself at a crossroads. As the country struggles to come to terms with its imminent status as a global superpower, it is staring in the face of vast, systemic resource challenges. China faces a triple threat to its energy, water and food security, and there is one common thread: climate change.

In the case of energy, an overexploitation of coal—and increasingly oil—to fuel its economic expansion is the root cause of rapid growth of greenhouse-gas emissions. The resulting change in climate is, in turn, altering precipitation patterns, leading to flash floods in some areas, but exacerbating droughts in large parts of others, an urgent predicament for a many land-locked regions that are already water-scarce. Such water scarcity, together with noxious acid rain caused by fossil fuel combustions, will choke off agricultural productivity, threatening future food supplies.

This food-water-energy “trilemma” will threaten physical security and disrupt economic and social stability, which is the very foundation of the Communist Party’s authority. Beijing fully grasps these implications and has turned its stance from one of climate denier to that of an emerging frontrunner in climate action in just a few years. Few noticed in 2007 when president Hu Jintao espoused the goal of creating an “ecological civilisation” that strikes harmony between man and nature. It would be easy to chalk this up as just another example of the central government’s colorful slogans. Yet, action has followed rhetoric.

China has embarked on some of the world’s most aggressive energy efficiency, renewable energy development and reforestation programs through its landmark National Climate Change Programme of 2007. Over the five-year period ending 2010, it plans to reduce its energy consumption per unit of its gross domestic product by 20%, obtain 10% of its primary energy from non-fossil fuel sources such as wind, solar and hydropower, and bulk up its carbon sinks by increasing forest cover to 20%.

Moreover, president Hu has just announced intentions for China to reduce carbon emissions per unit of GDP from 2005 levels by a “notable margin” by 2020. Recognising the strategic job-creating opportunities of innovating, manufacturing, deploying and disseminating the clean-energy technologies of the future, Hu also pledged to transform China into a “green economy, low-carbon economy and circular economy.”

China’s tide of western-style development will still be difficult to stem. When I visited Beijing earlier this month with a delegation from the Center for American Progress, both state councillor Dai Bingguo and Xie Zhenhua, vice chairman of the National Reform and Development Commission, assured us that China would not take the traditional, energy-intensive development path. Yet, even with its lofty green goals, it is difficult to imagine how it has not already.

China is already the world’s biggest market for building construction and automobile sales. This situation is unlikely to change. China is witnessing the largest scale of human migration in the history of civilisation, with 350 million rural residents moving to the city by 2030. And this urbanisation is coming with a shift in emphasis from exports to domestic consumption as an engine of future economic growth.

China will have to take at least three major steps to truly develop a green, low-carbon and circular economy:

1. Show bold, visionary leadership to set China on a long-term path to reduce absolute emissions, not just emissions per unit of GDP.

China believes that the west needs to take the lead to solve the problem that it created when it comes to climate change and emissions reductions. This position is understandable, but China must acknowledge that in reality it cannot wait for others to look out for what is in its own interests. World leaders continue to work out the complex structures for international climate financing and technology transfer, while the science urgently requires a collective reduction in emissions as soon as possible. If China is serious about its July commitment to limit global temperature rise to 2°C, it has to follow up on recent indications of willingness to act, by accordingly fixing a future date and level at which its carbon emissions peak and subsequently decline.

2. Develop tools to help the country achieve this bold new vision.

China needs to continue to strengthen its accountability mechanisms and create channels for increased information flow to ensure that its national plans are implemented locally. The government can meaningfully engage and mobilise civil society groups as partners, rather than treat them as annoyances, to facilitate the measurable, reportable and verifiable implementation of government actions. Such partnerships might include crafting purposeful campaigns targeted at the business community and citizens to educate them about the comprehensive benefits of creating a clean energy economy. The central government has already demonstrated progress in these areas by, for instance, increasing penalties for false statistical reporting and enacting a law on open government information, but it can do more.

3. Collaborate with the international community in a comprehensive manner.

Cooperation with the international community should not focus merely on joint research, development, and deployment on important carbon abatement technologies. China and the United States, for instance, can enhance trading relationships and unlock vast, lucrative markets for technology commercialisation in both countries by coordinating on reducing barriers to market access, such as high tariffs on clean-energy technologies and restrictive foreign investment policies. Jointly building capacity for real-time emissions, monitoring and reporting, and enhancing efforts in energy modelling and simulation can greatly inform energy and climate policy-makers. Climate collaboration opportunities exist even on the military-to-military level: coordination in disaster relief activities and in addressing other non-traditional security threats posed by climate change can yield mutually beneficial learning and capacity-building results.

Addressing climate change will be the fundamental challenge for China over its next 60 years. It will give China an opportunity to combine central elements of its historical development: a new low-carbon vision that is revolutionary in its transformation, but also pragmatic in its approach to enable a real and measurable low-carbon reform. The best birthday gift the international community can give to China is to walk with it hand-in-hand down this low-carbon path through the adoption of robust domestic climate measures and by forging ahead to build consensus on a sound global climate deal at the United Nations climate-change conference in Copenhagen and beyond.

Julian L Wong is senior policy analyst at the Center for American Progress, a policy think-tank based in Washington, DC He is also a founding member of the Beijing Energy Network and blogs on The Green Leap Forward, a site dedicated to discussing China’s energy and environmental issues.

This article was written for chinadialogue and for the Center for American Progress, where it appears simultaneously. The version here includes the Chinese-language translation.

Homepage image: China guccio

Crucial cooperation on climate

John Podesta, Andrew Light, Julian L. Wong, Orville Schell — Fri, 13 Nov 2009 11:13:00 +0000

As Obama visits Asia, John Podesta, Andrew Light, Julian L Wong and Orville Schell present their proposal for US-China collaboration on carbon capture and sequestration.

The United Nations climate-change summit in Copenhagen is less than a month away. Nations will negotiate a framework for a successor treaty to the Kyoto Protocol, which expires in 2012. Any successful outcome at Copenhagen will require a commitment from the world’s major economies, not least of which are China and the United States, the two largest emitters of greenhouse gases and two largest consumers of energy. The Center for American Progress and Asia Society has published a new report, “A Roadmap for U.S.-China Collaboration on Carbon Capture and Sequestration,” which sets out a detailed plan for how these two countries can mutually benefit from working together to achieve greater emissions reductions than they can alone.

Recent history makes clear the importance of these two countries working together. The past decade of unprecedented economic expansion has helped China lift millions out of poverty, but not without consequence to its environment and emissions profile. The past eight years in the United States have been marked by the conspicuous absence of climate policy at the federal level and a lack of participation in any international climate agreement. Both countries are also representative of the antagonism that still dominates much of the current discussion over forging a new UN climate treaty. The Senate, the upper house of the US Congress, has previously expressed its opposition to joining any agreement that does not include major developing countries such as China; China has insisted that western countries take responsibility for a problem that they caused and provide assistance for developing countries in the form of finance and technology to move them toward a low-carbon pathway.

Yet both countries have an unprecedented opportunity to move beyond this impasse. There has been a sea change in Chinese leadership on climate change during the past few years. China is now embarking on some of the world’s most aggressive energy efficiency, renewable energy and forestry projects. The recent change in presidential leadership in the United States has heralded a fundamental shift in climate policy, with president Barack Obama laying the foundation for a domestic transition to a clean-energy economy in his initial economic stimulus package. This was quickly followed by passage of the first comprehensive climate and energy legislation in the House of Representatives, the lower house of the US Congress. Both countries have emerged as active and productive participants in the international negotiating process in the UN Framework Convention on Climate Change (UNFCCC) and leaders in smaller rounds of negotiations in the G-8, G-20, and Major Economies Forum.

A series of recent developments have raised the prospects of more concrete US-China cooperation on climate change, including US energy secretary Steven Chu’s visit to China, which resulted in the announcement of a joint US-China clean energy research center, declarations at the Major Economies Forum on Energy and Climate after the last G-8 summit in Italy in July and a memorandum of understanding (MOU) on energy and climate signed later in the month at the US-China Strategic and Economic Dialogue in Washington, DC.

President Obama is preparing to leave for the US-China summit in Beijing, and the time has never been more ripe for the launch of a commitment between both countries to embark on a collaboration on clean energy that will not only benefit China and the United States, but also have a galvanising effect for the rest of the world to move towards a successful outcome in Copenhagen.

The July MOU from the Strategic and Economic Dialogue identifies 10 specific areas for cooperation between the United States and China on low-carbon technology and climate change, including energy efficiency, electric cars and carbon capture and sequestration. General declarations of goodwill are a necessary step for cooperation, but the upcoming summit must put meat on these bones and focus on specific proposals for collaboration. Our aim in this new report is to provide just such a proposal for discussion and as the basis for action.

All of the areas for low-carbon and clean-energy cooperation identified in the July US-China MOU must be pursued. Nothing in our report should be interpreted as suggesting that any one of these is more important than any other. There is a compelling argument, however, that neither country can achieve the emissions reductions it needs to make without addressing its heavy reliance on coal. For this reason, secretary Chu issued on October 12 a “call to action” on CCS, advocating widespread, affordable deployment of this technology.

CCS is a process that separates and captures carbon dioxide from large point sources, such as coal power plants, and stores it away from the atmosphere by several means, including underground sequestration in geological formations. Our proposal for US-China collaboration on CCS technology answers this call by helping to prove, or not, the feasibility of this technology as part of the solution to climate change.

We identify three areas of collaboration for the United States and China in the development of CCS technologies in the short-, medium- and long-term, navigating potential political, technological, financial and regulatory hurdles.

1. Cooperation on sequestration of pure carbon dioxide (CO2) streams from existing Chinese industrial plants. There are now approximately 100 facilities throughout China producing pure streams of CO2 for various industrial purposes. This climate pollution is vented unabated into the atmosphere where it contributes to global warming. China also has a large documented geological storage capacity, consisting mostly of deep saline formations. A first step to mitigate these emissions can be to jointly fund five geological sequestration projects that can easily capture this source of carbon and store 2 million to 3 million tonnes of CO2 per year. Each project would cost US$50 million to $100 million, with the United States contributing $20 million to $40 million. Together, these sites could sequester 10 million to 15 million tonnes of CO2 per year, equivalent to taking 1.7 million to 2.5 million cars off the road.

2. Invest in research-and-development for retrofitting existing power plants. Much attention has been placed in both countries on producing a new generation of integrated coal-fired electricity plants that combine power production, capture of CO2 and sequestration. But both countries will have to maintain huge fleets of traditional plants in the short- to medium-term that will have to be retrofitted later for capture and sequestration. China and the United States should therefore develop a strategy for research, development and deployment of a series of pilot facilities for CCS retrofits for existing coal power plants under the auspices of the already planned US-China joint clean energy research centre.

3. Catalyze markets for CCS. China and the United States will have to mobilise private capital to fund the plants envisioned in step two by investing public funds and stimulating public-private partnerships. This focuses on developing financial incentives for companies to invest in cooperation initially through government-backed public finance structures that serve as a bridge to market mechanisms such as a carbon offset regime that includes proven CCS facilities and the creation of a global market for carbon abatement.

Cooperation in these three areas could accelerate CCS deployment in the United States by five to 10 years. This would deliver immense gains for US job creation and consumer savings and more than compensate for American investment in this roadmap. Under a business-as-usual scenario, a proven CCS sector would create 127,000 jobs in the United States by 2022, including jobs in equipment manufacturing and infrastructure construction. A five-year acceleration of CCS deployment as a result of US-China collaboration increases that figure to 430,000. A 10-year acceleration in deployment could create as many as 940,000 new US jobs by 2022. Collaboration will also quickly help lower the cost of CSS, and such savings will be passed along to electricity consumers. A five-year acceleration of CCS deployment in the United States would lead to US$5 billion in savings, and a 10-year acceleration would lead to $18 billion in savings.

Cooperation between the United States and China on this roadmap would also serve as an example of a specific bilateral step that the two countries could take together on climate change for mutual benefit. Our hope is that the recommendations contained here have the potential to contribute to—in the words of presidents Hu and Obama—a “positive, cooperative and comprehensive” Sino-American relationship for the 21st century. Such a relationship could become the cornerstone for a new era of greater cooperation between developed and developing countries overall on finding solutions to climate change by setting an example that could be emulated and duplicated many times over.

Read the full report: “A Roadmap for U.S.-China Collaboration on Carbon Capture and Sequestration” [pdf] (Chinese version here)

John Podesta is president and CEO, Andrew Light is senior fellow, and Julian L Wong is a senior policy analyst at the Center for American Progress. Orville Schell is the Arthur Ross director for the Asia Society Center for US-China Relations.

Homepage image from The White House