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Jan 14 2013
Cleaner rivers and bluer skies mean progress, not poverty
By Dan Steinbock

In the past, rapid growth often occurred at the cost of the environment. In the future, Chinese prosperity will mean both rising living standards and a beautiful environment.

At the 18th National Congress of the CPC, Chinese leader Hu Jintao emphasized the importance of ecological progress and spoke for building a "beautiful" China. His report gave ecological progress a prominent position by incorporating it into the country's overall development plan together with economic, political, cultural and social progress.

As Xi Jinping became the new CPC secretary, he seconded President Hu’s environmental quest. Not only do Chinese people hope for better education, more stable jobs and more reliable social security and medical services, Xi said, but “a more beautiful environment.”

In turn, vice premier Li Keqiang argued recently that clean rivers and blue skies should not be identical with poverty, and that China is seeking both prosperity and a better natural environment.

All these authoritative statements reflect a critical shift. In the past three decades, economic reforms and opening-up policies supported primarily the rise of the Chinese economy. The new leadership will focus not only on GDP growth, but on GDP per capita.

In turn, Chinese prosperity is no longer seen as an inevitable trade-off between rising living standards and declining natural environment. On the contrary, there is now a deep consensus in Beijing that living standards and environment are mutually inclusive.

From energy intensity to energy efficiency

On the one hand, the quest for a more beautiful environment reflects the ongoing shift in China’s economic development. As countries industrialize and the share of energy-intensive industry in the GDP rises relative to other sectors, energy intensity increases accordingly.

That’s where China is today. In the past three decades, high growth was fueled by investment and exports. After China’s membership in the World Trade Organization (WTO) in 2001, this growth model accelerated. It was driven by Chinese exports abroad and foreign direct investment in the mainland.

In the aftermath of the global recession of 2008-9, export-led growth has been lingering worldwide, which has shifted momentum toward investment in China. But that’s not sustainable in the long-term.

In the coming years, China will gradually move from exports and investment toward consumption. As the great ‘world factory’ will morph into a new ‘world demand’ engine, industry changes from heavy and energy-intensive to lighter and high value added, and becomes more energy-efficient.

Seizing environmental technologies

But Chinese aspirations do not just reflect the shift from an industrial economy to a service society and the parallel move from energy intensity to energy efficiency. The objectives are more ambitious. The goal is not only to support environmental industries, but to transform them into a huge market that will allow China to complete its industrialization and urbanization.

What Detroit’s car industry meant to America’s industrialization in the first half of the 20th century, environmental technologies will mean to China in the early 21st century.

"Take the photovoltaic industry as an example,” Li Keqiang said recently. “Domestic installation accounts for only less than 10 percent of the total output. We will support the solar power industry in the future to promote its sustainable and healthy development, opening up a larger domestic market for it. In 2020, the country's photovoltaic power installed capacity will reach 50 million kilowatts."

On the one hand, the solar power industry is driven by bottom-up market forces. But on the other hand, it is an emerging industry that requires public support - the importance of applying more legal means to regulate behaviors and norms related to environmental protection and international cooperation, as Li emphasized.

These objectives are neither marginal nor niche areas for the economy. State Council is working on a plan to develop a recycling economy by 2015. Reportedly, it includes the establishment of recycling systems in industry, agriculture and service sectors. It formulates the construction of model cities, model enterprises and model projects of a recycling economy.

Leadership in the all-renewable sector

The green future will be neither easy nor inevitable. In effect, the huge dependence on coal as part of the fuel mix remains a great challenge in both China and India. Indeed, coal is likely to remain a significant proportion in 2020, despite both countries making extensive investments in renewables. As a consequence of high economic growth, energy consumption is forecast to increase 40%–50%.

Conversely, recent discoveries of shale gas are dramatically shifting energy equations worldwide. While the U.S. may benefit most in the short- and medium-term, China also has great potential in the natural gas, although it must cope with more difficult extraction challenges. Further, the shale gas potential goes hand in hand with increasing environmental risks.

China is already at the top of the Ernst & Young all-renewable index, which ranks the attractiveness of renewable energy markets across 40 countries worldwide. It is followed by the U.S., Germany, India, UK and France.

While deterioration in the U.S.-China trade relations could have an adverse impact on China’s export market, a recent report by the International Energy Administration (IEA) suggests that China could contribute around 40% of the total increase in global RES capacity over the next five years.

Further, while the country is still challenged by oversupply of wind turbines and solar panels, there are signs that the country is taking action to address the grid transmission issues.

Preparing for diminishing resources, extreme weather

There are two other pressing motives to move fast into the emerging clean technology sector. First, energy resources are not indefinite, but increasingly costly. When the currently advanced economies industrialized, energy resources still seemed to be abundant. That is no longer the case today.

In the 21st century, China is the first large emerging economy with rapidly rising energy needs, but not the last. It will be followed by India, Indonesia, Vietnam, and other emerging economies. The race of multiple emerging economies to industrialize as rapidly as possible will constrain global resources in a dramatic manner in the next three decades.

Since the 2011 disaster at Japan’s Fukushima plant, many countries have sought to turn away from nuclear power. Emerging and developing economies, however, do not have such a privilege. India, for instance, seeks to massively expand its nuclear program, despite a vocal opposition and technologies worries.

Second, the simultaneous industrialization of numerous emerging and developing countries is likely to result in 5-6 Celsius (rather than 2) increase in average global temperature relative to the pre-industrial era. That, in turn, will translate to a dramatic increase in extreme, possibly catastrophic weather by mid-century.

Source of documents:ShanghaiDaily