Green Development and Technology Innovation in China: A Global Perspective

IMGXYZ3811IMGZYXSince the Chinese government first proposed the concept of green development in the 12th Five Year Plan in 2011, the theoretical framework and practice of green development have become an important issue for policy discussions. Carnegie invited Zhao Jianjun and Pang Yuanzheng from the Central Party School, Jiang Jianmin from the Xi’an Zhongya Science and Technology Development Company, Wang Hongsheng from Renmin University of China, Li Hong from the Tianjin Institute of Technology, Zhang Yajing from Ningbo Party School, and Liu Kaimiao from China University of Mining and Technology to discuss pathways for China’s green development and technology innovation. Other participants of this roundtable dialogue included scholars from Carnegie’s Climate and Energy Program and Asia Program, the Center for Strategic and International Studies, Johns Hopkins University, the World Bank, the World Watch Institute, and Global Environment Fund. Carnegie’s Kevin Tu moderated.

The Theory of Green Development

• Definition of Green Development: Green development is an innovative economic development model, which recognizes the constraints of ecological and environmental carrying capacity and strives to achieve sustainable development with environmental protection as one of its key pillars, Pang explained. He outlined the four types of transformation central to green development:
  
  
  1. Transformation from a resource-dependent economic development model to an innovation-driven one;
      
  2. Transformation from a high-carbon emissions economy to an increasingly lower carbon emissions trajectory;
      
  3. Transformation from industry-dominant development to service-based economy;
      
  4. Transformation from an investment-driven economy to consumption-based growth.
  
   
• Green Development and Sustainable Development: Green development is not synonymous with sustainable development, Pang added. Some regard green development as a specific and practical way to achieve sustainable development. Others argue that green development is a more advanced concept than sustainable development. Sustainable development is passive, aiming not to harm future generations. In comparison, they say, green development is proactive, aiming to benefit future generations. Pang explained that the mainstream view in China is primarily that green development is a means to achieving sustainable development. Zhang added that one can see green development as including sustainable development, because green development has a broader horizon.

Green Development in Practice

• Retrofitting of Existing Buildings: With China’s continuous urbanization, energy consumption in buildings, especially public buildings, has gradually increased. Jiang explained that, in the past two years, the government has responded to increasing consumption by retrofitting older buildings with technology to improve energy conservation, such as improving insulation, installing more efficient central air-conditioning systems, and improving lighting, elevators, and other equipment. He described one way of supporting green technology, a method known as “Energy Performance Contracting,” which helps finance customers’ investment in energy efficient and environmentally friendly equipment. His own company uses this method, which reduces operational costs through energy savings and transfers a percentage of those savings back to his company to pay off the initial investment.
   
• China and Coal: Many cities in China are heavily reliant on coal, with coal-related industries dominating local economies. Liu explained that these cities can be categorized by their development phases, as developing, maturing, or declining. Such categorization can help determine the best way to implement green development in these cities. For example, Liu said, cities in the developing period can implement green technology as they develop their coal industry. Maturing cities can encourage non-coal-related development and cities in the declining period can concentrate on alternative industries and addressing existing environmental and social challenges. Tu added that developing a way to deal with coal-based emissions is critical, pointing out that China’s coal-fired carbon emissions in 2009 were 10 percent higher than total U.S. carbon emissions. He told the other participants about Carnegie’s coal value chain project, which promotes coal value chain exchanges to nurture U.S.-China bilateral collaboration on coal.

Supporting Policy and Incentives

The Chinese government first proposed that China should pursue “low-carbon economic development” in the 2006 National Assessment Report of Climate Change.  In the 12th Five Year Plan issued in 2010, Beijing set up specific intensity targets for energy conservation and emissions reduction.

• Intensity Targets: In the 12th Five Year Plan period, China laid out targets like a 16 percent reduction in energy use per unit of GDP between 2010 and 2015, and a 17 percent carbon emissions intensity reduction per unit GDP over the same period, explained Tu.
   
• Preferential Policies: Jiang pointed out that the National Development and Reform Commission (NDRC) clearly offers preferential policies for approved energy conservation enterprises, including sales tax exemptions, exemptions from income taxes for the first three years and a 50 percent tax reduction for the following three years, and qualifications for special financing for investment on energy conservation equipment.  After the introduction of these policies, the willingness of Chinese banks to finance energy conservation projects has increased significantly and many shareholding commercial banks began to voluntarily offer favorable loans terms to energy-conservation enterprises, Jiang added.
   
• Project Evaluation: In 2009, the NDRC began to evaluate energy conservation projects with government investment. By 2011, NDRC had evaluated 29 projects. As a participant in evaluating Beijing’s Metro No. 4 project and the cyclic economy of Tianjin Ecological Industry Park, Li described how the evaluators use hierarchical analysis method to design evaluation indicators and weigh framework that are suitable for regional cyclic economic development, and how they develop regional cyclic economy-based fuzzy comprehensive analytic model.
   
• Additional Policy Support: Zhao highlighted the need for more policy support to further encourage low-carbon economic development in China, like the long-awaited energy pricing reform.

Historical Review and Future Prospect

• Peace and Turmoil: Ancient Chinese society was unable to escape “the cycle of peace and turmoil,” Wang said. Population growth always reduced per capita resource availability, leading to resource shortages, which exacerbated social conflicts. This historical model has clear modern applications, he added.
   
• International Cooperation and Responsibilities: Zhao suggested that China should ensure a smooth transition towards green development, without negatively impacting the scale and growth of the Chinese economy. As the largest developing country in the world, China should coordinate its position with as many developing countries as possible, and shoulder the common but differentiated responsibilities.
   
• International Exchange and Cooperation: Tu pointed out that China and the United States are the world’s two largest energy consuming economies and there is great potential for these two countries to strengthen bilateral cooperation on coal supply chain, nuclear development, and international climate negotiations. Furthermore, Tu emphasized that the Group of CURE (China, United States, Russia, European Union) economies, a new concept he recently proposed, can serve as an ideal multilateral collaboration platform for the Chinese government.