Q&A: Jost Wübbeke on the economic challenges to China's hazy climate change goals

Seeing past the smog

Q&A: Jost Wübbeke on the economic challenges to China's hazy climate change goals

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The eyes of the world have turned to Paris as the two-week United Nations Convention on Climate Change summit gets underway. Within China, public attention has centered on a front of haze so dense that pollution-tracking instruments in Beijing could no longer accurately measure how noxious the air in the capital had become. Policymakers would seem to have every reason to cut the country's coal use. Yet it would be a mistake to conflate air pollution with carbon emissions, or to assume enduring harmony between China's economic and environmental goals.

With China ranking as the world's largest emitter of carbon dioxide - and in a position to potentially exhaust well over a third of the world's carbon budget to mid-century by 2035 - its role in the Paris negotiations could prove crucial to mitigating catastrophic climate change. Hence the Mercator Institute for China Studies (MERICS) has released a new qualitative study (pdf) scrutinizing China's existing emissions pledges, as well as the implications of the country's economic slowdown for its ability to keep them. China Economic Review spoke to co-author Jost Wübbeke about the institute's findings and his thoughts on the outlook for the Paris summit.

Part of your report is dedicated to laying out China's carbon emissions targets, which turn out to be pretty vague because they're based on the carbon intensity of economic growth. What's the basic range there, and how does that compare to popular perceptions?

As you rightly said, these targets are quite ambiguous, they allow for ample space for future emissions because the carbon intensity is linked to economic growth. The more your economy is growing, the more you will be allowed to emit, and you have a huge range for interpreting these targets. 

It's not a fixed target like absolute CO2 emissions: With an average annual growth of around 5%, China can emit much more CO2. It would probably reach 11 billion tons by 2030. If economic growth is only 3%, China would emit much less, probably only 8 billion tons by 2030.

This target is unclear about what will actually happen in the future, it cannot guarantee that China will really control its CO2 emissions. If you take the International Energy Agency's 450 ppm scenario as a reference, you can say China would have to grow only around 4% for these targets to make a real contribution to climate change mitigation. 

However, it is an open question whether China can really meet its intended targets. In our report, we argue that if the country faces increasing economic difficulties, these targets are likely to be watered down. I believe Beijing is very honest about reaching its targets at the moment, but one should be realistic and keep in mind that if China is really facing economic pressure and jobs are at stake, possibly leading to labor protests—under those circumstances policymakers would probably put the economy first and the environment second.

There's been a lot of hubbub over China's carbon emissions records recently. Can you sum up the key points for those who might not be up to date?

As you know, China is the largest CO2 emitter in terms of absolute emissions. However, it is a tricky task to derive its real emissions, as with any other country. China's CO2 emissions are indirectly calculated from primary energy consumption. It is always possible that the formula or data being used is not accurate. 

That was actually the case when China had to revise its coal consumption data earlier this year. It came out that it consumed much more coal between 2000 and 2013 than was previously believed. We have to factor that into the calculations of CO2 emissions, which are now much higher due to the revised coal consumption data. But this does not ultimately change the general trend that China is consuming less coal.

And not even relatively speaking?

Even in absolute terms, 2014 was the first time since 2001 that China’s coal consumption did not increase year-on-year. This doesn't change even if the data has now been revised. At the same time, other studies found that the carbon content of Chinese coal is lower than assumed in current CO2 calculations, suggesting that China has been emitting less CO2 than indicated by official data. In sum, we have a lot of uncertainty about what China’s real emissions are. 

But it is still safe to say that China is the world's largest CO2 emitter.

Yes, sure, but only in terms of absolute emissions. In per capita terms, China is emitting much less CO2. Compared to more than 18 tons per capita in the U.S. and around 10 tons in Germany, the average Chinese person generates only about 7 tons. However, the average per capita emission of CO2 is increasing in China.

What are the two “extreme” scenarios you discuss in the new report, and why do you ultimately conclude they're unlikely?

The first scenario describes a backslide of China's climate policy, where China returns to its previous path of relying on heavy industry, including the steel and cement industries, as well as investment in infrastructure and construction. 

In the case of a major economic slowdown we can expect that emissions will initially decelerate, but what's important is what happens next. It is quite likely that China will use investment in infrastructure and construction to create economic growth. These measures would result in greater demand for steel, cement, and other raw materials and increase CO2 emissions significantly.

At the same time, this scenario is rather unlikely because it has become rather difficult to create growth from infrastructure investment and construction. In addition, the ability of energy-intensive industries to generate new jobs in China is decreasing. On top of that China now has stronger environmental institutions, which can act as a stronghold against a serious backslide.

The other extreme scenario would be the very optimistic one of accelerated transition. Under this scenario, China would use the economic slowdown to boost its economic transition towards high-tech and service sectors, and establish environmental industries as a key pillar of the economy. This would help to reduce CO2 emissions tremendously. 

However, this scenario is also an extreme case, because it's rather risky for the Chinese government to vigorously push economic transition under these circumstances; it does not really know if these new industries like e-commerce or environmental technology will really create enough growth and jobs. Under such uncertainty, I'd say the Chinese government would rather not pin all of its hopes on these industries. We should not expect to see a stimulus mainly relying on low-carbon measures. 

You also outline a third scenario, labeled "delay". What does that look like, and why do you consider it more likely?

It's a combination of the other two. In times of economic slowdown, it is quite probable that China will initially use traditional measures of facilitating growth—that is already visible in individual stimulus measures calling for more railway and housing construction. This will of course produce more demand for raw materials and also lead to an increase in CO2 emissions. 

This could go on for some months or even years, but the Chinese government will see that these measures are running out of steam and are not as effective as before. The political leadership will gradually orient the country more towards high tech and environmental technologies, promoting economic transition. However, this process is being delayed by the economic crisis and the many ad-hoc stimulus measuresthe transition is coming later than expected. As a consequence, a sustained fall in China's CO2 emissions will occur much later than we had previously hoped. 

Until now, one could be quite optimistic about China's climate policy. Its economic policy and climate policy have been quite compatible with each other. But this could now fundamentally change if economic conditions worsen. 

What determines the differences in your three scenarios?

Our basic assumption is that policy decisions fundamentally influence the direction of these scenarios. There are three major factors: 

First, the question is, how green is the government stimulus? In the 2008 stimulus package during the global financial crisis, around 70% of funds went into railway, highway and other construction projects. This was a rather “dirty” stimulus, though it included some energy efficiency measures

The second factor is job creation. You can see that there are still a lot of jobs in heavy industries like steel and coal, manufacturing, and construction. It's quite hard to transfer these jobs to high-tech or environmental-tech industries. This will be a challenge, and there will be a lot of uncertainty about whether the government can really transfer these jobs from one sector to another, especially in the short term.

The third factor is the role of environmental policies and institutions. The question is whether the environmental regulatory framework can in practice really prevent a backslide to a more heavily polluting economy and the relaxation of key environmental targets in the face of economic difficulties. 

From your perspective, what are the most likely best- and worst-case scenarios for negotiations in Paris?

Paris is more about diplomacy than really solving the challenges of climate change. Everybody in this game, like China, Europe and the US, wants to avoid losing face and to ultimately have something to show for it. But with what we've seen so far I'm not very optimistic, because China's goal aren’t so ambitious, and the US's goals are not that impressive, either. 

There is another question of whether this protocol and the emissions targets will be legally binding. If not, it will be very hard to ensure climate change mitigation. Right now, the world is in a critical situation. The impact of climate change is already visible, and 2015 will be the hottest year on record. If you really want to mitigate climate change, you’ll have to do more right now, not in ten years. But postponing climate efforts is what most countries are doing now, China in particular.


Interviewer: Hudson Lockett (@KangHexin)