Posted by Fabrizio Battaglia on Sun, May 30, 2010 @ 04:16 PM
Chinese Low Carbon Consumption
When looking at GDP components Y = C+I+G+(X-M) (Consumption + Investment+ Government + (Exports -Imports) the major area of growth China can leverage is internal consumption.
As a matter of facts China is facing major strategic challenges: International Trade (X-M) has reached its limits. International trade from and to china has become so important on a world scale that increasing imports to China will affect imported goods prices upwards, while increasing exports from China will affect exported goods prices downwards. Expanding trade further will yield little benefit to overall GDP. Investments (I) have reached a limit also at more that 50% of GDP, (developed countries are in the range of 25% of GDP). Only Consumption and Government spending are left to seriously increase GDP, and the natural choice will be to boost the untapped potential of Consumption in a country with a very high saving rate, where currency reserves are skyrocketing (M2 in China is close to equivalent 8TUSD; for comparison M2 for Europe in 2007 is equivalent to 7 T EURO, and in the US is in the range of 8 TUSD).
Considering consumption will most likely grow in cities and that urbanization is likely to keep progressing the question is how Chinese people consumption can be reconciled with lowering carbon intensity?
There are many areas of course that could be surveyed here from food consumption, to consumer goods, or services (see Exhibit below GDP composition in next 40 years). We decided to look at an important part of consumption: transport, to illustrate our point.
Transport
Transportation is one of the major contributors in CO2 emission; how China is orientating consumption in that field is very important to understand.
In China the national average for car ownership is still low at 17 cars per 1000 people (in 2005) compared with over 700 in the United States and 400 to 550 in European countries in 2004. With similar size of territory or less, China had 186 major airports 7 in 2007, compared with 415 in the United States, and 457 in the European Union (CIA 2008). It also has much less extensive railway infrastructure, at 75 438 km in 2007 only one third of that in the European Union or United States (226,427 km - source Wikipedia 2009).
We see a major potential for growth in all means of transport, and as we are going to see mass transportation is highly privileged. Major efforts have been done to increase railways and airports networks. Airplane transportation accounts for only 2% of all transportation emission. Railway transportation is even below.
While additional 97 airports should be built by 2020, railways will expand by 110 000km by 2020 with the "Go-west" project. In addition to providing low-carbon emission transport this massive railway expansion will link up the poorer western regions with the more prosperous coastal areas, and provide jobs during economic downturns.
In the automotive sector a massive plan has been launched to convert publicly-owned vehicles to less-polluting fuels. China openly declares its objective to become a world leader in the manufacture of electric vehicles.
For example in June 2009, an initiative was launched to eliminate up to 50 percent of traditional fossil-oil-powered cars and replace most of them with cars using alternatives energies such as: bio-fuels, compressed natural gas (CNG) and electricity. Experts forecast a reduction of China's energy use by up to 1.6 quadrillion British Thermal Units (QBTUs) by 2025 (= 2% of China's current annual energy use).
In the headlines we could read in February 2010, that the first 50 gas-electric hybrid buses were put in use in Changchun, capital of northeastern Jilin Province cutting carbon emission by 30 percent, compared to traditional buses.
Chinese car maker BYD, will invest 22.5 billion Yuan ($3.3bn, £2bn)) over five years starting in 2010 to build China's largest solar power battery plant. The plant will have capacity to produce a total of 5,000 MW (5GW) of batteries. Launched in the first half of 2010, their first electric car, the e6 sedan, is powered by a Lithium-ion battery and will mainly be supplied to government, the civil service and taxi fleets.
References-
- 18th
Asia-Pacific Seminar on Climate Change / March 2009
- COMMENTARY IS MISINFORMED-CHINA'S COMMITMENT IS SIGNIFICANT by WILLIAM CHANDLER
-China Climate Change info net: http://www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=22284
-China energy transition- Path ways for low carbon development - Dr Tao Wang & Dr Jim Watson
-Business Green.com - Article : China eyes export ban on rare metals used in hybrids and wind turbines
-China Policies for Addressing Climate Change- Information office of the state council of the People's Republic of China (October 2008 Beijing).
-Stratfor - China's Expanding Railway System: The Significance
-Business week- China's Great Railway Expansion
-China's Transport Revolution - World Resources Institute - www.wri.org
-China Climate Change Info-Net www.businessgreen.com/business-green/news/2256681/byd-build-solar-power-battery
Posted by Fabrizio Battaglia on Sun, Mar 28, 2010 @ 02:16 AM
Strategic Anticipation
We propose here a quick analysis of the conference course of events.
From a strategic anticipation perspective, we have looked for typical elements considered importantin successful negotiations.
A long Process ...
COP15 is the result of an 18 years process towards climate change.
At the beginning there is the "Convention of Rio" first adopted in Rio de Janeiro on May 9, 1992, which went into effect on March 21, 1994. It was signed by 192 countries. In 1997 the Kyoto Protocol was drafted as an addition to the convention, committing those ratifying it to reduce emissions by an average of 5 percent between 2008 and 2012.
It is in December 2007 in Bali that the Kyoto members agreed to set a conference in Copenhagen with the objective to reinforce the Kyoto agreement. Consequently the Copenhagen Summit on Climate change from December 7 and December 19 2009 was meant to produce a drafted treaty to amend the Kyoto Agreement signed in 1997.
The conference day by day
Day 1-4: As soon as day 3 of the conference the Danish Text, which is supposed to be the agreement draft proposal to be discussed and modified is understood very differently by the parties.
On one side Kim Carsten (WWF International) considers the text as insufficient and recognizes a tremendous amount of work is needed before all parties could agree to sign it. On the other side, far from being consensual, Lumumba Stanislaus (representing G77) claims the same text shortcuts the negotiation process and becomes a terrible threat for developing countries. He does not hesitate to assimilate the Copenhagen process to a Breton-Wood-take-over by developed countries. He asks for a middle way, a more balance text calling for compromise. These comments not only focus on the divergences between parties about substance but highlight disagreements on the negotiation process itself.
During day 4, to reinforce ambassador Lumumba point, China declares support to the G77 position and refuses any discussion over a text that "fundamentally changes the structure and content of the Kyoto protocol" while other countries like Australia or Tuvalu (12000 inhabitants) reinforced their willingness to continue discussion over the proposed draft, leading to a suspension of the negotiations for the day.
Days 5-7 crystallize discussions around contributions, as planned in the initial schedule. How much should the US contribute vs. the European Union? How can the US and Europe make sure that China would not be subsidized, but on the contrary contribute also to the effort? At the end of the 7th day two texts are pushed forward despite the controversy around American and Chinese commitments.
Day 8-10 see the recentralization of the debate around common interests and especially climate change consequences on ice melting and oceans rise.
It is during the plenary session of day 9 that the president of COP15 Mrs. Connie Hedegaard recognizes that finally "ministers" are "down to work". By saying that she conveys the message that they were not actively involved in the text since that moment, which directly questions UNFCCC legitimacy for organizing such event. When Prime minister of Denmark, president and chairman of the conference Lars Rasmussen closes day 10 by praising the political will demonstrated by head of states, Chinese delegate immediately comments: "Mr. President you cannot put forward some text from the sky", to what Mr. Rasmussen answers in short that the process has to move forward (even without consensus) simply because an agreement has to be reached. Eventually India and Bolivia join China in expressing their frustration about process transparency and fairness.
Day 11-12: The heads of state enter the debate listing monetary and CO2-emissions targets per country. It is difficult to see coordinated strategies among countries.
Among the commentaries Secretary of State Hilary Clinton clearly considers the "inability" of some countries to pursue transparent process as a "deal breaker", while President Lula or president Obama express their frustration over the inability of the community to reach agreement.
Here is an observation: Head of States comments were often positional and substance centered, while country delegate's comments were often principled and process centered (how pieces of information were circulated, how procedures were respected...). Probably timing was responsible for that, but still the problem remains. There was no consensus on the negotiation process from the negotiators perspective.
In negotiation, disagreement on process indicates that either the process has drifted over time, or more simply that there was no agreement on that process before the negotiation started. Since the negotiation process is supposed to support the substance negotiation, if the process is not agreed discussions are somehow doomed to miss their primary target.
As Horacio Falcao (Negotiation Professor at INSEAD) puts it in his book "Value Negotiation- How to finally get the win-win right", "Process" always comes first. When there is no agreed, stable negotiation process, the odds for a negotiation to not reach its expected objectives are very high.
References
-BBC news : http://news.bbc.co.uk/2/hi/8396696.stm
-Times Online: http://www.timesonline.co.uk/tol/news/environment/copenhagen/article6954510.ece
-Value Negotiation- How to finally get the win-win right by Horacio Falcao
-Getting to yes by Roger Fisher and William Ury
-UNFCCC Website: http://unfccc.int/
-Youtube: http://www.youtube.com/cop15#p
-http://www.iloubnan.info/environment/actualite/id/40668/titre/Copenhagen-for-dummies:-The-five-major-stakes-of-the-summit
-"Principled Negotiation at Camp David" as described in Getting to Yes, Roger Fisher and William Ury. New York: Penguin Books, 1981
Posted by Fabrizio Battaglia on Fri, Feb 19, 2010 @ 08:03 PM
China diplomacy is at stake
China is attaching major importance to climate change issues. Reasons are multiple. In addtion to problems related to drought, shortage of drinking water, massive population movements, species protection ... China faces international pressure due to its influence on climate change at world level. This pressure can clearly undemine its diplomatic positions.
Today China is perceived as bearing responsibility towards climate change as one of the most important carbon emitter countries. The per capita carbon emission has achieved the world average level, and total CO2 emissions have overtaken US emission in 2008 (still American emissions per capita are 4 times higher than China).
On the economical scene China is number two. The country with GDP 4.9TUSD in 2009 has overtaken Japan (4.6TUSD) for the first time in history.
Even if China is far from challenging the American economical supremacy (USA GDP is 14.2TUSD in 2009), another form of leadership can clearly be disputed by the old Middle Empire. The country that discovered silk, invented gun powder, paper and printing might well be up for another revolution and gain diplomatic advantage on the world scene by leading the emerging low carbon economy.
It is very important to identify the forces that could drive China towards a low carbon direction. In this Post we will look at the ongoing efforts to optimize the country economic structure through the COP15 (Copenhagen summit) commitment.
Optimizing the economic structure
Copenhagen summit
As illustrated by the memo to Copenhagen by William Chandler (leading expert on energy and climate at the Carnegie Endowment for International Peace), "[...] China's offer to the Copenhagen summit is significant. The global community should grab this offer without hesitation in order to lock in China's commitment in time for China to include it in the next five-year plan. The United States also needs now to step up and show leadership or risk falling far behind China as a global leader on a crucial issue..."
The often heard criticism that by committing to 45% of carbon intensity emissions reduction China is doing "business as usual" is funded. What criticism forgets to explain is precisely that China has been aggressively cutting CO2 intensity for the past 5 years and that this aggressive program will continue, showing the extent of Chinese commitment towards CO2 emissions containment.
While reflecting its fear of Climate change, the commitment prepares the country to play a much stronger political role on the world scene.Today a major green leadership position is available for the country that may dare to take it.
As William Chandler mentions, China should also consider putting a cap on CO2 emissions (not only reducing intensity), but what needs to be taken into consideration is that unlike developed countries China is still equipping and building infrastructures.
Urbanization and industrialization cannot be halted without provoking internal social instability, the consequences of which may be highly undesirable, compromising probably future CO2 reductions.
To understand clearly what China has committed to at COP15, Carbon Intensity must be clearly defined:
Carbon Intensity is the ratio of carbon emissions to economic activity, so carbon intensity is proportional to carbon emissions and conversely proportional to GDP. It is interesting to see Chinese commitment at Copenhagen is not subordinated to a specific GDP growth rate.
Again, for the sake of understanding let's consider a country that wants to maintain its carbon intensity constant. If the economy shrinks, the efforts for improving energy efficiency must be all the more reinforced to compensate for the slow GDP; conversely if the economy grows, then it will be easier to maintain Carbon emission intensity constant. Still, as experience shows (in developed countries), efficiency improvement will be necessary even GDP grows, since one point of GDP costs in average of 1 to 1.5 point of carbon emissions. So carbon emission intensity has a natural tendency to increase.
As a consequence reducing carbon emission intensity by 45% percent is a strong commitment, as shown on the graph of Figure 2. Maintaining that rate of reduction means maintaining aggressive investment efforts in power efficiency.
After becoming a major economic power China has yet to strengthen its position on the geopolitical scene. Building a low Carbon economy can support that objective.
As a matter of facts, even if today's Chinese develepment is far from being sustainable China has all it takes to reverse the situation. China has the strategic resources (natural, economical, demographical, and cultural) to build the low carbon economy that could support its sustainable growth. China sustainable growth could inspire other developing countries and probably also certain developed countries that need to reduce their high consumptions habits.
References-
- 18th
Asia-Pacific Seminar on Climate Change / March 2009
- COMMENTARY IS MISINFORMED-CHINA'S COMMITMENT IS SIGNIFICANT by WILLIAM CHANDLER
-China Climate Change info net: http://www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=22284
-China energy transition- Path ways for low carbon development - Dr Tao Wang & Dr Jim Watson
-Business Green.com - Article : China eyes export ban on rare metals used in hybrids and wind turbines
-China Policies for Addressing Climate Change- Information office of the state council of the People's Republic of China (October 2008 Beijing).
-Stratfor - China's Expanding Railway System: The Significance
-Business week- China's Great Railway Expansion
-China's Transport Revolution - World Resources Institute - www.wri.org
-China Climate Change Info-Net www.businessgreen.com/business-green/news/2256681/byd-build-solar-power-battery