23May

UK Leadership Can Help Encourage Low Carbon Growth in China

In a second article from GLOBE UK members on low carbon growth in China, Tim Yeo MP, Chair of the Energy and Climate Change Select Committee and Vice President of GLOBE UK, looks at the argues that low-carbon leadership in the UK would encourage major emitters, such as China, to move down the low-carbon growth pathway, which would create new markets and business opportunities for the UK.

Tianjin

The Energy and Climate Change Select Committee has closely engaged with China over the past two or three years, and not only in writing its recent report 'Low Carbon Growth Links with China.' We invited staff from the Guangdong province development and reform commission back to the UK and Europe to discuss the design of their emissions trading pilot scheme. They visited the UK in May and I followed up the Committee’s visit to China with two further visits of my own, in October and earlier this month.

The Select Committee believes that China’s response to the challenge of climate change is crucial for the whole world. Having been a regular visitor to China over the past few years, I am extremely impressed and encouraged by the greater engagement it has shown over climate change and the efforts it is making to transform its economy to a low-carbon one, though we all understand that it has a long way to go. The 12th five-year plan, which is soon to be at its midpoint, contains a wide range of measures designed to accelerate the introduction of low-carbon technology.

The Select Committee's report argues that low-carbon leadership in the UK would encourage major emitters, such as China, to move down the low-carbon pathway. We also believe that low-carbon growth in China provides new markets and business opportunities for Britain.

Every assistance should be offered to the Chinese to develop their emissions trading scheme. The type of system they are choosing is rather more complex than the EU one, but they start with the benefit of fewer, and perhaps less accurate, data than we and most EU countries enjoyed at the outset of our schemes, which are reasons to be more helpful, rather than less. The UK should offer assistance on the measurement of data and the design of a legal infrastructure for emissions trading—areas in which the UK has a lot of expertise. That is applicable to China nationally and at a provincial and city level.

It is also possible to assist with the integration of pilot emissions trading systems with broader national systems. Emissions trading will face a crisis as a result partly of Tuesday's vote in the European Parliament, and partly because of the collapse in the price of carbon in the EU ETS, but it is worth mentioning that the concept has traction around the world. Not only is China seriously piloting such schemes, but California’s state ETS started operating in January this year, and it is clear that the governor, his staff and the state are committed to its success.

If Britain is to capitalise on China’s low-carbon ambitions, we need to maintain our own commitment to low-carbon growth, so that our companies can continue to develop expertise and remain competitive internationally. We on the Committee were encouraged by the work already being carried out by our officials in China, but we were disappointed that the intention is to cut the rather limited project funding there. The UK Government need to set high-level objectives for co-operation with China on low carbon.

The Committee concluded that there is scope for better alignment of funding opportunities and joint research ventures. We hope the Government will maximise their resources by looking for opportunities to provide match funding alongside other organisations, including research organisations. It is important that the UK delivers on the promises it has already made, in particular on carbon capture and storage. British expertise is not perhaps as widely recognised as it might be and I hope that the Government will take a strategic approach to such projects.

In general terms, I am concerned that Britain risks losing out to other countries in its general efforts in China. It is noticeable that Germany has made a strong commitment of time and to visits at the highest possible level. Although there is a temporary obstacle to ministerial visits from this country, I hope that it will be lifted before long, because it is extremely important that they resume as quickly as possible.

Regular contact with key individuals is the route to closer relationships and greater influence in China, perhaps to a greater extent than in other countries. It is not enough to go once or twice; we need to be seen on the ground regularly. I commend the work of GLOBE International. Its engagement with the EU-UK-China agenda is admirable, and I am glad to have had the opportunity from time to time to take part.

The Committee was glad that the Government response agreed with our assessment that the Chinese low-carbon growth model is central to the success of global efforts to tackle climate change and that the UK should be an active and strategic leader of climate change policy internationally, offering the chance to punch above our weight in influencing China. We were also glad to have the Government’s agreement that a successful and compatible ETS in China is key for global efforts. We welcome the Government’s support for our recommendation that the UK should help China with the design of its emissions trading systems, including the detailed aspects.

There were areas of disagreement between the Government and the Committee over our recommendations. We were particularly concerned about CCS. That technology is vital the world over, but particularly in China. Despite the fact that coal will represent a declining proportion of China’s energy mix, it will remain substantial in absolute terms, so, without CCS, it is difficult to see how progress towards the long-term emissions reductions targets can be achieved. We recommended that CCS be added to the list of UKTI high-value opportunities.

We also recommended a dialogue on the development of gas and highlighted the opportunity for us presented by shale gas. I hope that Britain will exploit its shale gas resources and develop its expertise, which could be shared with the Chinese in due course. There is also conscious desire in China for collaboration with us on a number of renewable technologies, including offshore wind and other marine technologies.

The process is not entirely one way, and we should look at the progress China is making. For example, I was talking only last week to the state grid in China, the customer base of which is a small matter of 1 billion people—twice the number of people in the European Union. Some of the work that it is undertaking, which will produce greater efficiency in the use of energy through smart grids, is worthy of examination.

I hope, too, that we can consider developing common standards, whether in the building industry, the vehicle industry or other appliance industries. If there were a common standard between Britain, or preferably the EU, and China, which would cover almost a third of the world’s population and a substantial proportion of GDP, that might give businesses in the EU, and in Britain in particular, a head start, and set an example that the Americans felt the need to follow. To facilitate this ,GLOBE International is establishing a EU-China Dialogue will bring together legislators from the EU with Chinese Ministers and senior officials to promote the opportunities low carbon growth in China will create. It's first project is to explore the potential for common standards in sectors such as low carbon buildings, vehicles and appliances.

On the question of progress in China, emissions are obviously rising because of the growth in the economy, but the goal that it has set to reduce the carbon intensity of its economy is having an impact in slowing down the growth of emissions. In 2012, the growth was down to only 3.2%, compared with 9.3% in the previous year. Last year, the carbon intensity of the Chinese economy appeared to decline by at least 4%. The 12th five-year plan has a target to reduce carbon intensity by 17%, and during my recent visit it was interesting to find senior advisers to the Chinese Government talking openly not only about the prospect of setting an absolute target for carbon emissions by 2020, but about expecting it to be a declining target as soon as possible thereafter. I do not think that advisers would have been heard making such recommendations four or five years ago.

The pilot emissions trading system is clearly still in its infancy. During the next three years, we expect to see the pilots operating on a small scale, with the first one probably in Shenzhen. Their scope is significant; they cover about a quarter of China’s GDP across six energy-intensive industries and some of the country’s most important provinces and cities. There is potentially a big prize—not just for Britain, but for the world—if we can encourage China’s engagement in the low-carbon agenda. I am confident that the new Chinese leadership will be at least as committed to progress as its predecessors.

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