Ways to develop low-carbon economy in China

On February 16, United Nations Economic and Social Commission for Asia and the Pacific, United Nations Environment Program and the Asian Development Bank jointly reported that economic growth in the Asia-Pacific region has been increasing for 20 years, but resource consumption of the region is the highest in the world. Since mid-1990s, resource consumption of the region has accounted for more than half of the global total, and the resources needed to produce $1 of gross national product is three times that of other regions.

Recently, the World Wildlife Fund released Climate Change Solutions - WWF2050 Outlook, saying that China's energy utilization efficiency is approximately 33 percent, equivalent to the level of developed countries 20 years ago.

Hu Angang, director of Center for China Study of Tsinghua University and professor of School of Public Policy and Management of Tsinghua University, pointed out that China should shift its mode of economic development as soon as possible and implement the Green New Deal. He proved with data that from 2001 to 2008, China's economy grew at an average rate of 10.2 percent, but the energy and coal it consumed also saw a drastic increase. Taking carbon dioxide emissions for example, it surpassed that of the United States and ranked first in the world.

It is thus clear that the low-carbon transformation of Chinese economy is facing severe challenges needing effective countermeasures, whether seen from the current situation and trends of development of the world or of China.

Government should guide and promote low-carbon development.

First, laws and regulations need to be perfected to bring low-carbon economic development into national policies. China should issue the low-carbon economic law as soon as possible, and establish the relevant laws and regulations in auditing the performance of the low-carbon economy policy. Meanwhile, China should improve local rules, amend and promulgate Energy Conservation Ordinance, and determine the law enforcement body for energy-saving. And to strengthen law responsibility, it is necessary to make the accomplishment of energy-saving targets as part of evaluation of local government and its administrators. Hu Angang thinks that China listed eight green indicators in its “Eleven-Five” program, first setting national aims, and then broken them down to local government. To form competitions among local governments, performance shall be reported once every year. And one’s promotion depends not only on the GDP, but also on the completion rate of the green indicators.

Second, China should establish and improve its carbon trading system. “Quasi-financial attribute” of carbon emission allowance has become increasingly prominent. The United Nations and the World Bank predict that the market capacity of global carbon trading will reach $150 billion in 2012, exceeding the scale of international oil trading. As carbon trading market is gradually expanding and carbon monetization is rising, carbon emissions will further derive investment value and liquid financial assets. However, China lags behind in the development of carbon capital and carbon finance, lacks of mature carbon trading system and platform. There is no financial innovation on carbon financial derivatives, nor is there scientific and rational interest compensation mechanism, resulting in the absence of China’s pricing right about carbon financial products as well as restrictions to China’s low-carbon transformation of relevant industries in China.