chinese economic growth and atmospheric...

Chinese Economic Growth Chinese Economic Growth and Atmospheric Pollution:and Atmospheric Pollution:

An OverviewAn OverviewJie HeJie He

CERDI, ClermontCERDI, Clermont--FerrandFerrand

David RolandDavid Roland--HolstHolstUC BerkeleyUC [email protected]@berkeley.edu

1 February 20061 February 2006

mailto:[email protected]

He & RolandHe & Roland--Holst Holst 221 1 FebruaryFebruary 20062006

MotivationMotivation

Why we should care about this:1. Chinese GHG emissions are already a

significant regional externality and could be decisive on a global basis.

2. China’s energy demand is “rocking the tanker.”3. Because of its status as a populous DC, what

happens in China in terms of sustainable living is of special significance.

He & RolandHe & Roland--Holst Holst 331 1 FebruaryFebruary 20062006AOD (Unitless)

Source: Y. Kaufman: 2001, NASA-GSFC

Aerosol Optical Depth : April 2001NASA-TERRA Satellite; MODIS Inst


Source: Novakov, Ramanathan, Hansen, .. Sathaye, GRL, 2002


Three Focal PointsThree Focal Points

1. Where is China along the path of energy dependence?

2. How might energy prices and policies influence its course?

3. How can we decompose the ensuing environmental effects?


Energy and GHG Trends in ChinaEnergy and GHG Trends in China

Two contending perspectives: 1. Optimists point to falling coal intensity in

the late 1990s and massive technology infusion across the economy.

2. Others see resurgence of coal and overwhelming demand shifts in recent years, driven mainly by final consumption and completion of the process of modernization.


Reported Growth Rates of GDP and Commercial Reported Growth Rates of GDP and Commercial Energy Use in ChinaEnergy Use in China

Source: Logan:2001


Chinese Steel: An Optimistic ViewChinese Steel: An Optimistic View


Chinese Steel: Reality Chinese Steel: Reality –– Now below average, Now below average, growing fast, and headed much highergrowing fast, and headed much higher

• Per capita consumption up 2.5 times in last decade• Likely to more than double again in coming decade• Even 15% annual growth would still be less than Korea in 1992

Steel Production

Oil Consumption

Country 1992 2001 2000China 59 132 905Korea 499 809 2071Japan 635 575 4136France 382 390 4366United States 330 373 8141

Annual Kilograms Per Capita


Per Capita Steel and Energy(Chinese levels = 100)

100

200

300

400

500

600

700

800

900

1000

China Korea Japan France United States

Countries

Nor

mal

ized

Qua

ntity

Steel Oil

Mountain

Hill

Industrialization may be energy-intensive, but affluence is much more so.


China: The Worlds 3China: The Worlds 3rdrd Largest Car Market by 2010Largest Car Market by 2010


Demographics of Vehicle DemandDemographics of Vehicle Demand


Coal Coal atat the the FoundatonFoundaton, , OilOil atat the the MarginMargin::EnergyEnergy Composition by TypeComposition by Type

A. Energy preduction structure

0

20000

40000

60000

80000

100000

120000

140000

160000

1978

1985

1990

1992

1994

1996

1998

2000

2002

Year

Ton

of e

quiv

alen

t coa

l

B. Total energy consumption

0

20000

40000

60000

80000

100000

120000

140000

160000

1978

1985

1990

1992

1994

1996

1998

2000

2002

Year

Ton

of e

quiv

alen

t coa

l

hydropow er

natural gas

crude oil

coal


TippingTipping the Trade Balance:the Trade Balance:EnergyEnergy DemandDemand and and SupplySupply CompositionComposition

-30000

-20000

-10000

0

10000

20000

3000019

80

1986

1988

1990

1992

1994

1996

1998

2000

Year

MTE

C

total export

total import

totalconsumptiontotalproduction


Macro Macro EfficiencyEfficiency DeterminantsDeterminants

0

500

1000

1500

2000

2500

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Year

Per c

apita

ene

rgy

cons

umpt

ion

and

prod

uctio

n (k

g eq

uiva

lent

oil/

pers

on)

GD

PPC

and

indu

stria

l GD

PPC

(199

5 U

SD)

Per c

apita

SO

2 em

issi

on (g

/per

son)

Energyproduction Energyconsumption GDPPC

industrialGDPPCSO2 emission


China: Per Capita Waste Gas Emissions China: Per Capita Waste Gas Emissions (1,000 cubic meters)(1,000 cubic meters)

Source: Aufhammer et al: 2003


Projections to 2025Projections to 2025

• We use a recursive dynamic CGE model to forecast trends for China over the next two decades.

• Around a calibrated baseline of consensus GDP growth, we evaluate the effects of rising oil prices.


Sectoral Output CompositionSectoral Output Composition

0%

20%

40%

60%

80%

100%

Perc

enta

ge

1997 2000 2003 2006 2009 2012 2015 2018 2021 2024

Year

Service

Construction

Manufacture

Agriculture


InvertedInverted Kuznets Kuznets CurveCurve??Real GDP and SO2 Emission TrendsReal GDP and SO2 Emission Trends

0

1000

2000

3000

4000

5000

6000

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

Year

Rea

l GD

P (1

0^9

USD

) SO

2 em

issi

on(1

0^4

Tons

)

0

2

4

6

8

10

12

SO2

emis

sion

inte

nsity

(k

g/10

00US

D) SO2

RealGDP

SO2intensity


CO2 as the CO2 as the HiddenHidden Dragon:Dragon:Final Final ConsumptionConsumption TrendsTrends

0%

20%

40%

60%

80%

100%

Perc

enta

ge

1997 2000 2003 2006 2009 2012 2015 2018 2021 2024

Year

Service

Construcution

Manufacture

Agriculture


IllsIlls of Affluenceof Affluence

0

1

2

3

4

5

6

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

Year

Emis

sion

inte

nsity

(Kg/

1000

USD

)

Agriculture

Manufacture

Construction

Service

Mfg reverses course because of electricity production.Services are about transportation.


Real Sources Of Emission Real Sources Of Emission IntensityIntensity

0

50

100

150

200

250

Year

Coa

l int

ensi

ty (T

CE/

mill

on U

SD)

0

50

100

150

200

250

300

1997

2000

2003

2006

2009

2012

2015

2018

2021

2024

Ye a r

Petr

ol a

nd c

oke

inte

nsity

(TC

E/m

illon

USD

)

AgricultureManufactureConstructionService

020406080

100120140160180

19972001200520092013201720212025

Year

Oil

inte

nsity

(TC

E/m

illon

USD

)


Composition of Environmental Incidence:Composition of Environmental Incidence:Primary Drivers and the Pollution Troika Primary Drivers and the Pollution Troika

Economic sources of pollution can be decomposed into three parts:

1. Growth effects – expanding the envelope of economic activity. China’s successes here are now legendary, and becoming almost surreal.

2. Composition effects – shifting patterns of supply and demand around the surface of the envelope. Things will get much worse before they get better.

3. Technological change – efficiency gains, bending the envelope. Here is the only unequivocally good news, driven mainly by coal use/distribution constraints and technology transfer.


Divisia Divisia DecompositionDecomposition ResultsResults• SO2 emission variation during 1997-2025.

Scale effect

0

5000

10000

15000

20000

25000

agricult u

reManu factu

ring

Constructio

nServ ices

Composition effect

-5000

0

5000

10000

15000

20000

25000

agricultu

reManu factu

ring

Constructio

nServ ices

Technique effect

-15000

-10000

-5000

0

5000

10000

15000

20000

250001997-2003

2003-2015

2015-2025


SO2 emission changes for some manufactures

Composition effect

-200

200

600

1000

1400

1800

2200

Oil

Petro

l and

cok

e

Elec

trici

ty

Text

iles

Wea

ring

appa

rel

Leat

her p

rodu

cts

Che

m. P

rod

Oth

er m

iner

al p

rods

Ferr

ous

met

als

Mot

or v

ehic

les

Oth

er tr

ans.

equ

ips

Elec

troni

c eq

uipm

ent

Oth

er m

ach

& eq

uip.

Land

tran

spor

t

Sea

trans

port

Air t

rans

port

Sectors

17094 5751 3303

Divisia Divisia DecompositionDecomposition


CrudeCrude OilOil Absorption TrendsAbsorption Trends

0

100

200

300

400

500

600

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

Year

Oil

cons

umpt

ion

and

impo

rt (1

0^6

USD

)

0

10

20

30

40

50

60

70

80

ratio

of i

mpo

rt (p

erce

ntag

e)

oil import

total oilconsumption

import ratio intotalconsumption


ConclusionsConclusionsChina’s economy has attained levels of growth and modernization that

seemed beyond imagining only a generation ago. Along with its many successes in improving material living standards, however, have come new risks to sustainability and environmental quality.

• Without more effective emission control policies, China’s economic growth will give rise to very significant SO2 emission problems, especially in the period of 2015-2025.

• After a period of industrialization, structural transformation inducesrapid expansions of energy-intensive final demand, mainly privateelectricity, heating, and transport services.

• To meet the needs of a consumer society, SO2 emissions shift from the other manufacturing and service sectors into intermediate energy generation (electricity generation and petrol and coke sectors), and petroleum refining.

• Coal will be significantly replaced by relatively cleaner intermediate energy sources such as electricity, oil products and natural gas in manufacturing.

• Higher crude oil price may slow or even reverse this trend.• Even these pessimistic results understate the the problem, since final

consumption emissions are not even considered.• What is to be done? A very good question.


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