White Paper on Climate Change

China’s Emerging Green Consensus October 2015

The Center for China & Globalization (CCG) is a leading global think tank formed by China

Global Talent Society and Policy Advisory Committee of China Overseas Returned Scholars

Association. It brings together academic scholars, business leaders and public policy experts

from China and abroad, addressing issues related to China’s growing globalization.

For more information about CCG, please visit www.ccg.org.cn

North Head is an independent strategic communications consultancy with a clear China focus.

Focused on a research and knowledge based approach, North Head works on international

campaigns and reputation management.

For more information about North Head, please visit www.northhead.com

Executive Summary

The rise of a “green consensus”

China’s economic development has improved living standards for millions of people and created a new

engine for global growth. However, it has also brought severe environmental consequences. Air pollution

is one of the most visible of these.

In 2014, 89 percent of major cities in China failed to meet air quality standards according to China’s

Ministry of Environmental Protection (MEP). Air pollution is a leading cause of chronic respiratory

diseases, cardiovascular diseases and lung cancer, contributing to around 1.7 million deaths per year in

China. The economic costs arising from adverse health impacts and loss of labor productivity due to air

pollution were estimated at around 6.5 percent of China’s GDP each year between 2000 and 2010.

With growing awareness of these health risks, public demands for environmental remediation are

increasing. The government also recognizes that China’s current economic model is obsolescent,

requiring a shift of bias from heavy manufacturing and exports towards services and consumption.

In the past three years, a political “green consensus” has emerged on the path China must take to ensure

sustainable growth. This entails taking steps to shift to a cleaner energy mix, moving away from heavy

polluting basic material industries and strengthened environmental protection.

Early adoption of low-carbon policies, coupled with transition arrangements, will enable China to improve

local air quality, accelerate economic restructuring and spur Chinese firms to boost innovation and

become global leaders in low-carbon industries. In the medium- to long-term, the positive impacts on

growth will more than offset the temporary dislocations of a move to a low-carbon growth path.

With GDP growth levels of 6 to 7 percent and ample fiscal resources, there is a window of opportunity for

economic transformation in the coming decade. Costs of restructuring will increase if action is unduly

delayed.

A by-product of these trends is a shift of China’s position on climate change. Previously, climate change

was considered an issue to be addressed primarily by mature developed economies. Moving forward, it

can be anticipated that China will be fully engaged and a principal at COP21 and for any negotiations

beyond.

Three pillars of action

There are three prime components of China’s efforts to address air quality and climate change: energy,

basic materials industries and environmental protection policies.

Reducing energy-related emissions. Based on burning fossil fuels and particularly coal, China’s

energy intensity per unit of GDP is almost twice the global average. However, efficiency

improvements and economic structural trends have resulted in China’s growth becoming

progressively less energy intensive. Energy consumption growth fell to 2.6 percent in 2014, the

slowest rate since 2008. Escalating investments and targets for renewable energy, including nuclear,

solar, hydro-electric and wind power are having effect. In 2014, consumption of coal fell for the first

time in 14 years.

Cutting overcapacity of basic materials industries (BMI). Reducing emissions from BMIs including

steel, cement, aluminum and plate glass is necessary if China is to improve air quality and meet its

climate change commitments. BMIs account for nearly 70 percent of China’s energy use and are

major contributors to emissions of PM 2.5, sulfur dioxide and nitrogen oxides. The central

government has vowed to redress chronic overcapacity in these sectors by a combination of

measures mandating technological upgrades and investments, higher environmental standards or

forcing outright closures.

Effective environmental protection. Previously, the government relied on top-down targets and

command-and-control regulations that resulted in ineffective enforcement at local levels. There is

now increased momentum for adoption of market-based instruments (MBI). Regional pilots are

underway for a national carbon market and an environmental tax law is currently being drafted. The

recalibration of officials’ key performance indicators (KPIs) to give more weight to environmental

outcomes is an important reform, incentivizing implementation and enforcement at all levels of

government.

Conclusions and Recommendations

With the Xi Jinping – Li Keqiang administration there has been a renewed vigor for economic

transformation and environmental remediation. Building out from a core political consensus in the party

and government, a “green consensus” has been forged by co-opting business and an emerging domestic

civil society.

There has been a steady drumbeat of environmental legislation and regulation encompassing higher

standards, incentives for innovation and clean tech, disincentives for emissions and waste, and

regulations curtailing licenses to operate. Indications are that these trends will continue, if not accelerate.

Renewable Energy. It is expected that China will continue to ratchet up its commitment to increase

the share of renewable energy in the country’s energy mix and introduce further incentives to

promote green investments.

Carbon trading schemes. To cut carbon emissions efficiently and accelerate economic restructuring,

China should build on current pilot domestic emissions trading schemes (ETS) and be in a position to

follow through on commitments made by Xi Jinping in September 2015 to implement a national

carbon trading scheme as a core component of the 13th Five Year Plan (2016-2020).

Emissions reductions can be achieved without sacrificing growth. There are already signs of a

decoupling between growth and carbon emissions in China, with total carbon emissions declining by

2% in 2014. Meanwhile, the clean tech sector is rapidly becoming a driver of growth in China, creating

30 million jobs as of 2015. This figure is expected to double by 2030. The positive impacts of growth

in services, consumption and high end manufacturing can more than offset the temporary

dislocations of a move to a lower-carbon growth path.

Effective implementation and enforcement at local levels are keys to success. Government efforts to

strengthen systems and capacities are welcomed and encouraged, so that national policies can be

thoroughly implemented and enforced throughout China.

o The government is taking steps to increase the weighting of environmental outcomes in

officials’ KPIs. These efforts are to be commended and should be continued.

o Further investment and training are required to realize the government’s plan to build a

nationwide system to monitor and control emissions by 2020.

o Campaigns to educate local officials, industry and the public will help ensure that

environmental policies are effective at the local level.

o Existing policies to promote the growth of domestic civil society and efforts to enable such

groups to play constructive roles are noted and seen as useful.

Transition arrangements are required to manage the closure of excess capacities, particularly for

basic materials industries, and the shift to lower-carbon industries. More proactive measures to

facilitate the restructuring are warranted. Designated fiscal transfers for restructuring will help

impacted local governments manage temporary dislocations and create alternative employment.

Measures required include the promotion of entrepreneurship, new industry start-ups and re-skilling

programs of human capital for affected localities and industries.

Benefits for frontloading and additional costs for delay. By adopting ambitious emissions reduction

targets, low-carbon policies can accelerate economic restructuring, boost innovation and increase

energy security. Indeed, there are potential costs for undue delay in tightening environmental

standards and introducing low-carbon technologies. Given a growing momentum, China should

recognize the advantages of peaking carbon emissions during the 14th Five Year Plan period (2021-

2025). This allows China the flexibility of going beyond the current commitment to reduce carbon

intensity of GDP by 60 percent compared to 2005 levels, by 2030.

Climate Change Commitments

China is well-placed to work together with international partners to reach a clear and ambitious

agreement at the Paris COP21 talks in December 2015.

In keeping with domestic developments and economic transformation, China should have the

capacity to gradually ratchet up its climate change commitments in the coming decades.

Contents

I. Introduction 1

II. Current situation overview 6

III. China’s evolving approach to environmental protection 12

IV. The way forward 20

V. Conclusions and policy recommendations 25

Appendices 29

References 34

1 | P a g e

1. Introduction

In past decades, China has made remarkable progress in eliminating hunger and poverty, slashing rates of

extreme poverty from 61 percent in 1990 to just four percent in 2015.1 In the process, China has also become

an important engine of global economic growth. However, the country has paid a high price for these

achievements and the Chinese government is now confronting the environmental legacy of years of rapid

development.

Since November 2012, the Chinese administration under President Xi Jinping has accelerated economic

reform and the shift from an economy based on exports and labor- and energy-intensive industries, towards

greater emphasis on consumption and services. Concurrently, the leadership has embarked on robust

renewal of the Communist Party of China (CPC) and administrative reform of government and state-owned

enterprises (SOE). This comes against a background of consistent economic growth over a number of years

that has produced a large, articulate middle class that increasingly prioritizes environmental remediation and

quality of life.

One result of these changes is that China’s position on climate change has evolved considerably. While

climate change is not a primary environmental concern for either the Chinese government or people, there is

a considerable degree of alignment between climate-friendly policies and China’s own developmental

objectives, including improving air quality and positioning China as a leader in clean technologies (see box

text on p4 for more). Where China once saw climate change as an issue largely relevant for mature

developed economies, the country now views itself as an engaged principal in the negotiations. This has

already had significant international effects and will continue to do so. At the Asia-Pacific Economic

Cooperation (APEC) summit in November 2014, the U.S. and China announced an agreement on climate

change in which China committed to stop its emissions growing by 2030.2 More recently, in the run up to

1 Somini Sengupta, 'Global Poverty Drops Sharply, With China Making Big Strides, U.N. Report Says', Nytimes.com, 2015. 2 U.S.-China Joint Announcement on Climate Change (Beijing, 2014).

2 | P a g e

COP21 in November 2015 in Paris, China has announced that it will cut carbon dioxide emissions per unit of

gross domestic product (GDP) by 60 to 65 percent from the 2005 levels by 2030.3

This paper charts the background and path of this evolution, looking at the key challenges for the Chinese

government in successfully effecting economic transformation and redressing environmental degradation.

The rest of section one provides an overview of China’s current environmental problems and the

rise of a “green consensus” among China’s leadership and public on the need to shift to a

sustainable growth model.

Section two places China’s environmental challenges in the context of China’s economic

restructuring process. While the transition to a sustainable growth model will entail temporary

dislocations, over the long term this shift can be made without sacrificing growth. Key to affecting

this transformation will be addressing China’s basic materials industries, which currently suffer from

overcapacity and account for a significant amount of the nation’s energy consumption and

emissions.

Section three gives an overview of factors that have contributed to increased environmental

awareness among Chinese citizens and the government’s evolving approach to environmental

protection. There is increasing momentum towards using market-based instruments as the most

efficient way to reduce pollution and Xi Jinping has said China will implement a nationwide carbon

trading scheme by 2017. Finally, this section looks at some of the barriers to implementation of

environmental policies at the local level that must be overcome to make progress in environmental

remediation.

Section four looks ahead to prospects for China shifting to a low-carbon development path and the

implications this would have for China’s domestic development and globalization process. Given

current structural trends and the potential gains from adoption of low-carbon policies and new

technologies, this paper argues that China should be able to peak emissions ahead of the current

schedule in 2030. In our view, it is in China’s interests to do so, given the advantages of early climate

change action in terms of improved air quality, accelerated economic restructuring and innovation.

Finally, section five offers some conclusions and policy recommendations for how China can meet

its environmental objectives and help secure a clean environment for its people and those around

the world.

3 China, Enhanced Actions On Climate Change: China's Intended Nationally Determined Contributions, 2014.

3 | P a g e

1.1 Environmental costs of rapid growth

Over the last three decades, economic growth and effective decentralization of micro-economic decision-

making led to widespread environmental degradation that proved difficult to monitor by central government

agencies. This has taken a serious toll on China’s air, water and soil.

Air pollution. As the most visible manifestation of China’s environmental crisis, urban smog has

become a hot-button issue for the public, tarnished China’s international reputation and become a

priority concern for the government. In 2014, 89 percent of major cities failed to meet air quality

standards according to the Ministry of Environmental Protection (MEP). This severe air pollution has

significant health and economic costs. A 2015 study indicates that air pollution contributes to around

1.7 million deaths per year in China, while a previous global study of disease burdens found air

pollution to the fourth-leading risk factor for deaths in China and a major cause of chronic

respiratory diseases, cardiovascular diseases and lung cancer.45 The economic costs of air pollution,

arising from adverse health impacts and loss of labor productivity, were estimated at around 6.5

percent of China’s GDP each year between 2000 and 2010.67

Water pollution. Water shortages and severe pollution of vital watersheds will continue to be an

environmental burden for years to come. Water supply is unevenly distributed across the country

and per-capita water supply is low, particularly in northern China. There are also too few treatment

facilities that can adequately mitigate high levels of agricultural and industrial contamination. The

water in half of China's top ten river systems is polluted, and water quality is getting worse. Among

these ten rivers and their tributaries, the Yellow, Huaihe, Haihe, Liaohe and Songhuajiang are all

polluted, with northern China's Haihe River the worst affected. According to the MEP, over 60

percent of groundwater is polluted.8

Soil pollution. Despite receiving less attention than China’s water and air problems, soil pollution has

become an increasingly serious issue for food safety and security. A nationwide survey released in

2014 reported that almost a fifth of China’s arable land is dangerously contaminated. Cadmium,

nickel, and arsenic are the top pollutants, which leach out from open mines and industrial sites and

contaminate the surrounding farmland.9 The government is now taking action to redress this

problem and a soil pollution law is expected by 2017.

4 Robert A. Rohde and Richard A. Muller, 'Air Pollution in China: Mapping of Concentrations and Sources', PLOS ONE, 10 (2015). 5 Gonghuan Yang and others, 'Rapid Health Transition in China, 1990–2010: Findings from the Global Burden of Disease Study

2010', The Lancet, 381 (2013), 1987-2015. 6 Zhimin Mao and Keith Crane, Cost Of Selected Policies To Address Air Pollution In China (RAND Corporation, 2015). 7 Cankaoxiaoxi.com, '90%中国城市空气质量不达标保定空气污染最严重_中国频道_《参考消息》官方网站', 2015. 8 Chinadaily.com.cn, 'Over 60% of Underground Water Substandard: Report', 2015. 9 Ministry of Land and Resources, Communiqué on 2014 China Land and Resources (Beijing, 2015).

4 | P a g e

The main pollutants that cause local air

pollution, like sulfur dioxide, nitrogen oxide,

and particulate matter, are different from

greenhouse gases (GHG) that cause global

warming. However, in China the main

emitting sources of both are fossil fuels, and

particularly coal, so there is a close

relationship between solutions to address

both problems.

While poor air quality is the main motivating

factor in the government’s efforts to reduce

energy consumption and pollution, China’s

emerging “green consensus” will also serve

as a key driving force for action on climate

change in the coming years and decades. As

Karplus (2015) points out, the alignment

between these two environmental objectives

is not perfect and varies across different

abatement solutions. Thus policies are

needed to maximize positive impacts on

both carbon mitigation and air quality such

as introduction of an effective price for

carbon and increased adoption of renewable

energy. With regards to climate change,

these are more effective than measures that

focus on local atmospheric pollutants such as

end-of-the-pipe solutions and switching to

natural gas.

Relationship between air quality and climate

change strategies

1.2 Rise of environmental awareness

Chinese citizens are increasingly aware of how

environmental degradation is impacting their health and

wellbeing. A survey conducted by China Daily prior to

National People’s Congress (NPC) in 2015 found air

pollution to be the top concern for Chinese citizens.10

Similarly, studies conducted by PEW Research found that

between 2008 and 2013 the number of Chinese who

consider air pollution a “very big problem” went up from

31 percent to 47 percent.11 Citizens have also turned to

more active means to voice their concerns, with the

number of environmental protests growing at 29 percent

every year from 1996 to 2012.12 Particularly in eastern

provinces, communities have become increasingly active

in protesting construction of chemical plants, large

incinerators and waste treatment works.

Several factors have contributed to this trend, including

rising incomes, increasing property ownership, the

emergence of domestic environmental NGOs and more

open discussion of environmental issues in both

traditional and social media. These factors are analyzed in

more detail in section three.

The social impacts of pollution have gradually pushed

environmental protection up the political agenda over

the past decade. China’s central environmental

protection agency was elevated to full ministerial status

in 2008. At the 18th Party Congress in 2012, “ecological

civilization” was written into the party constitution as a

development priority and new leader Xi Jinping launched

a campaign to create “Beautiful China” and ensure a

clean, safe environment for the Chinese people.

10 Usa.chinadaily.com.cn, 'Air Pollution Tops Public Concerns For "The Upcoming Two Sessions"’, 2015. 11 Motivaction International, The Different Faces of Sustainability in China, US and Europe, Flash Report 3, 2015. 12 Speech by Yang Zhaofei, vice-chair of the Chinese Society for Environmental Sciences, to a special meeting of the Standing

Committee of the 11th National People’s Congress.

5 | P a g e

The rise of Chinese environmentalism reached an inflection point shortly after, during the winter months of

early 2013. Smog hung over Beijing and much of northern China for weeks, obscuring buildings and

prompting advisories for children and older adults to be kept indoors. Coinciding with the NPC confirmation

vote of the Xi Jinping leadership and government, this episode moved poor air quality to the forefront of the

political agenda and tied environmental concerns with social stability and legitimacy of the party. For the first

time, government began releasing hourly air pollution readings from 74 Chinese cities and state media

featured candid discussion of environmental issues. The People’s Daily called it a “siege of pollution”, and the

government pledged to spend USD 275 billion on cleaning up air pollution in the five years from 2013. One

year later, Premier Li Keqiang opened the 2014 meeting of the NPC by announcing China would declare “war

against pollution” as it had done against poverty.

Over the last decade, a fundamental paradigm shift has taken place for both the public and government. A

political “green consensus” has emerged whereby economic and social stability demands not only stringent

environmental standards, but also stricter enforcement. This shift challenges many basic industries that were

previously vital to the country’s growth. These once lucrative labor- and energy- intensive industries will face

radical reforms as China fosters new engines of growth, assuming more modest roles as the economy

matures.

6 | P a g e

2. Current situation overview

The first part of this section situates China’s emerging “green consensus” in the context of the government’s

economic restructuring program. The experiences of developed countries and gradual decoupling of growth

from emissions in China indicate that the country will be able to achieve the shift to a low-carbon economic

model without sacrificing economic growth in the long run. The rest of this section provides an overview of

China’s energy sector and basic material industries. These are the most important emitting sources of local

air pollutants and GHG in China and reforming them will be vital if China is to meet its environmental

objectives.

2.1 The necessity of economic reform

The Chinese government recognizes that the current export-based, investment-driven economic model

cannot be relied upon to continue delivering high growth in the future. A shrinking labor pool means that

Chinese exports can no longer depend on cost competitiveness alone to succeed in international markets.

Existing modes of production and reliance on heavy industry have led to severe environmental consequences,

and the pattern of economic development over the last 30 years has led to unbalanced regional growth and

large urban-rural disparities.

In order to address these challenges, Xi Jinping’s government committed to a comprehensive reform program

at the Third Plenum in November 2013. This program constitutes an ambitious transformation of the

economy with increased emphasis on market disciplines along with fiscal and bureaucratic reforms. China will

attempt to transition to a more sustainable model of growth based on consumption, services and innovation.

As Premier Li pointed out in September 2013, “the service sector will be an increasingly important pillar of

our economy… as the biggest job provider, the sector (will) help ease employment pressure in economic

transformation.”13 This structural shift in employment is already well under way, with job creation in the

service sector exceeding that from manufacturing and mining combined between 2003 and 2013.14

Managing the dislocation resulting from economic reform will require generating enough growth via

consumption, as well as upgrading energy and manufacturing to counterbalance the adoption of restrictive

policies and limitations on fossil fuels and basic manufacturing industries. These industries are in the process

of shedding millions of jobs. Furthermore, the government is attempting to navigate this transition while

facing a period of slowing growth referred to as China’s “new normal”. Even if China manages to achieve its

target of 7 percent GDP growth for 2015, this will represent the slowest expansion for the Chinese economy

since 1990.15 At present, this topline growth rate is still sufficient to absorb the temporary dislocations

necessary to shift to a more sustainable growth path. However, given the long-term structural slowdown of

the Chinese economy, it is unlikely that that the country will be able to bear these burdens if serious action is

delayed.

13 Keqiang Li, 'China Will Stay the Course on Sustainable Growth', Financial Times, 2015. 14 Julian Zhu and others, China’s Environment: Big Issues, Accelerating Effort, Ample Opportunities, Goldman Sachs Global

Investment Research (Goldman Sachs, 2015). 15 Bloomberg.com, 'China Growth Beats Economist Forecasts As Stimulus Kicks in', 2015.

7 | P a g e

Gradual decoupling of economic growth from carbon emissions in China suggests transition to a low-carbon

development model can be achieved without significantly impacting long run growth.16, 17 Experiences from

developed countries support this view. For example, the US, UK and Japan experienced only short-term

downward pressure on the economy when phasing in emissions reductions. 18,19 Many transition economies

such as Poland have been able to significantly reduce emissions while boosting economic growth.20 In the

long run, innovation and upgrading stimulated by environmental initiatives can play a beneficial role in

economic restructuring and generating new engines of growth. Indeed, environmental protection itself is

rapidly becoming an important source of employment. As of 2015, it is estimated that energy saving and

environmental protection industries have created 30 million jobs in China, a figure that is expected to double

by 2030.21

The urgency for climate change measures and the current window for change mean that China’s impressive

first step must be swiftly followed by even more comprehensive efforts to reduce carbon emissions. Much

like China’s earlier effort to eliminate extreme poverty, the goal of a more sustainable economy can only be

realized through forthright objectives and mobilization of resources to achieve these objectives. One of the

most important tasks is addressing China’s energy sector and basic materials industries. These are outlined

below.

2.2 Energy

Energy Consumption

In 2010, China surpassed the U.S. to become the world’s largest consumer of energy.22 By 2014, China

accounted for 23 percent of total global energy consumption and 61 percent of net energy consumption

growth.23 Given that China accounted for only 13 percent of global GDP in 2014, this means that energy

intensity per unit of GDP in China is almost twice the global average.24 However, efficiency improvements

and structural trends mean that China’s growth is becoming progressively less energy intensive. Energy

16 China’s emission figures in 2014, which declined for the first time since 1999, are consistent with a weakening of the link

between economic growth and increased emissions. International Energy Agency, Energy and Climate Change, World Energy Outlook Special Report (International Energy Agency, 2015), p. 29.

17 Tsinghua University study China and the New Climate Economy (2014) estimates that with appropriate policy design China can achieve its climate change commitments with low GDP costs (i.e. under 1% of GDP), even before including the environment and health benefits of action.

18 For major countries which industrialized earliest such as the UK and US, per-capita emissions have remained close to levels 50 years before whilst per-capita GDP trebled. In transition economies, resumed economic growth in many of the fastest-growing economies has been accompanied by continued emission reductions. Michael Grubb, Benito Muller and Lucy Butter,

The Relationship Between Carbon Dioxide Emissions And Economic Growth, Oxbridge Study On C02 一 GDP Relationships 4, 2004, pp. 227-246.

19 Julian Zhu et al, China’s Environment: Big Issues, Accelerating Effort, Ample Opportunities, Goldman Sachs Global Investment Research (Goldman Sachs, 2015).

20 The World Bank Poverty Reduction and Economic Management Unit, A Low-Emissions Economy in Poland (World Bank, 2011), pp. 36, 38.

21 News.xinhuanet.com, 'Xie Zhenhua: China Scored High in Addressing Climate Change (解振华：应对气候变化“中国答卷”拿

高分当之无愧)', 2015. 22 Spencer Swartz and Shai Oster, 'China Tops U.S. In Energy Use', Wall Street Journal, 2010. 23 BP, China’s Energy Market In 2014, BP Statistical Review 2015 (BP, 2015). 24 163.com, 'Li Yizhong: China Consumed 1/4 World Energy Consumption. 李毅中：去年 GDP 能耗占全世界 1/4 已难以支撑',

2015.

8 | P a g e

consumption growth fell to 2.6 percent in 2014, the slowest rate since 2008, while energy intensity

decreased by 4.5 percent.25

Energy mix

Coal is the most abundant energy source in China and makes up around two thirds of the fuel used for

electricity generation.26 It is also the single most significant factor for both local air pollution and China’s

position as the world’s largest emitter of GHG.27 Encouragingly, there are already signs that China’s coal

consumption is beginning to plateau, with 2014 seeing the first fall in coal consumption for 14 years. The

government is adopting various measures to limit the use of coal and investing in renewable energy sources

including nuclear, solar, hydroelectric and wind power.28 However, the cost advantages of coal and time

needed to build sufficient capacity in renewable energy and connect these sources to the national grid mean

that it will be many years before renewable energy plays a substantial role in China’s energy mix. In the

meantime, to address air quality and climate change China will also have to address energy-hungry

overcapacity basic materials industries.

25 BP, China’s Energy Market In 2014, BP Statistical Review 2015 (BP, 2015). 26 US Energy Information Administration, 'China Analysis Brief'. 27 Damien Ma, Rebalancing China’s Energy Strategy (Paulson Institute, 2015). 28 In November 2014, State Council released Energy Development Strategy Action Plan (2014-2020) 《能源发展战略行动计划

（2014-2020）》which pledges to increase nuclear capacity from the current 22 gigawatts to 58 gigawatts, increase

hydroelectric installed capacity from 268 gigawatts to 350 gigawatts, and double wind power capacity to 200 gigawatts. In the

first quarter of 2015, China’s newly installed solar capacity was almost equal to all of France’s installed PV power, with the

country set to surpass the solar world-leader Germany by the end of the year with 45 gigawatts, a clear signal that China is

intent on restructuring its energy mix.

9 | P a g e

According to international standards,

any industry with a capacity utilization

rate less than around 80 percent is

considered to have “excess capacity”.

Utilized capacity in many of China’s

basic material industries is

considerably below this threshold,

including steel (72 percent), cement

(73.7 percent), electrolytic aluminum

(71.9 percent) and plate glass

(73.1percent) by the end of 2012.

[Figures come from a 2013 State

Council policy, Guiding Opinions of the

State Council on Resolving Serious

Overcapacity Conflicts.]

China’s overcapacity industries

2.3 Basic materials industries

China is by far the world’s top producer of steel, cement and

nonferrous metals, all of which provided the raw materials

necessary to fuel China’s rapid economic development over past

decades. As government stimulus and demand from the

construction sector have receded in recent years, these sectors

have been left to suffer from weakening demand and excess

capacity (see text box). However, while many basic materials

industry (BMI)29 facilities have become unprofitable, production

has continued to increase.30

Reducing emissions from overcapacity BMIs is vital if China is to

improve air quality and meet its climate change commitments.

Altogether, BMI take up nearly 70 percent of China’s energy use,

with steel alone accounting for 10 percent of national energy

consumption.31 A 2012 study estimates that steel accounts for

around one third of China’s total manufacturing carbon

emissions, with manufacturing of non-metallic mineral products

accounting for just over a quarter.32 BMI are also a major

contributor to emissions of PM 2.5, sulfur dioxide and nitrogen

oxides in the heavily polluted Beijing-Tianjin-Hebei area.33

29 Basic materials industries are defined here as ferrous and non-ferrous metals, cement, aluminum and plate glass 30 See Appendix 1 - Table of basic materials industry output (2010-2014) 31 Jun Li and others, 'Truth about Overcapacity in Steel Industry (钢铁产能过剩真相)', Economy & Nation Weekly, 2015. 32 Hongyou Lu and Lynn Price, China’s Industrial Carbon Dioxide Emissions in Manufacturing Subsectors and in Selected

Provinces (China Energy Group Environmental Energy Technologies Division Lawrence Berkeley National Laboratory, 2012). 33 Dabo Guan and Zhu Liu, Truth about Haze: Decoding PM2.5 in Beijing-Tianjin-Hebei Cluster and Emission Reduction Strategies

(Greenpeace, 2013).

10 | P a g e

Recognizing these problems, the government has identified eliminating excess capacity as a key task to

accelerate economic restructuring and environmental remediation. In October 2013, the State Council issued

an order prohibiting provincial governments from approving capacity-increasing investments in overcapacity

industries, promoting industrial consolidation and shifting production overseas, and strengthening

environmental standards to help eliminate outdated facilities and technologies.34 This followed by a string of

supporting policies.35 However, as illustrated by the unintended consequences of central directives targeting

China’s steel industry (see Tangshan case study below), the government faces major challenges in efforts to

eliminate overcapacity in BMI. The most significant of these challenges include:

BMI enterprises are an important source of employment and tax revenue in underdeveloped regions.

As such, local governments are eager to support these operations. For example, the Shanxi Haixin Steel

Corporation has struggled on the verge of bankruptcy since 2011, but it directly and indirectly hires a

quarter of the workforce in Wenxi County and pays over 60 percent of the total tax.

In some cases, SOEs in overcapacity sectors are able to use their political clout to resist efforts to scale

back production. Along with divergent interests between central and local government discussed above,

these connections have led to policy inertia in the drive to tackle overcapacity in BMI.

BMI such as steel are slow in adjusting capacity based on market demand due to high fixed costs and

relatively low marginal costs. If companies cut or slow production, they are still burdened with labor and

other costs. Labors costs are a particular burden for SOEs, who are unwilling to downsize out of

consideration for providing jobs.

Businesses are reluctant to “make the first move” in reducing capacity. As supply falls, prices will rise

and the firms who stuck to their guns will be able to generate profits again.

Some government measures for resolving overcapacity are impractical. Low global demand and trade

barriers have meant that moving off-shore is often an unfeasible solution. Elimination of “outdated”

capacity has little impact because only 4.7 percent of total capacity is considered “outdated” by current

standards, since these standards remain lax.

34 State Council, Guiding Opinions on Resolving the Contradictions of Serious Production Overcapacity《国务院印发关于化解产

能严重过剩矛盾的指导意见》(Beijing, 2013). 35 This includes Ministry of Industry and Information Technology’s Measures to Replace Capacity in Serious Overproduction

Sectors《部分产能严重过剩行业产能置换实施办法》which forbids expansion of electrolytic aluminum, steel, concrete and

glass projects, State Council’s Opinions on Strengthening Standardization of Energy Conservation 《国务院办公厅关于加强

节能标准化工作的意见》, which calls for differential and even punitive pricing mechanisms and State Council’s Guiding

Opinions on Encouraging International Cooperation on Capacity and Manufacturing《国务院关于推进国际产能和装备制造

合作的指导意见》, under which government will encourage Chinese firms to “go-out”, mine non-ferrous metals, and build up deep processing in foreign countries.

11 | P a g e

Case Study: Attempts to tame steel industry overcapacity

Located 200 km east of Beijing, the city of Tangshan produces more steel annually than the U.S., and

has been a natural target for frontline campaigns to tackle overcapacity. The city has pledged to reduce

its annual crude steel capacity by 28 million tons from 2013 until 2017, roughly a fifth of its total, and

steel firms in the area are required to undergo necessary technology upgrades in order to continue

operation.36

The experience of Tangshan is illustrative of the challenges of reducing overcapacity in BMIs. In 2010,

the State Council issued a directive on eliminating outdated capacity which called for closure of all

furnaces smaller than 400 cubic meters.37 However, this order saw local governments scramble to

protect taxpaying steelmakers from closure by subsidizing their expansion and upgrading. From 2011

to 2012, the industry retired 18 million tons of capacity while opening 125 million tons of new capacity.

Total capacity reached 1.1 billion tons but consumption remained stable at only 750 million tons,

leaving an excess some five times the annual steel consumption of the U.S.

In addition to reflecting the challenges posed by central-local government dynamics, the adverse

effects of this policy demonstrate how simple administrative approaches can be rendered ineffective

and even counterproductive if not complemented by more nimble market instruments. More than half

of China’s steel firms are unprofitable, but until now have been sheltered from serious market reforms

by local and industry interests. However, in recent years increasingly rigorous central policy is a sign

that the government is serious about changing the game for these low-value, energy-intensive

industries through an emphasis on domestic consumption and industrial upgrading.

2.4 Implications

Over the last decade, China has undergone two fundamental paradigm shifts – the rise of a “green consensus”

encompassing government and the general public, and a decision to shift away from its previous energy- and

labor- intensive growth model. China’s traditional BMIs are on the cusp of a sudden upgrading and

contraction. As the economy shifts gears to focus on higher value manufacturing, cleaner energy,

consumption and services, the challenge is to maintain sufficient overall growth to facilitate the

transformation without undue economic and social dislocation.

Economic restructuring and the rise of environmentalism constitute the necessary preconditions for a robust,

comprehensive climate change policy. In section three, we will analyze in more detail the rise of public

environmental awareness in China and look at the government’s evolving approach towards environmental

protection.

36 David Stanway, 'China's Steel City Feels Impact Of Pollution Regulations', Reuters, 2015 37 State Council, Notice on Further Eliminating Outdated Capacity《关于进一步加强淘汰落后产能工作的通知》(Beijing,

2010).

12 | P a g e

3. China’s evolving approach to environmental protection

To understand China’s prospects to address climate change and shift to a path of green growth, it is

important to understand how the public and government’s approach to environmental challenges has shifted

over the last three decades. The first part of this section provides an overview of factors contributing to

China’s burgeoning environmental movement: concern over localized pollution, growth of China’s middle

class, emergence of domestic environmental civil society, and increased access to information and discussion

of environmental issues in the media. The second part tracks the evolution of the government’s approach to

tackling environmental efforts, covering the use of targets and command and control instruments; efforts to

build a legal and regulatory system for environmental protection; and finally moves to adopt market-based

instruments to achieve environmental objectives. The third section examines remaining barriers to

implementation at the local level and steps the government is taking to overcome these challenges.

3.1 Growth of environmentalism in China

Local environmental concerns and growth of China’s middle class

China’s nascent environmental movement originated in the 1980s through localized opposition to severe

incidents of pollution. These incidents often took place in villages undergoing rapid urbanization and

industrialization, where weak enforcement of environmental regulations resulted in serious soil and water

pollution and public health risks. Some communities in affected areas sought to address such issues through

petitions and protests, making environmental protection an issue of social stability and political legitimacy for

the central government.

The growth of China’s middle class over the last twenty years has also led to wider demands for action by the

government. As citizens’ basic material needs are met, attention has shifted to wider quality of life measures,

most significantly having a clean, safe environment. This trajectory is not unique to China. The experiences of

countless other countries have shown that individuals typically begin to place higher priority on the

environment once per-capita GDP reaches USD 5,000-10,000. China’s per capita income reached CNY 46,629

(USD 7,315) in 2014 and the government aims for incomes to reach twice that of 2010 levels by 2020.

In addition, China’s growing urban middle class began to buy and own real estate beginning in the 1980s,

when the government gradually moved to abolish the danwei work unit system, under which housing units

were allocated to employees. To safeguard health and living conditions, local urban communities increasingly

united to voice demands for environmental improvements and opposition to planned facilities in the local

area perceived to threaten public health, also known as not-in-my-backyard (NIMBY) movements.

Emergence of Chinese environmental civil society

Closely related to the rise of NIMBY movements, domestic environmental non-government organizations

(ENGOs) emerged in the 1990s and have proliferated since 2000. According to China’s Ministry of Civil Affairs,

the number of registered ENGOs in China has increased from 5,675 in 2007 to 7,881 in 2012.38,39 Not only

have ENGOs proliferated in number, but they have also been able to establish and strengthen support

38 Ministry of Civil Affairs, 2007 Survey of Social Organizations 39 Ministry of Civil Affairs, Statistical Communiqué on the 2012 National Social Service Development

13 | P a g e

networks and communication channels within the community, helping them to share information and

resources. At the same time, there has also been a rise in university-based and other grass-roots

environmentalism.

To date, grass-roots environmentalism has tended to remain fragmented and relatively localized and ENGOs

still suffer from limited funding and capacity. Recognizing the role that ENGOs can play in China’s

environmental remediation efforts the leadership pledged more space and support for environmental NGOs

at the Third Plenum in November 2013. The new Environmental Protection Law that came into force at the

start of 2015 continues in this vein, including articles that empower ENGOs to file public interest lawsuits.

Given more space to operate and strengthen capabilities, China’s ENGOs are likely to play a larger role in

supervising environmental compliance and persuading local authorities and communities to change attitudes

to environmental protection.

Access to information

The government is working to increase recording and disclosure of environmental data and leverage public

opinion to pressure local governments and industry to comply with environmental regulations. Successive

environmental protection policies over the past decade have called for more sophisticated measuring

techniques, extended geographical coverage of monitoring networks and increased transparency.40As

mentioned in section one, the real-time disclosure of PM2.5 data for China’s major urban areas has

significantly increased attention on air pollution and its causes.

40 See Appendix 2: Overview of environmental monitoring policies

14 | P a g e

In addition, investigative journalism and increasingly candid coverage of environmental issues in the media

have played an important role in promoting environmental awareness and highlighting the link between

uncontrolled development and environmental problems. In recent years, the rapid growth of social media has

provided new channels for residents to gain access to information and discuss issues. Using smartphone apps

that agglomerate official data sources, citizens can now access real-time information on air quality and

emissions from major polluters. This has helped create a mutually-reinforcing interaction between demands

for public disclosure of information, more open offline reporting and discussions of environmental issues in

social media.

Attitudes towards climate change

Given the serious immediate environmental challenges that China still faces, not surprisingly, public concerns

are generally focused on “backyard” issues and more recently regional and national issues such as air quality.

While climate change itself is not currently a priority for most Chinese citizens, in recent years the issue has

begun to attract attention from well-educated middle class individuals, as well as farmers who recognize the

impact of climate change on crop yields. In addition, a large proportion of the public views climate change

and air quality as interlinked. According a survey conducted in 2013, 69 percent of urban Chinese residents

see low-carbon development as a means to improve air quality.41 Moving forward, ENGOs may seek to raise

public awareness of climate change by emphasizing the link between air pollution and carbon emissions

reductions.

3.2 Evolution of environmental policy

As discussed in section one, the government’s approach to environmental protection has evolved as public

concerns over resource degradation have grown. Traditionally, China’s environmental governance system has

relied heavily on top-down command and control instruments. In more recent years, there is an increasing

emphasis on legal mechanisms and market-based instruments to supplement this approach. This section

provides an overview of this path.

Targets and administrative measures

The setting of environmental targets is a key management tool to incentivize officials at each level of the

government administration to follow the central government’s environmental policies. National and regional

targets are determined by the central government and then sent downward through the administrative

hierarchy, becoming criteria in the performance evaluations of local officials.

Environmental targets have been included in Five Year Plans since the 1990s and gradually ratcheted up over

the last decade. From the 11th to 12th Five Year Plan, the number of binding environmental targets increased

41 Yujie Li, Low-Carbon Awareness and Action Analysis among Urban Citizens: A Study Based on 2000 Samples (我国城市公众低

碳意识和行动分析—基于全国 2000 个样本数据), 2015

<http://www.stats.gov.cn/tjzs/tjsj/tjcb/dysj/201503/t20150313_693963.html> [accessed 21 September 2015].

15 | P a g e

from three to nine and the range of pollutants covered was widened to include carbon dioxide for the first

time.42 China is expected to introduce yet tougher targets in the forthcoming 13th Five Year Plan (2016-2020).

Administrative measures have been a key tool to achieve these targets, such as orders to shut-down and

consolidate sub-scale, inefficient capacity in energy-intensive industries. In recent years the government has

increasingly sought to build upon these efforts by expanding China’s system of environmental legislation and

piloting market-based instruments to incentivize emissions reductions.

Building a legal system for green growth

October 2014’s Fourth Plenum meeting saw China’s leadership signal a clear commitment to build a system

of rules and laws to improve governance and guide economic reforms. China has made considerable progress

in building a legal system to support environmental protection over the last 20 years, and continued

legislative efforts will be important to guide the Chinese economy onto a green growth path. Since 2000

China has passed a range of environmental laws, culminating in the coming into force of a new

Environmental Protection Law in January 2015.43 This first revision of the law in 25 years strengthened

environmental protection measures in a range of areas, including granting new powers to environmental

protection departments, introducing tougher fines for violators, and allowing ENGOs to file environmental

public interest suits. Under amendments to the Legislative Law passed in March 2013, local governments

have more latitude to address local conditions and pass tougher environmental legislation than what is

established at the national level. However, there is still a need for tougher laws and regulations. Pollution

fines remain relatively low and often enterprises find it cheaper to pay fines rather than adopt abatement

measures.

The courts will also play an increased role in environmental protection efforts. In 2014, the Supreme People’s

Court established an environmental resources division and more than 300 specialized and professional

environment courts across the country. As mentioned above, steps have been taken to facilitate the filing of

public interest environmental lawsuits. A bill passed in July 2015 will also grant public prosecutors the right to

file environmental lawsuits in pilot regions. However, weaknesses remain both in the body of environmental

legislation and the willingness and capability of these courts to handle environmental cases.

3.5 Market-based instruments

There is now a considerable degree of consensus among economists and policy makers around the globe that

market-based instruments (MBI) offer certain advantages over compulsory measures like regulations, as a

way to cost-effectively address market failures that lead to negative environmental outcomes.44 Pilots for

MBI have now been running in China for several years. Following the commitment to give the market a

“decisive” role in allocating resources at November 2013’s Third Plenum, there is now increasing momentum

for nationwide implementation of MBI in the 13th Five Year Plan.

42 See Appendix 3: Overview of domestic emissions reduction targets 43 See Appendix 4: Key legislative developments since 2000 44 Robert Stavins and Bradley Whitehead, 'Market-Based Environmental Policies', in Thinking Ecologically, The Next Generation

of Environmental Policy, 1st edn (Yale University Press, 1997), pp. 105-117, Xin Wang, Market‐Based Instruments In China For Energy Security And Climate Change (Institute for Sustainable Development and International Relations, 2009).

16 | P a g e

Emissions trading schemes (ETS) are currently the dominant mode of MBI being tested in China. Plans to

develop ETS in China were laid out in the 12th Five Year Plan. There are two main types: 1) ETS for major

pollutants such as ammonia, sulfur dioxide, nitrous oxide and organic water pollutants, and 2) carbon trading

schemes. A range of cities and areas at different levels of development have been chosen to test ETS, and

localities have been given considerable leeway to design their own schemes.45

China has pledged to introduce a national carbon trading market by 2017 but the implementation of such a

scheme still faces many hurdles. Currently, trading companies are reluctant to make long-term trading plans

due to lack of clarity on how the market will operate.46 Previous experience with sulfur dioxide trading

schemes has shown that heavy involvement of local governments can lead to unfair allocation of permits and

interference in emissions monitoring.47

Ideally, a national ETS would cover a broader range of sectors and different types of firms, including private

and small scale enterprises. Small boilers, for example, consume about 10 percent of China’s coal and are one

of the main sources of air pollution in Beijing.48 Reliable systems for monitoring, review and verification

(MRV) of emissions will also be needed.

In addition to ETS, China is also exploring other MBI, including an environmental tax currently being drafted

that will cover a range of common atmospheric and water-borne pollutants and solid wastes that have

previously been covered by pollution fees. The initial draft of the law to support this tax states that provincial

governments may increase tax rates for enterprises that emit pollutants in excess of national standards.49

Similar to environmental taxes in other countries, the tax will initially be levied at a relatively low rate,

roughly equivalent to existing pollution fees. However, the shift to a tax should help to incentive pollution

abatement efforts, as collection of the tax will become more rigorous.

3.3 Overcoming barriers to implementation

As outlined above, China’s central government is adopting increasingly ambitious and comprehensive

environmental goals and policies. However, it is ultimately officials at the local level that are responsible for

implementing these policies. To date, lack of progress in this area has held back significant improvements in

environmental outcomes.

This section looks at four main challenges to effective implementation: conflict between central and local

government policy objectives; limitations of the top-down approach of setting targets for environmental

governance; challenges for local environmental protection agencies in terms of institutional capacity; and

finally, the need to increase public and private participation in environmental protection efforts. Suggestions

on how to overcome these barriers are given in section five.

45 See Appendix 5: Overview of China’s emissions trading schemes 46 Kathy Chen and David Stanway, 'Chinese Carbon Market Doldrums May Undermine Climate Efforts', Reuters, 2015. 47 The World Bank, Development Research Center of the State Council, the People’s Republic of China, China 2030 (The World

Bank, 2013), p. 245. 48 Zhu Liu and others, 'Climate Policy: Steps to China's Carbon Peak', Nature, 522 (2015), 279-281. 49 Ministry of Finance, State Administration of Taxation, Ministry of Environmental Protection, Environmental Protection Tax

Law (Draft for Soliciting Opinions) 《环境保护税法（征求意见稿）》, 2015.

17 | P a g e

1. Conflicting policy objectives

As discussed in section two, divergence of policy priorities between the central and local government,

particularly regarding environmental and economic objectives, means that officials are often selective in

implementation of the central government’s green agenda.

Decision making by local officials is highly influenced by the cadre evaluation system, which is linked to

budgets, promotions, benefits and punishments. Previously, efforts to implement environmental policies had

been stymied by local officials prioritizing economic growth, which was and in most cases remains the single

most important key performance indicator (KPI). This often led to lax implementation and enforcement of

environmental standards as officials adopted development strategies that emphasized short-term growth

over sustainability.

The recalibration of KPIs to incentivize sustainable development at the local level has been accelerated under

the Xi Jinping administration.50 For example, a new policy document released by the CPC Central Committee

in 2015 states that local government officials should be promoted according to environmentally-adjusted

benchmarks, rather than simply GDP growth, and that environmental blemishes will remain on their work

records for life.51 However, while environmental targets are substantially more important than they have

been in the past, they still compete with other concerns. As the economy slows, there is an increasing danger

that officials will revert to old ways and focus on short-term growth at the expense of environmental

objectives.

2. The limitations of targets

Environmental targets play a key role in the evaluation of officials. Over the past decade, the setting of

gradually tougher environmental targets has been instrumental in reducing environmental degradation.

However, there are limits to this top-down planning strategy. First, targets that cascade down from the

central government may not be suitable for local conditions, such as when environmental issues require

cross-administrative coordination. In addition, officials may use sub-optimal means to achieve targets, for

example gerrymandering emissions across administrative boundaries or using brute force measures that are

not helpful to long-term innovation and restructuring (see case study below). In addition, targets like energy

intensity are difficult to measure and verify.52

50 Third Plenary Session of the 18th CPC Central Committee, CPC Central Committee's Decision on Major Issues Concerning

Comprehensively Deepening Reform (Beijing, 2013). 51 The central policy document issued after November 2013’s Third Plenum proposed that officials be given an environmental

audit when leaving office and that GDP assessment be abolished for cadres in regions with serious environmental problems.

Action Plan on Prevention and Control of Air Pollution《大气污染防治行动计划》, released in 2013, called to build facilities to monitor PM2.5 and other industrial emissions, and for cadre evaluations to consider their records of releasing data environmental data. Most recently, an August 2015 directive 《党政领导干部生态环境损害责任追究办法（试行）》states that officials should be punished if they fail to protect the environment and will face life-long accountability for actions that cause serious environmental damage.

52 Energy intensity of unit of GDP can be difficult to measure accurately, with some localities counting only large-scale enterprises. Measurements can also be difficult to verify inspection teams out by the MEP to provinces rejected 30% to 50% of claimed sulfur dioxide reductions by some provinces during the 11th Five Year Plan.

18 | P a g e

Case Study: Last minute implementation and strategic behavior of local leaders

Incentives embedded in the cadre evaluation system can lead local officials to take actions with sub-

optimal or undesirable outcomes. The “last minute implementation” approach used to meet energy

intensity targets at the end of the 11th Five Year Plan (2006-2010) is one example. By the end of 2009,

in many areas reductions of energy intensity had fallen far short of progress with only one year left to

meet the Five Year Plan target. In response, many local governments undertook drastic measures to

meet their goals. According to a recent World Bank report, one county government in Hebei province

cut off electricity to homes and rural areas, while Wenzhou city in Zhejiang did not allow large

enterprises to operate for more than 10 days per month. In some cases such measures actually

increased pollution as companies turned to diesel generators to overcome electricity rationing. 53

After completion of the 11th Five Year Plan targets, many localities went back to “business as usual”,

using new tricks to ease burdens at beginning of the 12th Five Year Plan. For example, some

governments worked to attract outside companies in the hopes of boosting local growth as a means of

manipulating the energy intensity ratio.

In addition to last-minute implementation, officials may use strategic and selective measures to achieve

binding environmental targets, such as manipulating administrative boundaries. For example, to reduce

emissions within the municipality, the mayor of one city in Shanxi negotiated a deal to move polluting

factories to a neighboring county in exchange for a proportion of the tax income.

3. Lack of authority and institutional capacity

Compounding problems arising from the conflict between central and local government priorities, local

departments responsible for the implementation of environmental policy are often constrained by their low

bureaucratic status. This is the case when directors of local environmental protection bureaus (EPB) are

junior in rank to officials in state-owned enterprises and therefore unable to enforce compliance. In addition,

many EPBs lack sufficient well-trained staff or the advanced equipment necessary to verify the accuracy of

reported figures and targets, creating opportunities for local enterprises to misrepresent their emissions.54 In

order to track and control emissions, moving forward it is necessary that local EPBs across the country

receive additional support and develop rigorous measurement, reporting and verification procedures.

4. Engaging public and private participation

There is growing awareness that the government will not be able to achieve its environmental objectives

without support and assistance from industry and the public. However, there is a still “participation gap” that

limits the opportunities for non-government actors to help improve environmental management.55

53 Genia Kostka, Barriers to the Implementation of Environmental Policies at the Local Level in China, Policy Research Working Paper, No. WPS 7016 (Washington, DC: World Bank Group, 2014). 54 Ibid. 55 Genia Kostka and Arthur P.J. Mol, 'Implementation and Participation in China's Local Environmental Politics: Challenges and Innovations', Journal of Environmental Policy & Planning, 15 (2013), 3-16.

19 | P a g e

Considerable steps have been taken to create channels for public participation in environmental matters over

the last two decades. In 2003, the government passed the Administrative Licensing Law56 and the

Environmental Impact Law,57 which require government bodies to solicit public opinions on environmmental

affairs, including via public hearings and participation in environmental impact assessments. It is notable that

for the first time, China’s June 2015 climate change pledge proposes “low-carbon living” and a “social

participation mechanism” to engage the public to help achieve the country’s carbon goals. However, there

need to be more channels to engage the public and in particular ENGOs in policymaking and implementation.

In addition to expanding channels for participation, education will also be required to engage the public and

industry. For example, enterprise managers need training on how carbon trading schemes work, as well as

correct monitoring and recording procedures if such systems are to be effective. As domestic consumption

increases and China’s emission profile evolves, campaigns to promote green consumption and lifestyles will

also become more important.58

56 Standing Committee of the National People's Congress, Administrative License Law 《行政许可法》, 2003. 57 Standing Committee of the National People's Congress, Law Of The People's Republic Of China On Appraising Of Environment

Impacts《环境影响评价法》, 2002. 58 To this end, in May 2015 CCP Central Committee and State Council released Opinions on Creating and Ecological Civilization,

which encourages more thrifty consumption, promoting environmentally friendly products, and undertaking environmental awareness campaigns.

20 | P a g e

4. The Way Forward

The first three sections of this paper have discussed the emergence of a “green consensus” in China and the

challenges to be overcome if China is to transition to a low-carbon growth model over the coming years.

However, there are many reasons to be optimistic that China can overcome these challenges.

This section takes a look forward, analyzing prospects for China’s transition to a low-carbon growth path in

the coming years and decades. Considering current development trajectories and the co-benefits of adopting

low-carbon policies, this paper argues that 1) it is possible for China to shift to a low-carbon growth path and

peak emissions before 2030; 2) it is in Chinas interest to do so and take advantage of the synergies between

carbon control, economic restructuring and innovation, and; 3) finally, low-carbon development can play a

positive role in China’s globalization process.

1. Prospects for an early peak to carbon emissions

Over the coming years, many of the factors that have contributed to the rise of environmentalism in China

will continue to reinforce the “green consensus”, including rising incomes, urbanization, development of civil

society and access to information through various forms of media. This trend will reinforce support from the

public and government for adoption of tougher environmental policy.

At the same time, while China is expected to see strong economic growth and urbanization continue for the

next two decades, the economic restructuring process will work to offset resultant emissions increases as the

link between carbon and GDP growth becomes progressively weaker. This is reflected by the shifting

21 | P a g e

composition of China’s GDP away from heavy industry towards consumption and services, which tend to

have a lower energy and carbon intensity per unit of GDP. In 2014, consumption contributed more than

investment to GDP growth, accounting for over half for the first time (50.2 percent).59 This proportion is

expected to exceed 60 percent by 2020.60 Investment will remain an important component of China’s GDP

into the 13th Five Year Plan and beyond, but market demand and policy will direct more of this towards

sustainable development.61 Meanwhile, services, which had an energy intensity of one third relative to

industry in the previous 11th Five Year Plan, will continue to account for a growing share of the economy. 62

While promoting services as a pillar of China’s modern economy, the government has also identified

environmental protection and energy conservation among ten priority service industries for support.63

Increased adoption of low-carbon technologies will reinforce the positive impact of economic restructuring.

Given that most of China’s power generation and industrial capacity has room to move up to the low-carbon

technology frontier, there are still large and affordable efficiency and emissions gains to be made in this area.

Evaluating the technical potential of over 200 energy efficiency, clean energy and carbon management

technologies, a McKinsey study estimates that increased adoption of available technologies could help China

to significantly reduce dependency on coal and oil imports and achieve a 50 percent reduction in carbon

emissions by 2030 compared to the baseline scenario.64

Energy consumption, and particularly coal use, will be the key to carbon emissions trends over the next two

decades. As mentioned in section two, there are already signs that total coal consumption is beginning to

plateau, with 2014 seeing the first fall in coal consumption for 14 years. Over the coming years, as the

government continues to invest in alternative energy and connect these sources to the national grid, China’s

energy mix will gradually become less carbon-intensive. Analysis of structural and cyclical trends in key

emitting sectors leads Green & Stern (2015) to conclude that China’s GHG emissions are unlikely to peak as

late as 2030 and are much more likely to peak by 2025.65 Other studies have also found that appropriate

policy measures can accelerate China’s carbon mitigation process. For example, a 2015 study by China’s

National Center for Climate Change Strategy and International Cooperation concludes that China can peak

emissions before 2030 by implementing reasonable coal consumption caps.66

59 Chinadaily.com.cn, 'Consumption Contributes More to China's GDP Growth', 2015. 60 Shanghai Securities News, 'China Shifts To A Consumption-Driven Economy《我国进入消费主导经济转型新时代》', 2014. 61 A policy statement released by the State Council in 2014 《关于创新重点领域投融资机制鼓励社会投资的实施意见》

identified energy facilities and environmental protection among seven priority sectors for attracting private investment. 62 Xiaowei Xuan and Kelly Sims Gallagher, Prospects for Reducing Carbon Intensity in China (Center for International

Environment and Resource Policy, The Fletcher School, Tufts University, 2014). 63 State Council, Guiding Opinions on Accelerating the Development of Production-Type Service Industries to Promote

Restructuring and Enhancement of the Industrial Structure《国务院关于加快发展生产性服务业促进产业结构调整升级的

指导意见》, 2014. 64 McKinsey, China's Green Revolution, 2009. 65 Fergus Green and Nicholas Stern, China’s “New Normal”: Structural Change, Better Growth, And Peak Emissions (Centre for

Climate Change Economics and Policy, Grantham Research Institute on Climate Change and the Environment, 2015). 66 National Center for Climate Change Strategy and International Cooperation, Constraints And Impacts Between Carbon

Emissions Control And Coal Consumption Cap (World Wide Fund for Nature, 2015) <http://www.wwfchina.org/content/press/publication/2015/publication-20150707-coal.pdf> [accessed 21 September 2015]

22 | P a g e

Given the impact of China’s economic transformation, the gains to be made from technological adoption and

increased use of clean fuels, it is likely that China has the ability to peak emissions ahead of the current

timetable, possibly within the 14th Five Year Plan period (2021-2025).

2. The benefits of low-carbon development

In our view, it is not only possible for China to peak carbon emissions early. It is also in its interests to do so.

This is because taking action now will allow China to achieve the shift to a low-carbon growth path at a lower

cost and also due to the significant co-benefits of low-carbon policies.

Over the next decade, China will continue to invest in urbanization, industrial capacity and power plants.

Given the expense and difficulty of retrofitting existing building and facilities, implementing abatement

technologies for green buildings, industry and power generation is much more cost effective if done when

initial investments are made. A study by McKinsey estimated that a five-year delay in implementing

abatement technologies would result in a loss of one third of GHG reduction potential by 2030.67

In addition to potential cost savings from “frontloading” emissions reductions, taking early action on climate

change would also allow China capitalize on the synergies between carbon mitigation and other policy

objectives:

Firstly, adoption of low-carbon policies can help to accelerate China’s economic restructuring

process. As highlighted in a recent study by Tsinghua University, setting a national GHG reduction

target can act as a “guiding mechanism” to mobilize action down the administrative hierarchy and

balance multiple goals of economic restructuring, environmental quality and climate change.68

Similarly, adoption of MBI such as a national carbon trading scheme will help direct capital to low-

carbon sectors and emissions reducing technologies.

Secondly, policies to limit carbon emissions can boost innovation by incentivizing domestic firms to

develop more efficient processes and technologies. As discussed below, this will help Chinese firms

to climb up the global value chain.

Finally, by helping to reduce fossil fuel dependency and accelerate the shift to renewable energy

sources, low-carbon policies can also contribute to China’s future energy security. 69

Given the benefits outlined above, it is in China’s interests to “frontload” emissions reductions and take

action to shift to a low-carbon growth path sooner rather than later.

67 “McKinsey, China's Green Revolution, 2009. 68 Institute of Energy, Environment and Economy Tsinghua University, China and the New Climate Economy, The New Climate

Economy, 2014. 69 China Council for International Cooperation on Environment and Development, China’s Pathway towards a Low Carbon

Economy, 2009, p. 11.

23 | P a g e

3. Global dimensions of China’s approach to climate change

In addition to the domestic advantages discussed above, low-carbon policies can also play a positive role in

China’s globalization and rising international profile.

First, there are important multiplier effects of China’s approach to climate change. China’s adoption of

ambitious targets would remove a justification for inaction that has been used in certain developed countries

and contribute to the forming of a stronger international consensus on the need for climate change action. In

addition, China’s development path is also an important blueprint for developing countries and early action

could encourage them to adopt low-carbon approaches to urbanization and industrial development. For

example, by integrating environmental policies into international initiatives such as One Belt, One Road,

China can work with participating countries to achieve win-win environmental outcomes. This could work

through the sharing of expertise and transfer of domestically-developed green solutions that may be more

suitable for local conditions than those imported from the west. Greening China’s international footprint and

exerting a benign influence on global carbon trajectories around the world would go a long way to redressing

negative perceptions of China as the world’s largest polluter.

Second, adopting low-carbon policies will help China to leverage sustainability as a source of global

competitiveness in the years to come. Despite becoming the world’s second largest economy and largest

trading nation, since entering the WTO in 2001 China has largely remained in the downstream of global value

chains, serving as the world’s factory supplying products that are energy intensive and environmentally-costly

to produce. Moving forward, early implementation of low-carbon policies will stimulate Chinese firms to

innovate and improve efficiency, allowing them to climb up the global value chain and develop strengths in

low-carbon sunrise industries. China is particularly well-placed to take advantage of growing global markets

for clean technology, as it already plays a pivotal role in global supply chains for low-carbon technologies

such as solar power and wind, and enjoys internal markets of a sufficient scale to foster maturation of new

technologies.

24 | P a g e

Third, and closely related to innovation, adoption of low-carbon policies can promote restructuring of China’s

human capital and increase productivity of Chinese workers. China’s shift to a low-carbon model will

dislocate some workers, but also create new employment opportunities. At present, the Chinese government

recognizes the country must overcome a significant skills gap in order to complete this transition and since

2010 has encouraged higher education institutions to provide more degree programs in strategic industries,

including low-carbon industries and environmental protection.70,71 Further efforts will be needed to promote

job creation through entrepreneurship and new industries, as well as measures to ensure that labor markets

are flexible and dislocated workers are able to easily move to new jobs in low-carbon industries.

Recent moves to revise immigration rules and introduce incentives for skilled workers will also help to attract

international talent to help bridge the low-carbon skills gap. In particular, the government has been keen to

tap the pool of approximately 10 million overseas Chinese professionals by devising schemes such as the

“Thousand Talents Plan”, a long-term recruitment program that provides first-class working and living

conditions for the most prestigious international experts to work in China on a full-time basis. International

exchange has helped to strengthen China’s capacity to innovate and tackle environmental challenges, for

example through the National Institute of Clean and Low-Carbon Energy, which was established following

recommendations from world-class academic leaders and industrial specialists.

70 Ministry of Education, Notice on Applying For Majors Related To Strategic Emerging Industries《教育部办公厅关于战略性

新兴产业相关专业申报和审批工作的通知》, 2010. 71 Ministry of Environmental Protection and 6 other ministries, Medium & Long-Term Plan for Talent Development in

Environmental Protection (2010-2020) 《生态环境保护人才发展中长期规划（2010-2020 年）》, 2013.

25 | P a g e

5. Conclusions

A window of opportunity

This paper has argued that there is an emerging “green consensus” on the path China needs to take to achieve sustainable development in the years and decades to come. This entails taking steps to address overcapacity, shift away from heavy polluting industries and strengthen environmental protection.

Two main factors have helped forge this consensus. The first is increasing environmental awareness and concern among officials and the public. The second is recognition that to achieve sustainable economic growth China must shift away from labor- and energy-intensive industries towards an innovation-driven economy in which consumption and services play a larger role.

This is an important juncture for the Chinese government to launch the shift to a greener growth path. China currently enjoys sufficient economic momentum and fiscal resources to manage the transition without prolonged economic slowdown. However, if serious action is delayed, the costs of low-carbon restructuring will grow and the economy will be less able to bear the burdens of dislocation. The upcoming Paris COP 21 negotiations and 13th Five Year Plan offer windows of opportunity for China to address domestic environmental issues while taking a leading role in international climate change efforts. In the longer term, a shift to a low-carbon growth model will improve not only environmental, but also economic and social outcomes in China. This will improve quality of life for Chinese citizens, boost innovation capabilities, and accelerate restructuring of human capital. Concurrently, it can accelerate China’s globalization process, help contribute to “win-win” outcomes of One Belt One Road initiatives, and catalyze meaningful international action on climate change.

26 | P a g e

In order to seize the current windows of opportunity and realize the benefits highlighted in this paper, this paper recommends that China adopt the following policy measures.

1. More ambitious climate change commitments

China’s commitments to peak carbon emissions by 2030 and reduce emissions per unit of GDP by 60 percent-65 percent from 2015 are to be commended. However, given current structural and energy consumption trends and the potential gains to be made from implementing low-carbon policies, it is likely that China can achieve even more ambitious targets and peak emissions ahead of the current schedule. “Frontloading” emissions reductions is likely to be a less costly course of action in the long run and have significant benefits for China. In light of this:

The Chinese government should recognize that it is in the national interest to peak emissions ahead of the current schedule, for example during the 14th Five Year Plan (2021-2025). This would allow China to go beyond the proposed 60 percent-65 percent emissions decrease per unit of GDP by 2030.

The first step is working with international partners to reach a clear and ambitious agreement at the Paris COP21 talks in December 2015. The beneficial effects of China’s climate change efforts will be multiplied through its impact on both developed countries, by removing a justification for inaction, and also developing economies by setting an example of how to achieve low-carbon growth.

In keeping with domestic developments and economic transformation, China should have the capacity to ratchet up further its climate change commitments in the coming decades.

2. Accelerate the shift to a cleaner energy mix.

Efforts to improve efficiency and shift to a cleaner national energy mix will play a large role in determining whether the country is able to achieve its environmental objectives. The adoption of market-based instrument can make significant contribution towards achieving this. To achieve improvements in these areas, this paper recommends that China should:

Deliver on its continued commitment to increase the share of renewable energy in the country’s energy mix and push to increase the ratio of non-fossil fuels in China’s energy mix beyond the current 2030 target of 20 percent. Further preferential policies to promote use of renewable energy should also be considered.

Build on existing pilots to fulfill the pledge to implement a nationwide ETS by 2017. Establishing an effective price for carbon is in line with Third Plenum commitments to give the market a determining role in allocating resources and will help China to transition to a green growth model via the most efficient and least painful path. In order to maximize effectiveness at lowest aggregate cost, the ETS should include a comprehensive range of industries and sources of pollution with different marginal control costs.

27 | P a g e

3. Strengthen existing systems for environmental protection

Government efforts to strengthen systems and capacities are welcomed and encouraged, so that national

policies can be thoroughly implemented and enforced throughout China.

It is vital that the government’s recent plan to create a nationwide environmental monitoring system by 2020 is fully implemented. This will require further investment to build out a system to allow for accurate and transparent emissions monitoring, reporting and verification. This will form the foundation of an effective ETS, help to track progress and guide policy adjustments.

Continued efforts to adjust the bureaucratic architecture are necessary to effectively implement environmental policies and effect change management. This includes giving more weight to a range of environmental indicators in cadre evaluations to ensure that central and local policy objectives are aligned. In addition, the MEP and environmental protection bureaus at the local level should be given sufficient power and resources to ensure compliance with environmental policies.

Promote an environmentally-conscious mindset among officials and the general public. Ultimately, successful policy implementation and enforcement often depends on individuals at the local level. To bring about lasting change, work will be needed to change social norms, mindsets and behaviors among local officials, industry and the general public. Stepping up educational campaigns to promote environmental awareness would assist in these efforts, as would expanding current policies to enable domestic civil society groups to play a constructive role in environmental protection.

4. Make environmental protection a key component of China’s economic restructuring and globalization

There is considerable overlap between China’s environmental objectives and plans to restructure its economy. To capitalize on this double-win opportunity, this paper suggests the Chinese government should:

Recognize that policies to promote low-carbon development will also boost China’s innovation capacity and long-term prosperity. Establishing an effective carbon price will help to accelerate economic restructuring away from energy- and emissions-intensive industries. In addition, the government should continue to ratchet up of environmental standards as a tool to eliminate obsolescent industrial capacity.

Transition arrangements are required to support the closure of excess capacity, particularly in basic material industries. Proactive measures will help to minimize the localized pain of restructuring and reduce resistance to low-carbon policies. For example:

o Designated fiscal transfers for restructuring to help impacted local governments manage temporary dislocations and create alternative employment, such as through promoting entrepreneurship and new industry start-ups.

o Investing in education and training for low-carbon industries to overcome the current skills gap, which acts as a drag on China’s push towards a green growth path. For example, education institutions should be encouraged to offer programs related to low-carbon technology and processes. Areas dependent on carbon intensive “sunset industries” should be given targeted support to re-train and re-skill workers.

o Ensure labor market flexibility so that displaced workers are able to move to new jobs in different areas at low cost.

28 | P a g e

Promote sustainability as a source of global competitiveness. China has identified energy conservation and environmental protection as strategic industries to develop to give its companies a competitive edge in the global markets of tomorrow. The government should step up support for these industries in the 13th Five Year Plan and explore preferential policies to promote green investment and innovation in the private sector.

29 | P a g e

Appendix 1 – Industrial materials industry output 2010-2014

Production volume (10,000 tons)

2010 2011 2012 2013 2014

Steel 80,276.58 88,619.57 95,577.83 108,200.54 112,557.20

Nonferrous metals* 3,120.98 3,435.44 3,696.97 4,054.92 4,380.10

Electrolytic aluminum

1,577.13 1,961.39 2,314.14 2,543.81 2,751.74

Cement 188,191.17 209,925.86 220,984.08 241,923.89 247,613.52

* Copper, aluminum, lead, zinc, nickel, tin, stibium, mercury, magnesium and titanium Source: National Bureau of Statistics of the Peoples Republic of China

30 | P a g e

Appendix 2 – Environmental monitoring policies

Policy Initiative Details

Air Pollution Index (API)

空气污染指数 2000

In 2000, the daily Air Pollution Index (API) based on SO2, NO2 and PM10 monitoring data was introduced to assess air quality in 42 cities. In 2005, this was expanded to 113 more cities.

12th Five Year Plan on Air Pollution Prevention and Control in Key Regions (2011-2015)

重点区域大气污染防治

“十三五”规划 2012

The 12th Five Year Plan called for the creation of a unified air quality monitoring system for PM2.5, ozone (O3) and NO2 in the Beijing-Tianjin-Hebei area, Yangtze River Delta and Pearl River Delta, as well as ten other city clusters. 72

National Ambient Air Quality Standard (GB 3095-2012)

环境空气质量标准 2012

The 2012 ambient air quality standard outlined a three-step plan for developing urban air quality monitoring systems. The focus areas of BTH, YRD and PRD were required to start monitoring PM2.5 and O3 in 2012, with 113 key cities following in 2013. The document requires PM2.5 monitoring for 338 prefectural-level cities by 2016.

Action Plan for Air Pollution Prevention and Control

国务院关于印发大气污

染防治行动计划的通知 2013

The 2013 Action Plan pushed forward the timeline for compulsory PM2.5 monitoring and disclosure in 338 county-level cities to 2015.

Circular on Building and Environmental Monitoring Network

国务院办公厅关于印发

生态环境监测网络建设

方案的通知 2015

Outlines plans to tighten management over environmental monitoring agencies

and build a nationwide environmental monitoring network by 2020 in a bid to

ensure accurate, transparent data.

72 The ten city clusters are central Liaoning Province, Shandong Province, Wuhan region, Changsha-Zhuzhou-Xiangtan, Chengdu-

Chongqing, the West Bank of the Taiwan Strait, Gansu and Ningxia, Central and Northern part of Shanxi Province, Central Shaanxi Province and Urumqi.

31 | P a g e

Appendix 3 – Domestic emissions reductions targets

Plan Target

11th Five Year Plan (2006-2010)

Energy conservation and emissions binding targets were only set for energy consumption per unit of GDP, sulfur dioxide emissions and COD emissions.

Reduce energy consumption per unit of GDP by about 20 percent

Reduce total emissions of COD and SO2 by around 10percent.

12th Five Year Plan (2011-2015)

Reduce carbon intensity (carbon emissions per unit of GDP) by 17 percent.

Percentage of non-fossil fuels in primary energy consumption reduction of 3.1 percent from 8.3percent to 11.4percent.

Decrease of energy consumption per unit of GDP by 16percent and emissions of the main pollutants (SO2, COD, ammonia and nitrogen oxides) by 8-10percent.

Action Plan for Air Pollution Prevention and Control (2013-

2017)

Targets for 25percent reduction of PM2.5 in Beijing-Tianjin-Hebei, 20 percent in the Yangtze River Delta, and 15 percent in the Pearl River Delta based on 2012 levels.

For cities at or above the prefectural level, reduce PM2.5 by 10 percent from 2012 levels.

32 | P a g e

Appendix 4 – Key developments in environmental legislation since 1995

Policy / Legislation Details

Solid Waste Pollution Prevention Law

固体废物污染环境防治法 1995

Establishes a broad national framework for the management of industrial, municipal and hazardous waste, aiming to safeguard human health by means of preventing and controlling solid waste pollution. Places obligations on those who generate, collect, store, transport, utilize, dispose of or import solid waste, although full details are subject to national and local implementation regulations.

Environmental Impact Assessment Law

环境影响评价法 2003

All programs and plans on land use and development projects for natural resources are subject to environmental impact assessments. Detailed environmental impact reports are required for construction projects that are likely to cause a range of significant adverse environmental impacts.

Administrative Licensing Law

行政许可法 2004

Standardizes administrative power and procedures over issuing administrative licensing. Requires local governments to create administrative service centers that allow license applicants to get their applications approved in one central office without having to visit many government offices.

Water Pollution Prevention Law

水污染防治法 2008

Prevents and controls water pollution, protects and improves the environment, safeguards human health, ensures the effective use of water resources. Does not apply to marine water.

Environmental Protection Law

环境保护法 2015

More punitive measures, tougher enforcement of environmental regulations and incentives for officials to encourage use of clean technology. The Environmental Protection Law is a framework law upon which other legislation is based.

Law of Prevention and Control of Atmospheric Pollution

大气污染防治法 2015

Provides greater environmental transparency to the public. It stipulates authorities of the State Council should evaluate provincial-level governments on their attainment of air quality improvement targets.

33 | P a g e

Appendix 5: Overview of China’s emissions trading schemes

Type Details

Carbon trading schemes

Pilots approved by NDRC in 201173 and launched between June 2013 and June 2014

Locations: Beijing, Shanghai, Tianjin, Chongqing, Guangdong, Hubei, Shenzhen.

Size: The Guangdong trading scheme alone is the second largest in the world after the EU’s in terms of CO2 emissions covered. Together, these areas account for around a quarter of China’s GDP.

Sectors / type of enterprise covered varies between different locations. Shenzhen has the most diverse scheme, with 26 sectors covered. Meanwhile, Guangdong focuses on only four sectors – cement, electricity generation, iron and petrochemicals.

As of October 2014, more than 28.7 million quotas worth about RMB 1.27 billion (USD 205.4 million) have been transacted at an average price of RMB 44.1/ton.74

All of these schemes, with the exception of Shenzhen, have adopted absolute caps. Shenzhen’s intensity cap is based on emissions per unit of GDP.

Conventional pollutant ETS

Launched in 2007, subsequently expanded to current 11 provinces.

Pilot locations: Jiangsu, Zhejiang, Tianjin, Hubei, Hunan, Inner Mongolia, Shanxi, Shaanxi, Chongqing, Hebei and Guangdong).

Pilots to be fully operational by 2017

73 NDRC, Notice on Carbon Emissions Trading Pilots, 2011 74 Daniel J. Dudek, Council Member Paper to China Council for International Cooperation on Environment and Development, http://www.cciced.net/encciced/event/AGM_1/AGM2014/wybg/201412/P020141201319105351241.pdf

34 | P a g e

References

李毅中：去年GDP能耗占全世界1/4 已难以支撑', 2015

<http://money.163.com/15/0725/10/AVC4VKQ500252G50.html> [accessed 10 September 2015]

Bloomberg.com, 'China Growth Beats Economist Forecasts as Stimulus Kicks In', 2015

<http://www.bloomberg.com/news/articles/2015-07-15/china-growth-beats-economists-forecasts-as-

stimulus-takes-effect> [accessed 10 September 2015]

BP, China’s Energy Market In 2014, BP Statistical Review 2015 (BP, 2015)

Cankaoxiaoxi.com, '90% Chinese Cities Failed Air Quality Standards’ (中国城市空气质量不达标 保定空气污

染最严重)', 2015 <http://www.cankaoxiaoxi.com/china/20150203/649651.shtml> [accessed 9 September

2015].

Chen, Kathy, and David Stanway, 'Chinese Carbon Market Doldrums May Undermine Climate Efforts', Reuters,

2015 <http://www.reuters.com/article/2015/07/01/us-china-carbon-idUSKCN0PB4BM20150701> [accessed

10 September 2015]

China Council for International Cooperation on Environment and Development, China’s Pathway Towards A

Low Carbon Economy, 2009, p. 11

China, Enhanced Actions on Climate Change: China's Intended Nationally Determined Contributions, 2014

Chinadaily.com.cn, 'Consumption Contributes More to China's GDP Growth', 2015

<http://www.chinadaily.com.cn/business/2015-06/04/content_20907900.htm> [accessed 10 September

2015]

Chinadaily.com.cn, 'Over 60 percent Of Underground Water Substandard: Report', 2015

<http://www.chinadaily.com.cn/china/2015-04/24/content_20529263.htm> [accessed 9 September 2015]

Communist Party of China Central Committee, CPC Central Committee's Decision on Major Issues Concerning

Comprehensively Deepening Reform (Beijing, 2013)

Fergus Green and Nicholas Stern, China’s “New Normal”: Structural Change, Better Growth, And Peak

Emissions (Centre for Climate Change Economics and Policy, Grantham Research Institute on Climate Change

and the Environment, 2015).

Grubb, Michael, Benito Muller, and Lucy Butter, The Relationship Between Carbon Dioxide Emissions And

Economic Growth, Oxbridge Study On C02 一 GDP Relationships 4, 2004, pp. 227-246

<http://www.oxfordenergy.org/wpcms/wp-content/uploads/2011/02/Presentation19-The-

RelationshipBetweenCarbonDioxideEmissionsandEconomicGrowth-MGrubbBMullerLButler-2004.pdf>

[accessed 10 September 2015]

35 | P a g e

Guan, Dabo, and Zhu Liu, Truth About Haze: Decoding PM2.5 In Beijing-Tianjin-Hebei Cluster and Emission

Reduction Strategies (Greenpeace, 2013)

<http://www.greenpeace.org/china/Global/china/publications/campaigns/climate-energy/2013/jjj-frog-

track-rpt.pdf> [accessed 10 September 2015]

Ping He, 'Challenges for Environmental NGOs《环境NGO发展需破几重围？》', New Environment, 2015

<http://www.ifce.org/zh_cn/ngo_new.php?action=ngo_new&id=173> [accessed 10 September 2015].

Institute of Energy, Environment and Economy Tsinghua University, China and the New Climate Economy, The

New Climate Economy, 2014

International Energy Agency, Energy and Climate Change, World Energy Outlook Special Report (International

Energy Agency, 2015), p. 29

<https://www.iea.org/publications/freepublications/publication/WEO2015SpecialReportonEnergyandClimat

eChange.pdf> [accessed 10 September 2015]

International Monetary Fund and World Bank, Market-Based Instruments for International Aviation and

Shipping as a Source of Climate Finance, 2011

Kostka, Genia, and Arthur P.J. Mol, 'Implementation and Participation in China's Local Environmental Politics:

Challenges and Innovations', Journal of Environmental Policy & Planning, 15 (2013), 3-16.

Kostka, Genia, Barriers to the Implementation of Environmental Policies at the Local Level in China, Policy

Research Working Paper, No. WPS 7016 (Washington, DC: World Bank Group, 2014)

Jun Li and others, 'Truth about Overcapacity in Steel Industry (钢铁产能过剩真相)', Economy & Nation

Weekly, 2015 <http://www.ennweekly.com/2015/0515/15631.html> [accessed 10 September 2015].

Li, Keqiang, 'China Will Stay the Course on Sustainable Growth', Financial Times, 2015

<http://www.ft.com/intl/cms/s/0/03377ccc-16e0-11e3-9ec2-00144feabdc0.html> [accessed 10 September

2015]

Li, Yujie, Low-Carbon Awareness and Action Analysis among Urban Citizens: A Study Based On 2000 Samples,

2015 <http://www.stats.gov.cn/tjzs/tjsj/tjcb/dysj/201503/t20150313_693963.html> [accessed 21 September

2015]

Liu, Zhu, Dabo Guan, Scott Moore, Henry Lee, Jun Su, and Qiang Zhang, 'Climate Policy: Steps to China's

Carbon Peak', Nature, 522 (2015), 279-281 <http://dx.doi.org/10.1038/522279a>

Lu, Hongyou, and Lynn Price, China’s Industrial Carbon Dioxide Emissions in Manufacturing Subsectors and in

Selected Provinces (China Energy Group Environmental Energy Technologies Division Lawrence Berkeley

National Laboratory, 2012) <https://china.lbl.gov/sites/all/files/lbl-5575e-industrial-co2-emissionsjune-

2012.pdf> [accessed 10 September 2015]

36 | P a g e

Ma, Damien, Rebalancing China’s Energy Strategy (Paulson Institute, 2015)

Mao, Zhimin, and Keith Crane, Cost of Selected Policies to Address Air Pollution in China (RAND Corporation,

2015) <http://www.rand.org/content/dam/rand/pubs/research_reports/RR800/RR861/RAND_RR861.pdf>

[accessed 10 September 2015]

McKinsey, China's Green Revolution, 2009

Ministry of Civil Affairs, 2007 Survey of Social Organizations Ministry of Civil Affairs, Statistical Communiqué on the 2012 National Social Service Development Ministry of Education, Notice about Applying For Majors Related To Strategic Emerging Industries教育部办公

厅关于战略性新兴产业相关专业申报和审批工作的通知, 2010

Ministry of Environmental Protection and 6 other ministries, Medium & Long-Term Plan for Talent

Development in Environmental Protection (2010-2020) 生态环境保护人才发展中长期规划（2010-2020

年）, 2013

Ministry of Environmental Protection, 2014 China Environment Status (Beijing, 2015)

Ministry of Finance, State Administration of Taxation, Ministry of Environmental Protection, Environmental

Protection Tax Law (Draft for Soliciting Opinions) 《环境保护税法（征求意见稿）》, 2015.

Ministry of Land and Resources, Communique on 2014 China Land and Resources (Beijing, 2015)

National Center for Climate Change Strategy and International Cooperation, Constraints and Impacts

between Carbon Emissions Control and Coal Consumption Cap (World Wide Fund for Nature, 2015)

<http://www.wwfchina.org/content/press/publication/2015/publication-20150707-coal.pdf> [accessed 21

September 2015]

News.xinhuanet.com, 'Xie Zhenhua: China Scored High in Addressing Climate Change’ (解振华：应对气候变

化“中国答卷”拿高分当之无愧)', 2015 <http://news.xinhuanet.com/world/2015-07/22/c_1116010445.htm>

[accessed 10 September 2015].

Rohde, Robert A., and Richard A. Muller, 'Air Pollution in China: Mapping of Concentrations and Sources',

PLOS ONE, 10 (2015).

Sengupta, Somini, 'Global Poverty Drops Sharply, With China Making Big Strides, U.N. Report Says',

Nytimes.com, 2015 <http://www.nytimes.com/2015/07/07/world/asia/global-poverty-drops-sharply-with-

china-making-big-strides-un-report-says.html?_r=0> [accessed 9 September 2015]

Shanghai Securities News, 'China Shifts To A Consumption-Driven Economy《我国进入消费主导经济转型新

时代》', 2014.

Standing Committee of the National People's Congress, Administrative License Law《行政许可法》, 2003

Standing Committee of the National People's Congress, Law of the People's Republic of China on Appraising

Of Environment Impacts《环境影响评价法》, 2002

37 | P a g e

Stanway, David, 'China's Steel City Feels Impact of Pollution Regulations', Reuters, 2015

<http://www.reuters.com/article/2015/08/06/us-china-steel-tangshan-idUSKCN0QA2GT20150806>

[accessed 10 September 2015]

State Council, Guiding Opinions on Accelerating the Development of Production-Type Service Industries to

Promote Restructuring and Enhancement of the Industrial Structure《国务院关于加快发展生产性服务业促

进产业结构调整升级的指导意见》, 2014

State Council, Guiding Opinions on Resolving the Contradictions of Serious Production Overcapacity 《国务院

关于化解产能严重过剩矛盾的指导意见》(Beijing, 2013)

State Council, Notice on Further Eliminating Outdated Capacity 《国务院关于进一步加强淘汰落后产能工

作的通知》(Beijing, 2010)

Stavins, Robert, and Bradley Whitehead, 'Market-Based Environmental Policies', in Thinking Ecologically, The

Next Generation of Environmental Policy, 1st edn (Yale University Press, 1997), pp. 105-117

Sustainable Development Critical Issues: Critical Issues (OECD Publishing, 2001), p. 442

Swartz, Spencer, and Shai Oster, 'China Tops U.S. In Energy Use', Wall Street Journal, 2010，

<http://www.wsj.com/articles/SB10001424052748703720504575376712353150310> [accessed 10

September 2015]

The World Bank Poverty Reduction and Economic Management Unit, A Low-emissions Economy in Poland

(World Bank, 2011), pp. 36, 38

The World Bank, Development Research Center of the State Council, the People’s Republic of China, China

2030 (The World Bank, 2013), p. 245

<http://www.worldbank.org/content/dam/Worldbank/document/China-2030-complete.pdf> [accessed 10

September 2015]

U.S.-China Joint Announcement on Climate Change (Beijing, 2014)

US Energy Information Administration, 'China Analysis Brief'

<http://www.eia.gov/beta/international/?fips=ch> [accessed 10 September 2015]

Usa.chinadaily.com.cn, 'Air Pollution Tops Public Concerns for "The Upcoming Two Sessions"|Top

News|Chinadaily.Com.Cn', 2015 <http://usa.chinadaily.com.cn/2015-03/03/content_19703316.htm>

[accessed 10 September 2015]

Wang, Xin, Market-Based Instruments in China for Energy Security and Climate Change (Institute for

Sustainable Development and International Relations, 2009)

Xu, Beina, 'China's Environmental Crisis', Council on Foreign Relations, 2014

<http://www.cfr.org/china/chinas-environmental-crisis/p12608> [accessed 9 September 2015]

38 | P a g e

Xuan, Xiaowei, and Kelly Sims Gallagher, Prospects for Reducing Carbon Intensity in China (Center for

International Environment and Resource Policy, The Fletcher School, Tufts University, 2014)

Yang, Gonghuan, Yu Wang, Yixin Zeng, George F Gao, Xiaofeng Liang, and Maigeng Zhou and others, 'Rapid

Health Transition In China, 1990–2010: Findings From The Global Burden Of Disease Study 2010', The Lancet,

381 (2013), 1987-2015.

Zhu, Julian, Yan Yan, Christina He, and Claire Wang, China’s Environment: Big Issues, Accelerating Effort,

Ample Opportunities, Goldman Sachs Global Investment Research (Goldman Sachs, 2015)