China’s Energy Consumption Cap and America’s Gridlocked Democracy

With the most recent announcement that China is committed to peaking its total energy use by 2015, in addition to its energy and emissions intensity reduction goals, China’s ability to swallow the bitter pill of aggressive environmental policy seems unprecedented. Skeptics may ask, “But is it enough?” The answer from the Chinese perspective is that it’s much more than the world’s largest democracies are currently willing to do.

China has committed to an absolute energy consumption cap of 4 billion tons coal equivalent (tce) by 2015, a binding limit on energy use which has been included in the current draft of the 12^th Five-Year Plan. Depending on how one determines China’s projected energy consumption, the 4 billion tce cap could be more or less than business-as-usual for 2015. However, in this case, the fact that a cap is even being discussed – much less implemented - is more important than the actual number: the 2010 World Energy Outlook projected that Chinese energy consumption would increase by 75% between 2008 and 2035, thereby reaching approximately 5 billion tce.[1] That the world’s largest energy consumer, which is otherwise projected to contribute 36% of global growth in energy consumption over the next 25 years, could instate such a cap is actually quite meaningful.

First and foremost, the energy cap has well-recognized implications for reigning in China’s economic growth (Wen Jiabao has indicated that China will seek to reduce its growth rate by 0.5 percentage points over the next 5 years as compared to 2005-2010), and for reducing carbon emissions. Now that China is on the verge of implementing both an absolute energy consumption cap and an energy intensity reduction goal, the country is soon likely to have all the policy instruments in place to cap absolute energy-related emissions. Interestingly, the policy is not being communicated in this way, even though a Chinese emissions cap would generate an incredibly positive international response. Nevertheless, the connections are clear:

China’s energy ceiling could contribute substantially to the world’s ability to peak carbon emissions, or at least their ability to agree to do so. Such a development has come not a moment too soon: the Cancun Agreements, as drafted under the UNFCCC in December 2010, indicate that a time line for peaking global carbon emissions should be considered by the end of this year. China’s commitment to peaking energy use sets a nice pile of candy on the table for easing negotiations on this topic, and sets a precedent for other emerging economies to feel a bit more comfortable establishing similar goals.

The raw simplicity of the energy cap will also be harder for pundits to criticize, certainly compared to energy intensity and emissions intensity targets, which have solicited a mixed media response. A cap on energy use circumvents uncertainty over the utility of increases in energy efficiency for reducing energy use (due to the ‘rebound effect’). The cap complements China’s targets of decreasing the economy’s energy intensity by 16-17% by 2015, and reducing emissions intensity per unit GDP by 40-45% by 2020.

Furthermore, China has even started discussions with the EU on implementing pilot emissions trading systems (ETS) in certain Chinese provinces for select economic sectors (voluntary trading systems are already established in Beijing, Shanghai and Tianjin). Such supplementary initiatives can help achieve emissions intensity targets, and also indicate that China is serious about achieving its climate goals. It is also a promising indicator that China could institute an ‘absolute’ emissions cap in the near to medium term: a carbon trading system with an emissions intensity cap can be modified (relatively) easily to regulate absolute quantities. That China has built on its energy intensity target with a firm energy cap hints that it is not shying away from this type of progression.

The big question is: How likely is it that China will meet its climate and energy goals? Thus far, China has communicated remarkable progress, but has fallen just short of some key targets: China Daily indicates that energy intensity per unit GDP was cut by 19.1% during the period 2005-2010, missing its target of 20%. The non-fossil fuel proportion of energy consumption is currently about 8%, also short of the 2010 goal of 10%. At least some of this ‘success’ has come at the unpopular cost of intermittently shutting down and rationing electricity production, enforced with prohibitive fines, which has impacted the output and prices in China’s dirtiest sectors (chemicals, textiles, machinery).

In short, China appears to take these goals very seriously. But not only due to environmental concerns. China’s growing anxiety over energy security has come to the fore in recent months, particularly due to the instability of Middle East oil flows. Notably, the Chinese navy has even embarked on its first active-duty deployment outside East Asia in stationing an aircraft carrier outside of Libya in the Gulf of Aden. While this move was partially driven by concerns over the safety of the last remaining Chinese citizens in Libya, some point to this as an indication that China wants to get in good with new, incoming governments in the Middle East, thereby securing oil supplies.

Oil comprises about 20% of current Chinese energy consumption, and with the need to power a growing car fleet, oil imports are likely to grow proportionally, even under an energy consumption cap. The energy cap itself is likely a way for China to limit even greater reliance on foreign oil, which has become increasingly risky as of late. However, even if China’s renewable energy deployment goals were met completely, the energy cap would allow for growth of another 1 billion tce of fossil fuel energy by 2015. Even this buffer may not be enough to account for all the new car owners, which could more than double by 2020.

Another facet of China’s evolving energy policy, as well as first steps to globalizing its military activity, is the desire to appear as a ‘responsible’ super power. As Western (largely US) concerns over China’s rise to prominence have grown over the years, China seems to have found that it is in its best interest to quell these concerns to the extent possible.

This can be seen in China’s evolving climate and energy stance on the international stage over the past few years. While all UNFCCC Parties have had to make important concessions in order to come to consensus on the Cancun Agreements, China is now able to put commitments on the table that may have seemed impossible only two years ago. While China and the US still tend to clash on how national emissions should be monitored (whether at the national or international level), the US can no longer argue that its ambitions are limited by willingness of emerging economies like China and India to act according to their ‘common but differentiated responsibilities and capabilities’ (as described in the convention text of the UNFCCC). Granted, the international expectations for the form and content of a climate agreement have also been tempered – the negotiations are currently tending towards an agreement that would require only voluntary, not binding, emissions reductions from both developed countries and developing countries. Therefore, international expectations of what the US should agree to have been significantly lowered, while expectations of China have only slightly increased, if at all.

It is fairly clear that the decline in international expectations has come at least in part from the inability of big democracies (especially the US) to act on climate domestically. At a recent round table event with Urban Rid and Jonathan Pershing, Director of Climate and Energy for the German Ministry of Environment and US Deputy Special Envoy on Climate Change (respectively), both men reflected on the outcomes of Cancun and the magnitude of work that still needed to be done in order to fulfill the Agreements. Dr. Rid good-naturedly lamented the US’s difficulties as a democracy in implementing comprehensive climate policy. Germany has obviously not suffered to the same extent – but it is a point well taken, given that depending on who you talk to in Washington the prospects for passing any sort of climate legislation are nil for the next two to six years. Is the US doomed to climate shame simply because of the inertia of its political system? How much will it take for the US to catch up to China’s aggressive climate and energy policy framework?

While the Obama administration remains formally committed to reducing emissions 17% below 2005 levels by 2020, there is likely insufficient legislation in place at the state and federal level to meet this goal. And with the role of the EPA in regulating greenhouse gas emissions so precarious, for now there is nowhere near enough policy driving the over 80% emissions cuts needed by 2050. Though Obama has sought to make progress where he can (e.g. his State of the Union clean energy goal would have 80% of US electricity coming from ‘clean’ sources by 2035), none of these non-binding goals elaborate interim targets for which the current administration can be held accountable. The appeal of China’s Five-Year Plan, at least from a policy perspective, is that the target dates are so close we can touch them (not to mention their binding nature). The political prospects for short term, binding, and ambitious policy in the US are incredibly poor.

Both Rid and Pershing reiterated that, unfortunately, the emissions reduction numbers volunteered by all UNFCCC Parties under the Copenhagen Accord do not currently add up to staying within the 2° C limit determined suitable by the IPCC to avoid the worst impacts of climate change. Everyone needs to agree to do more (some a little and some a lot). As outlined by the IPCC, all countries, developing and developed, the US and China, must instate some sort of emissions reduction efforts in order to keep global temperatures within a 2° C rise (a target now formalized under the Cancun Agreements).

One could argue that China’s rapid moves to improve its climate and energy policy have signaled a shift in leadership at the global level. This may very well be true, but it is the result of unsurprising tectonic shifts that have been in motion for the past several years. To secure and sustain its place as an economic superpower, China has recognized the need to begin working in the same direction as Western countries. This momentum, combined with the ability for centralized decision-making, has allowed for broad sweeping changes in Chinese environmental policy. The US, while it has an enormous voice at the UNFCCC negotiations, has been increasingly questioned over its ability to fulfill its international climate commitments. Political warfare at home and more immediate concerns like passing a 2011 federal budget consume the US political landscape, if anything generating backwards momentum in the climate policy realm.

China appears to be on track to meeting the “substantial deviation” requirement. When will the US get on track to an 80-95% reduction by 2050, and meet its own super power responsibility? Turning its current goals into legislation and making binding year-on-year interim goals would be an excellent first step. But in a democracy, the political will of the voters and the legislators has to materialize.

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Emily McGlynn is a Policy Fellow in AEL’s New Energy Leaders Project and will be a regular contributor to the website. The views expressed are those of the author and do not necessarily reflect the position of AEL.

Phil Hannam, a Masters candidate at UNEP-Tongji Institute of Environment for Sustainable Development in Shanghai, contributed calculations and analysis.

[1] Assuming 2008 consumption was 2.85 billion tce.

[2] Based on Box 13.7 of IPCC Fourth Assessment Report, Working Group III: Mitigation of Climate Change. Developed and Developing correlates to Annex I and non-Annex I, respectively.

Photo by JKeckley.