The Next Five Years of Clean Energy and Climate Protection in China

With the adoption of its Twelfth Five-Year Plan, the Chinese government has cemented key long-term strategies for greening GDP, controlling energy use, greenhouse gas emissions and key pollutants, and capitalizing on the growing low-carbon economy (full Chinese plan). Environment and climate are given the most prominent position ever in a Five Year Plan, aspirations that will be backed up by a number of concrete planning documents over the coming months.

China has agreed to several binding targets important to making this transition. In the Chinese context, “binding” means that provincial and local officials and leaders of state-owned enterprises will be evaluated on their performance in meeting the targets, and will be promoted or penalized accordingly. Also explicitly stated in this plan, responsible departments must make public yearly progress reports toward meeting the key targets of the plan, which include:

  • Decreasing energy intensity (energy consumed per unit GDP) by 16% by 2015.
  • Decreasing carbon intensity (carbon emissions per unit GDP) by 17% by 2015.
  • Increasing non-fossil energy as a proportion of final energy to 11.4% by 2015, from the current 8.3%.
  • Increasing R&D expenditures to 2.2% of GDP by 2015, from the current 1.8%.
  • Decreasing water intensity (water consumed per unit of value-added industrial output) by 30% by 2015.
  • Increasing forest coverage rate to  21.66% and forest stock by 600 million cubic meters by 2015;
  • Decreasing sulfur dioxide and chemical oxygen demand (a measure of water pollution) by an additional 8% by 2015 (these were reduced by 14.29% and 12.45% during the 11th Five Year Plan); 
  • reducing two new key pollutants, nitrogen oxide and ammonia nitrogen, by 10% by 2015.  Reducing heavy metal pollution from industry will also be a key focus of the plan.

With the addition of the binding 17 percent carbon intensity target that will be allocated to each province and locality, China has linked climate change and low-carbon development strategically with its economic vitality. This comes from a sober realization of the perils of “unsustainable economic growth,” which Premier Wen Jiabao cited following the closing session as the reason for broadening economic indicators beyond simply GDP (original Chinese).

In addition to understanding the perils of not acting to address climate change, China sees clearly the opportunities of a low-carbon economy. That’s why over the next ten years China plans to invest RMB 5 trillion ($760 billion) in “new energy”[1] as one of the central government’s seven “strategic emerging industries.” These industries – which are all high-value-added and R&D-intensive – will have their pick of government incentives to promote innovation and expand production. Low-carbon technologies supported include: energy-saving and environment protection technology, new energy, new-energy vehicles, new materials and next-generation IT. (Skip to page 17 of The Climate Group’s excellent summary of the 12th FYP for more info.)

On renewables, over the next five years, China plans to build at least 70GW of new wind farms and 5GW of new solar farms. These are increases of 225% and 715% over 2010 figures, respectively, but we can expect 2015 numbers to exceed even these. Of the RMB 5 trillion public and private investment in new energy by 2020, renewables and grid investments take the largest shares: wind ($230 billion), smart grid ($210 billion) and solar ($30 billion). In 2010, China’s total clean energy asset investment stood at $51 billion, the highest in the world and more than a fifth of the world’s total $243 billion investment.

These strategic investments will be buttressed by a suite of energy policies, including both long-running, successful policies (such as the Renewable Energy Law) as well as several new ones, including (as discussed in The Climate Group report):

  • National demand-side management (DSM) regulations (effective January 2011) that require grid companies to achieve energy savings through efficiency programs equivalent to at least 0.3% in sales volume and 0.3% in maximum load compared with the previous year. 
  • Environmental and carbon taxes (environmental tax expected as early as 2011; carbon tax possible in next five years).
  • New energy quotas for grid companies, similar to renewable portfolio standards in the U.S. (details likely in 2011).

In a month’s time we expect to see the energy-specific plan and the strategic emerging industries development plan. The new energy plan is under review. Chinese officials are also seeking input on a national climate change law (see NDRC’s official request for public input, Chinese), and drafting specific plans for clean vehicles and energy efficiency among others.  China faces serious challenges in reining in its emissions and energy consumption growth and transitioning to a more sustainable development path, but the Twelfth Five Year Plan and other recent policy announcements demonstrate that it is taking a proactive approach to expanding clean energy development and climate protection over the next five years.

This post was coauthored with NRDC China Climate Fellow Michael Davidson and NRDC China Climate and Energy Policy Director Alvin Lin.

Note, corrected May 26: changed "primary energy" to "final energy" following second paragraph.

[1] This includes renewables, nuclear and unconventional gas, and is used interchangeably with “alternative energy.”