China’s Green Rise

Genia Kostka and Sarah Eaton on China's green leap forward.
By: , /
November 5, 2012
2012_11_Greening-the-Great-Wall.jpg

Five years ago, residents of Datong, a city of three million in the heart of China’s largest coal-producing region, avoided wearing white shirts to work because the soot hanging in the air would leave their clothes blackened by day’s end. Datong’s struggle with pollution is by no means over, but the city’s air quality has improved markedly in recent years; a recent research trip found white clothing in abundance. The municipal government can claim most of the credit – strenuous efforts by local authorities to curtail emissions from heavy industry, as well as to replace coal-fired boilers with district heating facilities and support greener industries (principally tourism), are helping the city take off its “black hat” (hei maozi).

Beijing hopes that versions of this story will be repeated all over China. The recent “green” Five Year Plans (FYPs) signal the importance that China’s national leaders attach to changing lanes – going from a pollution-intensive, growth-at-any-cost model to a resource-efficient and sustainable one. There is hard-nosed reasoning behind this shift in emphasis: China’s leaders see political peril in the rising tide of domestic environmental activism. Increasingly, they worry about energy security, and hope to capture first-mover advantages in strategic green industries with large export potential.

Beijing’s resolve in charting a new course is beyond dispute. But greening cities like Datong remains an uphill battle for national policy-makers. Beijing’s green agenda does not always find willing followers at lower levels. Indeed, many of Beijing’s green initiatives are implemented only selectively across China, when sub-national leaders take the lead. In the coming years, three elements will be critical to realizing Beijing’s green ambitions: strengthening the environmental bureaucracy, improving the centre’s capacity to react to local foot-dragging, and expanding market-driven mechanisms.

Beijing’s Green Ambition

China has earned a reputation for defiance in international negotiations on climate change. This perception of intransigence distracts from the fact that at home, reducing carbon emissions and enhancing pollution control form part of the core political agenda. China’s two most recent national Five Year Plans, the 11th (2006-2010) and 12th (2011-2015), make this clear. The 11th FYP defined conservation, efficient use of resources, and economic transformation in the interests of sustainable development as key national policies. The 12th FYP added substance to the 11th’s greener rhetoric by establishing the shift to higher value-added manufacturing, improvement of energy and resource conservation, and expansion of the service sector as key goals. Three of seven designated “strategic emerging industries” (SEIs) listed in the 12th FYP – alternative energy, clean-energy vehicles, and clean-energy technology sectors – align with the goal of conserving resources.

National plans, however, are only one part of realizing Beijing’s greener ambitions. A mix of laws, regulations, taxes, and industrial policies are also needed to propel a market of China’s size toward greater resource efficiency and lower carbon emissions. They include a revised Energy Conservation Law (2007), the Circular Economy Promotion Law (2009), and a Renewable Energy Law (passed in 2005, amended in 2009).

Why Now?

Leaders in Beijing are responding to protest action of a populace no longer quiescent in the face of thick smog, dirty water, and the public-health hazards rapid industrial development has brought. As early as the mid-1990s, a Central Committee report identified heavy pollution as one of the four leading causes of social unrest. The political salience of environmental problems has only become more evident in the years since. According to China Daily, in 2005 alone, a reported 51,000 pollution-related protests took place. The Chinese Communist Party (CCP) in the reform era has staked its political legitimacy on its ability to better the lives of ordinary Chinese. China’s leaders therefore have little choice but to make reducing the environmental toll of China’s torrid economic growth one of the CCP’s top priorities.

Recent protests in the northeastern city of Dalian and southwestern Shifang are illustrative of two key trends: a growing awareness of environmental problems by China’s citizens, and uncharacteristic government restraint in responding to the public demonstrations thus far. On Aug. 8, 2011, 12,000 people took to the streets to demand closure of a chemical plant. The Dalian protest made international headlines, partly because of its large scale and unco-ordinated formation, but also because of the local government’s immediate climb down. City officials agreed to close the factory the very same day.

Concerns about China’s energy security have also fed Beijing’s green ambition. More than half of the country’s oil is imported, and China became a net importer of coal in 2009 – an incredible turn of events given the vastness of its own coal reserves. Policy-makers worry that China’s increasing dependence on foreign energy exposes it to external supply shocks that could foment geopolitical conflict. Even more incredibly, at present rates of extraction, experts expect that China could exhaust its domestic sources of petroleum, natural gas, and coal in seven, 22, and 75 years, respectively.

Unsurprisingly, the goals of reducing energy consumption and developing alternative energy sources are front-and-centre in the national green plans. But lightening the carbon footprint puts a heavy burden on local governments, as with the 11th FYP’s call to reduce energy intensity per unit of GDP by 20 per cent as compared to 2005 levels. In the current planning period, local governments and state-owned enterprises have been tasked with squeezing out a further 16-per-cent reduction in energy intensity. Beijing also hopes to boost the share of non-fossil energy sources from 8.3 per cent of total energy use in 2010 to 11.4 per cent in 2015. To this end, in 2010, China was the world’s largest investor in the renewable-energy sector, and, according to a recent report on global trends in renewable energy, accounts for 23 per cent (or US$49 billion) of global investment.

china green

   The Xianrendao Wind Power Plant in Yingkou, Liaoning province, January 2010 (Reuters)

There is also a competitive innovation strategy behind China’s green turn. In heaping government support on “strategic” green industries, policy-makers try to position Chinese enterprises to leap ahead of foreign competitors in global markets. Chinese solar companies Suntech, JA Solar, and LDK Solar helped China capture more than half of the global market share in solar-cell production in 2011. Chinese companies are also global market leaders in wind and electric vehicles, and China is now widely seen to be leading the global “green-tech race.”

The Gap Between National Ambition and Local Reality

While national policy-makers’ efforts to nurture green industries have yielded impressive results, many elements of Beijing’s green agenda fall to local governments for delivery. Indeed, Beijing has provided only the first brushstrokes of its green vision, and largely leaves the localities to fill in the rest. For various reasons, instructions from the top are often diluted as they pass through the institutions that make up China’s “decentralized authoritarian” governance structure.

National policy-makers employ a Leninist control system of “hard” and “soft” targets to incentivize local leaders and the heads of state-owned enterprises to implement national plans. The 11th and 12th FYPs rely upon the inclusion of both “hard” (restricted, or yueshuxing) and “soft” (expected, or yuqixing) targets. Fulfilling “hard” targets is required for a Communist Party cadre to advance up the ladder and receive bonus payments. In addition to hard and soft targets (both of which are binding), cadres in leadership positions in local government also sign personal responsibility contracts for the fulfillment of these targets, to ensure accountability between levels of government. Under these contracts, leaders who fail to deliver on policy implementation are subject to a range of penalties, including (rarely) demotion.

Despite the fact that incentives to abide by Beijing’s directives have been woven into the cadre management system, a substantial environmental policy implementation gap exists. In the 11th FYP period, several environmental targets went unfulfilled. Officially, the only hard target not met was reducing energy intensity per unit of GDP by 20 per cent against 2005 levels (the actual recorded reduction for the period was 19.1 per cent). Anecdotally, some localities may have falsified their figures, while some met their green targets in the 11th FYP only at the eleventh hour. Some used extreme – even socially harmful – measures, including cutting off electricity to hospitals, homes, and rural villages. Local governments also used “sleeping management” (xiumian guanli) to temporarily shut down energy-intensive companies. Too often, local leaders are choosing short-term, low-quality means of satisfying environmental targets, effectively putting off the difficult business of changing lanes.

The roots of the green implementation gap can be traced to five major sources. First, local leaders tend to place much greater emphasis on economic and industrial development than on environmental and resource concerns. This bias is due partly to the heavy weight of economic targets in the cadre evaluation system as compared to other categories, including environmental protection. What this means is that in localities with a high proportion of heavy industry, faithfully implementing environmental measures may demand stark trade-offs against growth and/or local employment, so leaders may well drag their feet when it comes to adjusting their priorities. An official in southern China told us that despite the apparent “hardness” of the new green targets, his government continues to view maximizing GDP growth as its most important task by far.

Second, there is the problematic process of “selective policy implementation.” Presented with a long list of central directives, promotion-hopeful officials tend to devote their energy and resources to select projects that they expect will most enhance their careers. Implementing environmental policies still often falls at the bottom of a local official’s implicit list of priorities.  So-called “political accomplishment projects” (zhengji gongcheng), often in the form of extravagant construction initiatives, are at the top of local agendas. One of the more infamous examples of such local government largesse is the extravagant “piano house” found in one of China’s poorer central provinces.

Third, local leaders’ short time horizons widen the green implementation gap. With typical tenure periods of between three and four years, county- and municipal-level officials lean toward policies that will deliver quick results. Generally speaking, promotion-hopeful local leaders are inclined to pick projects with both high “political accomplishment” value and a high probability of producing results while they remain in power. The incentives local cadres face to secure short-term goals are sometimes starkly at odds with the centre’s long-term plans for green growth.

Fourth, difficulties in measuring certain environmental policies make them easier to sidestep. In China, as in many political systems, there is a structural bias toward policy implementation of readily measurable goals. While assessment of a locality’s performance in raising forest coverage rates is relatively straightforward, technological and organizational challenges make accurate measurement of energy and carbon expenditure extremely difficult.

china

Government banners promoting energy reduction and emission savings (“Save Energy and Reduce Emissions; Develop Scientifically”), July 2010

The fifth and final source of the growth in the gap between expectation and reality is a familiar one to observers of China’s development: bureaucracy. The environmental bureaucracy is beset with monitoring problems and bottlenecks resulting from turf wars. Local branches of the Environmental Protection Bureau (EPB) ­–­­­ the organization with primary responsibility for assessing localities’ compliance with Beijing’s plans – tend to be sorely underfunded and in chronic need of expertise in the domains of water pollution control and energy use. An EPB official in a polluted county in China’s northwest region confided that her office had not a single person trained in environmental statistics and there was no budget to hire one. In the context of ever-more-complex environmental targets coming down from Beijing, such as COD and SO2 reduction, she highlighted accurate measurement of pollutants as a major difficulty. The sheer number of bureaucracies with a stake in the process also takes a toll – it is not uncommon for more than 10 different overlapping government bureaus and agencies to play a role.

The Way Forward

In recognition of the shortcomings of implementation via command and control, China is experimenting with a variety of market-based instruments to supplement existing administrative tactics. In 2009, Beijing, Shanghai, and Tianjin created the first voluntary carbon cap-and-trade schemes, and by 2010, according to a report by Deutsche Bank Group, a total of 12 voluntary climate-change exchanges had come into being. The central government is said to be drafting plans for regulation of these markets. China is also moving towards a market-based electricity pricing system that more closely reflects the costs of power generation. For industrial users, electricity prices were repeatedly raised over the last few years, and several provinces are currently experimenting with raising household electricity prices. Going forward, market-based instruments are likely to be increasingly mixed with traditional command-and-control mechanisms to improve water, air, and soil management.

Technicians maintain solar panels on a roof at a solar power plant in Wuhan (Reuters)

Central policy-makers are also striving to lengthen local leaders’ time horizons in order to close the gap between nationally and locally perceived interests. A promising development in this regard is a 2006 regulation stipulating that, except in special cases, leading cadres should serve out their prescribed five-year terms in full. And further modifications to the planning and cadre evaluation systems can be expected in the coming years. Many see the hardening of environmental targets in the 11th and 12th FYPs as a promising step in terms of incentivizing leading cadres to prioritize green policies. And yet, as has been described, local leaders have myriad ways of meeting the short-term goals demanded by the plans, while staving off needed costly and difficult long-term change. One solution might be to move away from the current focus on quantitative measures in planning and cadre evaluation systems and towards a more comprehensive evaluation that includes qualitative indicators of greening growth.

Efforts are also underway to strengthen China’s environmental bureaucracy. To ease implementation problems resulting from a fragmented bureaucratic structure, local governments are increasingly using inter-departmental ad-hoc working groups at municipal and county levels. These groups, known as leading small groups (lingdao xiaozu), have worked well in other areas. At the national level, such groups have proven useful in bridging government departments, and local officials now use them to develop cross-department environmental-protection strategies.

For the CCP’s leaders in Beijing, who are viewing China’s green rise from the top-down, the way forward is as clear as Datong’s newly clean air. But for the vast majority of local bureaucrats, the path is littered with obstacles. China’s thousands of towns, counties, and cities will continue to face a steep climb to meet new, ever-more ambitious standards for green growth.