china’s climate change mitigation initiatives and energy ...€¦ · crude oil & nature gas:...
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China’s Climate Change Mitigation Initiatives
and Energy Outlook
The 37th IAEE International Conference
June 15-18, 2014New York City
Prof. Zhang XiliangProf. Valerie J. Karplus
China’s energy system: A snapshot
By primary energy type By end-use sector
Coal use by sector
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Energy and Environment Challenges in China
• The largest energy consuming nation in the world
– Coal (66.1%)
– Oil (18.5%)
– Natural gas (5.8%)
– 3.75 billion tons of standard coal equivalent in 2013
– Non-fossil fuel (9.8%)
• 58% of China’s oil consumption comes from
international market;
• The largest CO2 emitter in the world;
• Energy use is a major contributor to air quality
degradation and smog.
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www.china.org.cn
www.flickr.comwww.wikimedia.org
globalchange.mit.edu
Global Climate Change
Human Development
Local Pollution
Industrial Development & Resource Needs
How to balance?
Key players in China’s energy and climate policy
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Provincial Leading Group on Energy Conservation & Climate Change
•Director of the Leading Group is often the provincial governor
Led by Premier
Li Keqiang
State-Owned Assets
Supervision and
Administration
Commission
Pricing policy
Investment targets
Project approval
Carbon trading
Energy-
efficiency
standards
Energy-saving
subsidies
Renewable energy targets
Feed-in tariff/surcharge
Evaluates leaders’
achievement of
energy-saving
targets
Environmental
Taxation
Renewable Energy
Fiscal Fund
National Climate Fund
(CDM)
Pollution
AAQS
Environmental
levy
Research
Development
Demonstration
International
Climate
Negotiations
National Panel on
Climate ChangeUniversities
Research Institutes
(1) Historical Context: Energy Intensity Targets
Source: Ye Qi, Tong Wu, Jiankun He and David A. King, Nature Geoscience, 2013, 6, 507-509.
China’s energy intensity reduction targets and outcomes in previous five-year plans.
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Eleventh FYP: To reduce China’s energy intensity by 20 percent from 2005 to 2010.
(Proposed by the State Council and Ratified by National People’s Congress in 2006.)
Institutional Innovations & Capacity Building
• Disaggregating the energy conservation target to
provinces and major enterprises
• Provincial governors and managers of enterprises are
primarily responsible for achieving the energy
conservation targets
• Energy conservation agreements between
enterprises and the government
• Energy Conservation Reporting and Verification
Systems
• Evaluation system for energy conservation
performance of provinces & enterprises
Command-and-Control Measures
• Enforced retirement of low energy efficiency production
capacity during the 11th FYP
– 70GW of coal-fired power plants
– More than 100 million tons of iron & steel production capacities
– 260 million tons of cement production capacities
• Energy efficiency requirements for new investment
project approval & the market entrance of new products
• Energy efficiency requirements for new buildings
• Government purchase of energy efficiency products
Economic Incentives• Tax and levy
– Surcharge of electricity for renewable electricity
– Import & export tax and tariffs
• Subsidy & bonus for energy savings
• Lines of credit to support policy implementation
• Pricing
– Differentiated electricity tariffs
– Feed-in tariffs for renewable electricity
(2) Present: China’s Near Term Domestic Commitments—to 2015 Twelfth FYP (2011-2015)
Target Mechanisms Sectors
Energy intensity target:
Reduce 16% relative to
2010
• Top 10,000 Enterprises
Program – energy efficiency
(~40% of total energy
savings expected)
• Small plant closures
• Structural change /
rebalancing
Extractive industries
Electric power
Manufacturing (energy-
intensive)
Non-fossil energy:
11.4% of non-fossil fuel in
primary energy use by 2015
Renewable targets, tax
breaks, feed-in tariff
Electric power
Industrial direct use
Low carbon liquid fuels
CO2 intensity target:
Reduce 17% relative to
2010
Feed-in tariffs for wind,
solar and biomass
Alt. liquid fuel incentives
Emissions trading pilots
Results from above
measures to reduce energy
intensity and increase share
of non-fossil energy use
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Emissions trading system to help support achievement of CO2
emissions intensity targets
• Provincial/city level pilots starting in 2013: Tianjin, Shanghai, Beijing,
Chongqing, Guangzhou, Hubei, Shenzhen.
• Many scales, different system designs
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In: Zhang et al., 2014, Energy Policy, forthcoming. (CECP manuscript)
China’s ETS Roadmap
CDM
project
VER
trading
Learning
phase in
pilot
regions
Formal
regional
ETS
National
ETS
New Policy Developments in China
• Third Plenum in November 2013 defined important
future directions for policy:
– Deepening economic reform
– “Decisive” role of the market (reduce overcapacity)
– Pursue a relatively lower but sustained economic growth
– Develop “environmental protection markets,” support
energy reduction, markets for carbon, air pollution, water,
etc.
• Air Pollution Action Plan (September 2013)
• New momentums for renewable energies & nuclear
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Policy scenarios analyzed using C-GEM
Measures No Policy Continued Effort Accelerated Effort
Carbon tax None
Carbon price required to
achieve CI reduction
(~3%/year, $30/ton in 2035
and $73/ton in 2050)
Carbon price rises to
achieve CI reduction
(~4%/year, $55/ton in 2035
and $126/ton in 2050).
Fossil resource tax NoneCrude oil/natural gas: 5%
Coal: 8 CNY/ton (~$1.2/ton)
Crude oil & Nature gas: 8%
Coal: 10%
Feed-in tariff for
wind, solar and
biomass electricity
None
A 3.8% surcharge is applied
to electricity prices to
finance an FIT
A 6.5% surcharge is applied
to electricity prices to
finance an FIT
Hydro resource
development
Only economically
viable hydro
resources are
deployed with no
policy constraint.
Achieve the existing target
of 350 GW in 2020 and
slowly increase to its
economic potential of 400
GW by 2050.
Same as the Continued
Effort assumption.
Nuclear power
development policy
No targets or
measures to promote
nuclear energy
development.
1) 40 GW in 2015 and 58
GW in 2020;
2) Assumes site availability
of 160 GW.
1) Same as the Continued
Effort assumption.
2) Assumes site availability
of 400 GW.14
The Accelerated Effort scenario shifts away
from coal toward cleaner low carbon energy
sources
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Energy Trends
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Coal
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Average annual growth rate
• Carbon price and resource taxes cause significant reductions in coal use in the Continued Effort and Accelerated Effort scenarios.
• Coal use peaks in 2020 in the Accelerated Effort scenario.• Large reductions in coal use will help reduce pollution and improve air
quality.
Natural gas
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Long term
reliance on
natural gas falls
as carbon price
rises
Average annual growth rate
• Natural gas demand grows faster under Continued Effort and Accelerated Effort scenarios.
• By 2040 in the Accelerated Effort scenario, natural gas use begins decreasing because it still emits carbon.
Oil
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Average annual growth rate
• Oil demand is not very sensitive to a carbon price due to the lack of substitutes for its use, especially in transportation.
• A higher gasoline tax is needed to address energy security concerns, as a carbon price mainly require reductions from electricity and industry.
Nuclear
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Average annual growth rate
• If nuclear plans are met through 2020, growth of nuclear will be very high (given small starting level).
• Both Continued Effort and Accelerated Effort scenarios see significant additional nuclear deployment.
Renewable electricity
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Total non-fossil energy shares grow:
Continued Effort: 20% in 2030, 26% in 2050
Accelerated Effort: 26% in 2030, 39% in 2050
CO2 price
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CO2 emissions
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What is the Tsinghua-MIT China Energy and Climate Project?
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MIT Founding Sponsors:
A five-year collaborative research effort to develop new tools and
analysis for supporting strong climate and energy decisions in China.
Sustaining Sponsors:
Institute for Energy,
Environment and
Economy
Joint Program on the
Science and Policy of
Global Change
• 10 team members (5 students)
• Closely integrated research team
• Separate funding at MIT & Tsinghua
• Offices in Cambridge & Beijing
Tsinghua Sponsors:
MOST NDRC NEA
globalchange.mit.edu/cecp 25
Thank you
谢谢!