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Industrial Transformation, Urbanization and Sustainability in China Jiahua Pan Research Centre for Sustainable Development The Chinese Academy of Social Sciences CASS-Nottingham Workshop on Environmental Management 22-24 June, 2005 Nottingham University

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1.1 developmental challenges Industrialization as a measure of development Industrialization process urbanization infrastructure physical infrastructure and institutional infrastructure Industrial process labor intensive (energy intensity low)== capital intensive (energy intensity high) == knowledge intensive (energy intensity low) Industrial stages De-industrializing countries (decoupling energy) Industrialized ( stable and high level of energy consumption ) newly industrialized (slow growth of energy consumption) rapidly industrializing ( rapidly increasing consumption of energy ) Early industrializing ( moderate increase of energy consumption) Pre-industrial economies

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stages of development - developing countries: De- industrializing, industrialized, newly industrialized, industrializing Urbanization: shift from rural urban 82.1% in 1978 down to 69% in 2002, to 50% in 2020; Absolute numbers: 790.1m in 1978 to 890m in 2002 to 750m in 2020 Rural labor force: 400 million; 100 million rural laborers in urban sector; 150 million redundant rural laborers Construction of physical and institutional infrastructure Transition of the economy from labour to capital to knowledge intensive industrial structure 1.2 developmental challenges Industrialization: a process with different energy and emissions implications the case in China

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1.3 Developmental challenges: stage of Chinas industrialization? Going heavier? Latest trend in the past few years Energy demand elasticity: in the industrialised world, elasticity for energy demand is around 1, in China before 2000, the figure is between 0.4-0.7. And the projected number between 2000 and 2020 is 0.39. The actual number between 2001 and 2004 is between 1.2-1.6 For 2004 in China, total electricity production amounted 2,120 billion kWh: industrial sectors 75.3%, service sector 11.1%, residential sector 10.8% and agriculture 2.8%. Debate: development vs conservation The trend: energy >12% increase; GDP > 8%; investment: iron & steel 173% development: urbanization, employment, income generation conservation: energy, land, water, pollution Government decision: 7% GDP for 2004; actual 9.5%; (14% added up from provincial numbers); restriction in iron & steel, aluminum, cement

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1.4 developmental challenges Carbon Stocks vs carbon flows Stocks: all the build-up infrastructure, buildings and durables stock carbons physical infrastructure buildings durable consumption goods (cars, fridge) Flows: daily/regular need for carbon depreciation maintenance household/service

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Construction of physical and institutional infrastructure 1.5 developmental challenges: stocks vs flows

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1.7 energy demand: primary energy projection made in 2003 and reality in 2004 Scenario a: with limited intervention Scenario b: policy intervention for efficiency Scenario c: policy intervention for renewable energy Actual 2003 2004

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200020102020 SOx27.1940.7257.38 NOx19.8834.1749.82 CO22996.84989.06966.4 Emissions of major pollutants (million tons) in China, 2010 and 2020 Source: SO2 and Nox, Chen (2003); table 4; CO2: Zhou (2003), p. 143; CO2 for 2000: IEA, 2003 2.1 environmental, ecological and resource challenges

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2.3 resource endowments Dirty coal dominated energy structure Increase in electricity consumption: over 15% annually. The first half of 2004 generated 1001.72 billion kWh in China. 83.2% is from coal and 2.1% from nuclear energy, with 14.7% from hydropower.

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2.4 resource endowments: land Two thirds of land area are Gobi dessert, arid, and high altitude mountain ranges Urban expansion Infrastructure: road, airports Arable land: 7% of the world average, 0.1ha/c Deforestation Biodiversity: losses

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2.5 natural disasters Extreme climatic events: drought, flooding, heat waves Land slides Earthquakes Mine explosion

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3.2 social & economic challenges Population: Large population base, still increasing: 1.3 billion, 0.75% Aging: over 60 year old: 10%

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3.3 social & economic challenges Income distribution Urban-rural: urban/rural income ratio: from 2.5 in 1980 to 3.5 in 2004 East-west divide: drivers of the Chinese economy: Zhujiang Delta, Yangtze Delta, Bohai Region Rich-poor: Gini coefficient: 0.46 governance Tendency to be wasteful and luxurious: waste of limited resources: large cars, large houses Social inefficiency: corruption, policy failures

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3.4 Technological: theoretical vs realistic Source: Nakicenovics et al, IPCC,2000 2100 Total Energy Demand for SRES scenario range: 515-2737 EJ/yr Nuclear total:7700- 462000 EJ >> average 77-4620 EJ/yr over next 100 years

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4.1 Way out? Development of non-conventional fossil fuel energy Commercially viable large hydro nuclear power New and renewable energy: solar, wind, and bio-energy commercially yet to be competitive Clean coal? Technological leap forward Energy efficiency: 20% more energy intensive than OECD Energy intensive industries: moving out of China? To developed nations? They are De-industrialising To other developing countries? Not feasible (1) political and economic risk (institutional uncertainties); (2) they themselves need energy intensive products for physical infrastructure China needs them: industrialization, urbanization. The practice in industrialization in OECD countries proves a stage that cannot jump over.

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Legally binding regulations, planning and standards Buildings in China: life time too short, waste of energy for bricks, steel, cement, chemicals. In OECD countries, over 100 years Infrastructure: lack of planning, poor quality Political intervention in planning: should be avoided Energy saving: waste / luxurious consumption mass transport instead of private cars Smaller cars /houses 4.2 Way out?