Silver Lining in China’s Smog as It Puts Focus on Emissions?

August 31, 2013

Silver Lining in China’s Smog as It Puts Focus on Emissions


HONG KONG — Jiang Kejun may be one of the few Beijing residents who see a ray of hope in the smog engulfing the city. A researcher in a state energy institute, he is an outspoken advocate of swiftly cutting China’s greenhouse gas output, and he sayspublic anger about noxious air has jolted the government, which long dismissed pollution as the necessary price of prosperity.The grimy haze blanketing Beijing and other Chinese cities comes from motor vehicles, factories, power plants and furnaces that also emit carbon dioxide, the main global warming gas from human activities. The widespread ire about air pollution has forced China’s new leadership to vow firmer, faster measures for cleaner air that are likely to reduce carbon dioxide output, especially from coal, experts said. “The public concern about the air pollution has helped raise awareness about broader environmental problems,” said Mr. Jiang, a researcher at the Energy Research Institute, which advises the Chinese government. “This will be a big help in pushing China.”

Mr. Jiang is an unusual hybrid — part policy insider, part maverick — in a growing debate among Chinese officials, policy advisers and academics about how fast and far to limit greenhouse gas pollution, which now well exceeds that of any other country. The debate, increasingly vigorous but in typical Chinese fashion playing out largely behind the scenes, pits the demands of industrialization and urban growth against the realities of global warming.

Defying the habitual caution of government advisers, Mr. Jiang has developed a proposal to swiftly limit the growing volume of carbon dioxide that China produces from consuming fossil fuels, which constitute over a quarter of the world’s total such emissions. In his blueprint, China’s emissions would reach a peak by around 2025, at least five years earlier and at a much lower level than many Chinese experts have said is possible.

“I’m not saying it will be easy, but it’s feasible,” Mr. Jiang said. “Time for effective action is very limited.”

His plan appears far from winning government endorsement, but is “one of those trial balloons that wouldn’t be floated unless there’s serious discussion opening up about what China should do,” said Barbara Finamore, Asia director at the Natural Resources Defense Council, a New York-based advocacy group.

Chinese policy advisers have developed proposals to control greenhouse gases in the nearer term, government-sponsored studies show. They include a carbon tax on fossil fuels, and beginning in 2016 setting annual guiding limits for carbon dioxide emissions from energy use. China will explore expanding nascent local carbon credit markets into a nationwide plan starting in 2015, Xie Zhenhua, an official who oversees climate change policy, said in late July.

In part, China is responding to international pressure, as governments negotiate a proposed new global agreement on climate change, scheduled to be settled in 2015 and go into force in 2020. In June, President Obama and President Xi Jinping agreed to discuss how to phase out hydrofluorocarbons, a potent class of manufactured greenhouse gases.

But domestic economic, energy and environmental worries are also forcing China’s leaders to consider policies that could limit greenhouse gases, analysts said. The new leadership wants to reinvigorate the economy by reducing reliance on heavy industry that produces high amounts of pollution. Mr. Xi and Prime Minister Li Keqiang have vowed to clean up contaminated soil, air and water, and achieving those goals could also bring carbon reductions in their wake.

“Air pollution was the perfect catalyst,” said Wai-Shin Chan, director of climate change strategy in Asia for HSBC Global Research in Hong Kong. “Air pollution is clearly linked to health, and the great thing is that everybody — that’s government officials and company executives alike — breathes the same air.”

There are, though, formidable obstacles facing proponents of rapidly cutting China’s emissions. Robust economic growth remains imperative for leaders, who fear that slowing growth and rising joblessness would imperil the Communist Party’s rule. China remains dependent on coal, the source of about 70 percent of the country’s energy. And officials and companies in China are likely to resist steps they fear could jeopardize their industrial investments.

“They will not be happy to see that the investment in new capacity they made a few years ago may have to be scrapped,” said Wang Tao, an expert on climate change and energy issues at the Carnegie-Tsinghua Center for Global Policy in Beijing. “It really all depends on how quickly China can transform the current economic structure.”

In April, Mr. Xie, the climate change official, announced a reassessment of when and how high China’s greenhouse gas pollution could peak. “There is very limited room for putting more carbon emissions into the atmosphere,” said Yang Fuqiang, an expert on Chinese climate change policy at the Natural Resources Defense Council. “Determining when China could peak, and what the level will be, is extremely important for everyone and for working out a global pathway.”

The magnitude of that issue is evident in every Chinese city. Factories and homes run on power from plants that overwhelmingly use coal; and in the winter, many heating boilers in the north also burn coal. More cars and trucks crowd the roads. The expanding cities consume cement, steel and chemicals — all industries that emit large amounts of carbon dioxide.

China has been the world’s biggest emitter of carbon dioxide from fuel use since about 2006, when it passed the United States. In 2009, the Chinese government introduced a policy to reduce the carbon dioxide emitted in the production of each unit of economic activity by 40 to 45 percent by 2020, compared with levels in 2005. That means emissions grow along with China’s economy, but at a slower rate than if there were no improvements.

Even with such efforts, China’s size and feverish growth have pushed its emissions well past those of the United States. By 2011, China’s carbon dioxide emissions from fossil fuels accounted for 28 percent of the global total, and the United States’ for 16 percent, according to the Global Carbon Project, a consortium of researchers. The International Energy Agency estimates that China’s emissions grew by another 3.8 percent in 2012.

“I do not see anything coming out of China that would suggest a significant change in emissions in the short term,” said Glen Peters, a researcher at the Center for International Climate and Environmental Research in Oslo. “There would need to be some really radical policies to come out of China for a large change in the pathway to occur.”

Mr. Jiang, who has studied energy emissions for two decades, has that grand shift in mind. China must expand wind, solar and nuclear power beyond current targets, and curb heavy industry, forcing carbon dioxide emissions to peak within a dozen years, he argues. If China’s effort is accompanied by big emissions cuts by rich countries, he says, then there is a good chance of avoiding rises in the global average temperature of beyond 3.6 degrees Fahrenheit above the preindustrial average, which most governments have agreed is a dangerous threshold.

But other Chinese government experts said their country must not risk its prosperity on such a shift.

Wang Zheng, a researcher at the Chinese Academy of Sciences, estimated that China’s emissions were likely to reach their peak by around 2030 at up to almost a fifth higher than Mr. Jiang wants. “If we aim for earlier, that may mean wrecking stable economic growth and triggering an economic crisis,” Mr. Wang said.

Mr. Jiang said he would keep trying to persuade scientists and officials to back his proposal. Several years ago, some scoffed at his earlier, less ambitious idea for an emissions peak by 2030, which is now widely accepted.

“I’ve been in constant communication with the government,” he said. “They’re listening, and at least they haven’t yet said no.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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