Greenovation Hub: Opportunities for China’s energy transition during the 13th Five-Year Plan

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On March 16th, 2016, “the 13th Five-Year Plan for National Economic and Social Development (The Plan),” the longest plan ever, was approved by the Fourth Session of the Twelfth National People’s Congress. The Plan demonstrates China’s determination to achieve low-carbon prosperity through accelerating its clean energy transformation.

 

On March 16th, 2016, “the 13th Five-Year Plan for National Economic and Social Development (The Plan),” the longest plan ever, was approved by the Fourth Session of the Twelfth National People's Congress. The Plan demonstrates China’s determination to achieve low-carbon prosperity through accelerating its clean energy transformation.

 

The Plan emphasizes the following key objectives:

 

  1. To control the total energy consumption under 5 billion tons of standard coal equivalent (tsce) before 2020;
  2. To reduce energy consumption and carbon dioxide emissions per unit of GDP by 15% and 18% respectively by 2020 compared to the levels of 2015;
  3. To raise the ratio of the number of days with the good air quality over 80% in urban area by 2020, an increase of 76.7% from 2015;
  4. To develop new energy vehicles by encouraging the use of new energy vehicles as city buses and taxis. The cumulative production and sales of new energy vehicles will reach 5 million units in the next five years.

 

It is the most exciting that a quantitative goal to reduce PM2.5 was listed into the plan for the first time. The government is putting in significant efforts to promote the mode shift of economic development and energy transformation. The improvement of the environment will also improve public health and people’s well-being by bring blue sky, white clouds and fresh air to our daily life.

 

The Plan also includes energy-related targets. G:HUB’s interpretation is as follows:

 

On the Total Energy Consumption Control

 

The Plan set the target to control the total energy consumption within 5 billion tons of standard coal equivalent by 2020. As coal consumption continued to decline two years in a row, and clean energies achieved historic growth in 2015, The Plan sets mandatory energy consumption control for the first time, sending a clear signal of promoting energy structural optimization.

 

At the first sight of it, 5 billion tsce of total energy use control seems to be 200 million tsce more than the previous objective set in the Strategic Action Plan for Energy Development (2014-2020) proposed in 2014, which set forth to control the total primary energy consumption at about 4.8 billion tsce by 2020. In fact, due to the revision of the energy data in 2015 by National Bureau of Statistics, the total energy consumption of 2013 was updated to 42 billion tsce from 3.75 billion tsce, which creates a difference of 450 million tsce. Thus, with this difference included, the previous target set in 2014 should be 48 + 4.5 = 5.25 billion tsce. Based on the revised energy data, the new target in The Plan is, therefore, actually 250 million tons more rigid than the 2014 target in the Energy Development Plan.

 

A recent study shows that, on the new path of the ongoing economic transformation, if the nation could over-deliver its energy intensity targets in the next five years, just as it has done during the 12th Five-Year Plan, China is likely to be able to control the total energy consumption within 4.8 billion tsce by 2020, which will accelerate its optimization of energy structure and transformation to green and low-carbon economy.

 

On the Carbon Intensity Target

 

The Plan put forward to reduce energy consumption and carbon dioxide emissions per unit of GDP by 15% and 18% respectively by 2020 compared to the levels of 2015. During the 12th Five-Year Plan period, China actually reduced its carbon intensity over 20%, over-delivering its original target of 17%. With industrial restructure, technology advancement and the promotion of energy efficiency, China is able to reduce carbon intensity by 18% during the 13th Five-Year Plan.

 

During the Paris Climate Summit, based on its solid domestic action, China adopted a positive attitude and flexible position which is critical to reach the Paris Agreement, and further drove the global climate governance into a new era.

 

As the global CO2 concentration keeps smashing the records, there still exists a gap between the current efforts and the ambition required to achieve the target of controlling the global average temperature increase within two-degree compared to the level of pre-industrial period. In 2017 countries will evaluate the gap between the current pre-2020 ambitions and ambitions required to achieve the two-degree target. Xie Zhuanhua, China's special envoy for climate change, said in an interview that China is expected to over-deliver the pre-2020 climate targets. China could seize the opportunity to raise the target of carbon intensity reduction from 40-45% to 50% compared to the level of 2005, so as to generate more momentum to global climate actions.

 

About the Coal Consumption

 

According to the communiqué of National Bureau of Statistics, after a 2.9% drop in 2014, China's coal consumption continues to decline by 3.7% in 2015; while the generating capacity in 2015 increased by 33.5% for wind power and 73.7% for solar power, achieving a historical growth.

 

China has announced that it will close 1000 coal mines this year, and by 2020 the non-hydropower renewable energies will account for over 9% of the total energy mix. These targets outline a bright future for renewable energy industry, and generate stronger action to over-deliver the Pre-2020 climate target. China Energy Research Society predicts that by 2030, China’s non-fossil energy will reach up to 22% of the total energy consumption and that carbon emissions will likely peak by 2025. Another recent report from London School of Economics shows that China's carbon emission peak may have already arrived in 2014, which shows again that the coal consumption cap is the core driver of the total energy consumption control. Despite the uncertainties, China's carbon emissions peak may come earlier than expected, as long as the coal consumption continues to fall sharply, and the decreased carbon emissions caused by coal use drop exceed the growing carbon emissions of increasing oil and natural gas use.

 

Conclusion

 

While poverty eradication is the top priority of the 13th Five-Year Plan, the poor are the most vulnerable to climate change impacts. At present, the National Development and Reform Commission and the China Meteorological Administration are compiling the 13th Five-Year Plan of Meteorology, as climate change is a systematic risk and has been regarded as a matter of national security. Improving air quality and accelerating energy revolution could help the poverty-stricken area to enhance their ability to deal with climate change. In addition, the Plan balances between reaching the emission reduction targets in a resource-constraint world and the stable economic growth, which will boost the confidence of other emerging economies to set off a transition towards a low-carbon economy amid global economic downturn. If China can over-deliver its goals by 2020, it would mark an earlier arrival of China’s Kuznets Curve inflection point.