China and green growth

If China succeeds in its decarbonisation drive, global pressure on India to decarbonise faster will mount

Can China become a global leader in defining the contours of green growth? It appears to be aiming at that, judging by the speeches made over the past year or so by Xi Jinping and Prime Minister Li Keqiang. 

The Chinese leadership has signalled its intention of refocusing development to give greater importance to the environment. The slogan “Make the skies blue again”, was voiced a year ago at the 19th party congress. At the National People’s Congress this year the government announced the establishment of two new ministries — Ministry of Natural Resources and Ministry of Ecological Environment — which will bring together units scattered over various agencies. 
 

From a global perspective what matters is whether this will translate into leadership on climate change. Over the past few years, China’s carbon emissions seem to have stabilised or grown minimally but China’s dependence on fossil fuel use was still 87 per cent of its primary energy consumption in 2015.  However, China’s decarbonisation campaign seems to be running at full speed. Last year it accounted for 54 per cent of the global investment in solar power and about 40 per cent of the global investments in renewables and energy-smart technologies (smart grids, battery storage, etc.) making a total of $132.6 billion,  12 times more than India’s clean energy investment in that year. 

In order to reduce their petroleum dependence they are moving on electric vehicles (EVs) at a very fast pace. In 2016, China became the country with the largest electric car stock, with about a third of the global total of 2 million EVs. With more than 200 million electric two-wheelers, 3.3 to 4 million low-speed EVs and more than 3,00,000 electric buses, China is also the global leader in the electrification of other transport modes. They now account for about 50 per cent of the EVs sold in the world. There is a programme of subsidies and recently they have spoken of joining the UK and France in setting a date for the banning of petroleum-based vehicles.

If China succeeds in this decarbonisation drive, its emissions may peak well before the 2030 date they have pledged, and the global pressure on India, whose emissions have been increasing at 4-5 per cent per year in this decade, to decarbonise faster will mount.

The primary driver of China’s environmental emphasis is the growth of an urban middle-class, well represented in the councils of the party, who are demanding not just jobs and income, which have grown rapidly, but a better quality of life. This is not very different from the way in which local environmental concerns became more prominent in the politics of the rich countries. The government has responded and, in terms of local air-pollution, the 2017 winter in Beijing showed a 35 per cent reduction in PM 2.5, partly because of good weather but also because of stringent measures enforced by the government.

But there is another factor that is driving the pace of decarbonisation in China. China faces what has been called the middle-income trap but is better described as a middle-income hurdle. China’s growth in recent decades has been based on the rapid expansion of labour intensive export-based manufacturing. As it reaches middle income status and wages rise, its competitive advantage in labour-intensive manufacturing gets eroded and its growing presence in markets provokes protectionist reactions. China has to move into higher technology products and move beyond imitation to innovation, and focus as much or more on domestic markets as on exports. This transformation is what could be called the middle-income hurdle and the decarbonisation drive is a first step in leaping over this.

Some relatively small countries such as South Korea and Taiwan have crossed this hurdle successfully. But China is a big economy and if it leaps across this hurdle it will challenge Western technological and economic dominance.

China’s renewable energy and electric vehicles programme seems to be designed and timed to secure an early mover advantage and a commanding presence comparable to what the US, Europe and Japan had in the petroleum and electricity-driven economies of the 20th Century. They have understood that economic strength in the decades to come will depend more on the command over frontier technologies than over natural resource. But they are prudent and are securing supplies of lithium and cobalt which these technologies require.

Illustration by Ajaya Mohanty

 

China’s view of the decarbonisation as an instrument for economic dominance fits in with the strategy of development outlined by Xi Jinping at the 19th Party Congress. Essentially China is planning a shift away from resource-intensive development to knowledge-intensive development. The Chinese government and Chinese companies are already investing heavily in artificial intelligence, robotics, automation, etc. These technologies thrive on big data and the  Chinese have fought off data colonialism and retained control on the data generated by their extensive e-commerce and e-payment systems by systematically excluding the big US players and promoting their companies like Tencent Holdings, Alibaba, Baidu, etc. They have also invested heavily in upgrading higher education and now have seven universities in China and five in Hong Kong in the top 200 universities in the 2018 Times Education Supplements ranking. India has none.

Xi Jinping’s projection of China as a protector of multilateralism and an open trading system fits in with this. His announcements recently, at the Boao Forum about liberalising trade and investment access to Chinese markets may have been a response to the trade war launched by the Donald Trump administration and may be mere lip service. But it is possible that the Chinese planners recognise that an openness to imports is greater for a knowledge-based economy than for one that relies on global value chains. The Belt and Road Initiative that extends China’s infrastructural reach well beyond its borders is a part of this outward orientation and drive for dominance.

The message for India is clear. As we approach the middle-income hurdle, if we do not get our act together on green growth, technology development, an ecosystem for innovation and quality education, we could end up replacing technological dependence on the West with dependence on China.
 

nitin-desai@hotmail.com