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At COP 15 in Copenhagen, China has announced that the country carbon emissions per unit of gross domestic product (GDP) will be reduced in 2020 by 40–45% with respect to 2005 levels (this commitment is in the Annex to the so called Copenhagen Accords). This has marked a point of departure from the long standing reference to the UNFCCC principle of “common but differentiated responsibilities”, which requires Annex 1 countries to take on the initial responsibility in reducing carbon emissions. China’s appeal to the historical responsibility of developed countries and their higher per casame pita emissions remains a very valid point, but its now undisputed role as the largest emitter in the world –with 25% more emissions than the second one, the US– doesn’t get unnoticed. Before and during COP 15, many countries have pressed China to take on action in controlling their very rapid emission growth.

An important political statement with an elusive metric

Although China has resisted demands from American and European negotiators to adopt binding limits on its emissions, arguing that environmental concerns must be balanced with economic growth and that developed countries must first demonstrate a significant commitment to reducing their own emissions, its -40-45% proposal can be considered an important political statement. However, the assessment of its implications in terms of emissions reductions has generated less consensus, given that specific assumptions are needed to convert the somewhat elusive metric of carbon intensity into the conventional one of quota targets.

Economic and emissions projections can be used to provide some intuition of how demanding is the intensity proposal. According to the Energy Information Agency of the US Department of Energy (EIA-IEO09), in 2020 China will have an economy of 16.9 Trillions USD (measured in 2005$, PPP) and energy related emissions equal to 9.4 GtCO2, and thus a carbon intensity of 0.56 tCO2/’000$; with an intensity in 2005 just above 1, the country is thus assumed to achieve the 45% reduction target in the so called Business as Usual scenario, without any additional effort.

Another well known energy outlook, provided by the International Energy Agency (IEA-WEO09), foresees a very close carbon intensity figure (0.55), reinforcing the argument that the Chinese proposal would not entail measures that are additional to the ones considered as baseline. What China commits to do is therefore its business as usual.

However, this interpretation is at odds with declarations that suggest that significant action will be required to achieve a decarbonization of the economy of this sort, released for example by the same IEA¹. Chinese commentators² have suggested that the objective will require significant investments and increased taxes on energy or emissions. Yet, looking at Chinese own forecasts doesn’t provide a different picture from the ones of foreign agencies: in the report that forecasts energy and emissions to 2050, produced by China’s Energy Resource Institute, the carbon intensity in the baseline is expected to fall within the 40-45% band. Indeed, and contrary to other countries such as India, the main sources of projections seem to agree on similar growths in emission (3% per year) and in the economy (8% per year), which yield the rate of decarbonization set forth in the Chinese proposal in Copenhagen.

It should be noted that Business as Usual scenarios incorporate significant investments in low carbon technologies: for example, according to the IEA, 114 GW of wind and nuclear will be in place in 2020, as compared to today’s 14. China has also committed to a significant energy efficiency improvement before 2010. Yet, coal is expected to continue to dominate the energy mix, with the astonishing installed capacity in 2020 of almost 1000GW, twice as much as today. It thus remains unclear whether the proposed climate policy will achieve more than the already demanding “natural” evolution of baseline.

Economic development and carbon intensity

History provides some, though partial, guidance over the future. In the 15 years preceding 2005, China’s carbon intensity has decreased by roughly 44%, the same number that is forecasted to 2020, either as baseline or policy. Yet, significant variations can be detected over time. In Figure 1, we plot the historical carbon intensity for China, as well as for South Korea and Taiwan³. China achieved a remarkable drop from its initially extremely high carbon intensity, but then experienced a sudden reverse of this trend in the early 2000’s, that has ceased only after 2004. Though this well noticed fact can be imputed to a swift reallocation of the economic activity towards energy intensive sectors such as cement and aluminum, and to potential misreporting of emission inventories around the turn of the century, it also serves as a reminder that steady intensity improvements should not be given for granted.

Figure 1. Carbon intensity versus per capita gdp (log scales). Historical data for China (1988-2008), South Korea (1980-2005) and Taiwan (1975-2006), and projections to 2020 from EIA IEO09, IEA WEO09 and ERI. The two horizontal lines indicate the carbon intensity reduction target of 40-45% with respect to 2005 – click the picture to enlarge

Indeed, looking at a sufficiently large panel of countries doesn’t provide an unequivocal relation between economic development and carbon intensity⁴. Carbon efficiency gains are observed in many circumstances, but in widely varying relation to the economy. Figure 1 provides some evidence for two neighboring countries. Both Taiwan and Korea started from lower levels of intensity than China for similar level of income, potentially because both countries rely almost exclusively on imported energy and do not have significant coal resources. Over time, both managed to improve their intensity, though at rates lower than the historical (and projected) one for China. Other coal rich countries in transition through similar levels of intensity or wellbeing provide different evidence. Poland managed to decrease its intensity roughly one to one with its economy. South Africa didn’t essentially get any efficiency gain.

Therefore, the historical evidence provide us with only limited confidence to believe that naturally, as China’s economy develops from the roughly 5000$/per capita of today to the 11500 $/per capita in 2020, the carbon intensity will be driven down by a growing role of the service sector and of technology. That is, the projections reported in Figure 1 indicating a baseline straightly approaching the climate target might well be correct, but it also plausible that deviations from the historical rates of decarbonization would result in a much more demanding job.

Assessing the challenge of the carbon intensity target

By regressing per capita GDP on carbon intensity (in logs), we can estimate the carbon elasticity of per capita income for different countries and time spans. Looking at the past 20 years (1988-2008), China’s carbon elasticity is about -0.5, meaning that every 1% of increase in per capita income has been accompanied by 0.5% decrease in carbon intensity. This value is also true for Taiwan, for the 5-11.5 K$/cap range assumed to be for China between now and 2020. Using this value for projecting forward, would result – as noted above – in a carbon intensity reduction in line with the climate proposal, of about 41% with respect to 2005. Indeed, despite using a much richer modeling approach, this is what international and national scenarios are projecting.

Table1. Implications of different elasticities on carbon intensity and emissions in China in 2020 – click the table to enlarge

Using lower elasticities would alter the picture. For example, since 2004 (and according to provisional emission estimates to 2008) China’s carbon elasticity has been around -0.3. Estimates for South Korea – for a similar range of per capita income – yields a value of -0.25. In Table 1 we show what would happen if China follows such rates of decarbonization. The carbon intensity reductions for these two lower values would be lessened, consequently, to 27% and 23% respectively. Such lower rates would result in higher emissions, or equivalently in more emission reduction had the climate proposal of 40-45% to be attained. Table 1 also shows that an elasticity value of -0.3 would result in a mitigation effort of -26%, and that would exceed -33% for the lower case.

These results indicate that assessing the challenge of the carbon intensity target proposed by China is not an easy task. If China were to continue on its long term historical trend, then the 40-45% objective would essentially yield nothing more than the baseline. No additional effort. No leadership to fight climate change. The Copenhagen Accords would be even emptier than what is now perceived. This is what energy scenarios seem to predict to be the most likely case. Yet, the significant variations over time and across countries suggest that the proposal could turn into a serious mitigation policy, and possibly a very challenging task, even for somewhat lower rates of decarbonization of the Chinese economy.

1. The IEA Chief Economist, Fatih Birol, told Nature that “if the target is met, it would have significant implications for China and the rest of the world.” Nature, “China’s climate target: is it achievable?”, Vol 462|3 December 2009 [↩]
2. See for example http://www.chinadaily.com.cn/china/2009-12/04/content_9113522.htm [↩]
3. Data sources for GDP, population and emissions: World Development Indicators, CDIAC, Penn World Tables [↩]
4. Similar suggestions hold for economic development and per capita emissions, a topic widely analyzed in the so called environmental Kuznets curve literature [↩]