The China Syndrome
Published by MAC on 2014-11-26Source: Business Spectator
What’s motivating China to join the global climate change fight?
Around a decade ago, MAC took the decision to prioritise China on its website. It was a no-brainer: following China's accession to the World Trade Organisation in 2001, the country swiftly became the largest single consumer of a raft of metals and materials.
Indeed, without such towering demand, arguably the world extractives industry would have suffered enormous structural changes, resulting in the collapse of many junior mining companies, and the "downsizing" of bigger ones.
Far less clear was how long this bull market would last in a sector that is axiomatically characterised by cycles of economic boom-and-bust. The likes of BHP Billiton and Rio Tinto had reckoned bullish demand would be sustained at least until 2020.
Then came what investor Warren Buffet imaginatively dubbed the "financial nuclear winter" of 2008-2009. While many mining projects were mothballed or cancelled over succeeding years, China still continued investing in mines both at home and abroad.
However, that pattern began to alter some three years ago, and that's now becoming a radical transformation.
MAC has tried to reflect those changes as they occur. Above all we've pointed out that "civil society" actions, from the community level up, have become a prime determinant of Beijing's resources' policies at a level few could envisage ten years ago.
China's joining with the USA in forging a broadly-welcomed climate change agreement a fortnight ago is one aspect of this.
According to Xie Zhenua, China's chief architect of enviromental policy: "One of the biggest allies for China’s commitment to fight climate change is the rising tide of social discontent in the country".
As Business Spectator's Peter Cai puts it in the following article: "It is not the first time that Beijing has used its commitment to international treaties to overcome domestic resistance to the implementation of a major economic reform agenda".
Cai quotes former premier Zhou Rongji: "We must have an ambitious and enforceable target and build a sustainable economic model around that target. If we don’t do that and continue the business as usual approach, the people will not accept that” .
There's no crystal ball available to tell us what forsaking this "business as usual" approach will mean in five years time. China's clinging to nuclear power and exploitation of shale gas will seem to many to be incompatible with its promotion of renewable energy.
But, already, the regime's wholesale closure of many polluting coal and iron mines, along with other other plants, is having a transformative effect at home and - to a growing extent - on the choices being imposed on the global mining industry.
[Comment by Nostromo Resarch]
What’s motivating China to join the global climate change fight?
Peter Cai
Business Spectator (Australia)
26 November 2014
At the 2009 Copenhagen climate talks, former Prime Minister Kevin Rudd used profanities to savagely attack the Chinese government over its stance on reducing carbon emissions.
Beijing has been blamed as one of the principal culprits for preventing the global community from reaching a climate change agreement.
However, Beijing and Washington made a surprising joint statement on combating climate change against a background of increased antagonism between two countries at the recent APEC Summit in Beijing. Many commentators and analysts have been stunned by the agreement after years of obstructionist ploys from both countries.
Under the agreement, the US would cut its 2005 level of carbon emissions by 26 to 28 per cent before 2025. China would cap its carbon emissions by 2030 and promises to source 20 per cent of its energy from renewable sources.
Since the initial euphoria has dissipated, many more people have started to question China’s commitment as well as the motives behind this surprising U-Turn in its attitude towards global climate change policy.
In a comprehensive interview with Caixin magazine, China’s chief climate change negotiator and chief architect of its environmental policy, Xie Zhenhua, explains Beijing’s new climate policy and its commitments under the agreement.
Xie, the deputy chairman of the powerful National Reform and Development Commission, the country’s strategic planning body, says the Chinese government is committed to use international agreements to force major policy changes at home.
“The party central committee and the State Council are very clear about our goal. We want to use international conventions to force structural change, to engineer a shift in direction and increase the quality and efficiency of our economic development,” the 65 year old veteran climate change policy maker told Caixin.
He explains China’s commitment to global climate change action is not about caving in to international pressure; it is about China’s self interest. Both Chinese president Xi Jinping and Premier Li Keqiang have made similar points in the past about the necessity for China to see climate change as an opportunity to force structural change at home.
It is not the first time that Beijing has used its commitment to international treaties to overcome domestic resistance to the implementation of a major economic reform agenda. Former Premier Zhou Rongji, who enjoys a reputation as a reformer, used China’s ascension to the WTO to force major economic reforms at home including the vexed issue of state-owned enterprise reform.
“China’s economic development model is crude. We are facing so many problems including resources and environmental constraints. We must have an ambitious and enforceable target and build a sustainable economic model around that target. If we don’t do that and continue the business as usual approach, the people will not accept that,” he said.
In order for China to fulfil its commitment to cap carbon emissions by 2030 -- which is 10 years earlier than expected -- the country needs to tackle the climate change problem from two broad directions: improving energy efficiency and dramatically increasing the use of renewable energy.
Renewable energy sources account for 10 per cent of China’s energy consumption and the country wants to lift to 20 per cent at the end of 2030. Xie says China will undertake massive investment in all renewable sectors including nuclear, solar, hydro, wind and bio energy. He says the country has the largest nuclear energy sector under construction in the world.
Xie says the country needs to adopt smart gird technology to better incorporate wind and hydro energy into its transmission network. At the moment, vested interest groups prefer coal energy over wind and other renewable sources. China is also seeking better cooperation with the United States over the development of shale gas.
One the energy efficiency front, China’s standard is considerably lower than the international average. Xie argues the key problem is the prevalence of old and inefficient equipment. “Once we agree to an official target, all new projects must use the latest equipment with the highest standards and we will upgrade old equipment at the same time,” he said.
One of the biggest allies for China’s commitment to fight climate change is the rising tide of social discontent in the country. Xie, China’s lead negotiator, admits the country’s worsening environmental crisis has forced the government to act, saying pressure from domestic constituents is more important than pressure from foreign governments.
“The smog problem has accelerated our resolve to commit to tougher targets, it is much easier for the government to mobilise resources. When the government announced emission targets before, people felt it was quite remote. But people take it far more seriously because of the smog,” he told Caixin.
He recalled an incident when Chinese readers berated him for arguing for more lax emission standards for China. “Why are you putting up such a fight? The country is going down the sink,” he recalled one reader's remark to him.
On the issue of whether China’s commitment would be binding, he said the country’s climate change targets would be incorporated into China’s future five-year plans. These goals will be ratified by the National People’s Congress, the country’s parliament, making them legally binding.