CREDIT: <a href="">calwhiz</a> (<a href="">CC</a>).
CREDIT: calwhiz (CC).

Policy Innovations Digital Magazine (2006-2016): Briefings: China's Ecological Pivot

Jul 2, 2013

The 2nd World Cultural Forum held this spring in Hangzhou, China witnessed what may be an epochal pivot by the Chinese leadership toward an ecological future. The 500-person conference, with a mix of Chinese and international invitees, made it explicit that China and the rest of the world need to take aggressive steps to restore ecological harmony and balance. The common understanding was that the hour is late and much must be done.

Where the Forum departed from the usual litany of ecological woes was that some of the people present had the power to implement solutions. Senior Chinese officials explicitly recognized the need to embrace a reduction in the rate of growth for the sake of ecological improvement, and the Hangzhou Declaration, approved by the conference, calls for a global commitment to building an ecological civilization. Chaired by Yu Zhengsheng of the Chinese People's Political Consultative Congress—a Politburo member and the fourth-most powerful politician in China—the conference did not pull punches.

I was asked by the organizers to prepare a plenary speech [DOC], detailing a business-centered approach to ecological change supported by government leadership. I defined an ecological civilization as one where economic growth equates with ecological improvement. The business value proposition to drive the transition to renewables and efficiency is that we can extract profits from the trillions of dollars currently spent on fossil fuels and related infrastructure.

A Twenty-Year Plan for Transformation

I outlined to the plenary several policy tools that could drive a 20-year transformation to renewable energy—a crucial, but clearly not sufficient, linchpin of any ecological future:

Mandate an increasing percentage of renewable energy generation and storage on continental, regional, and local scales as relevant; at the same time, mandate conversion of coal to zero emissions or leave it in the ground, with all current coal subsidies redirected to emissions reductions. The capital cost of renewable generation continues to decrease rapidly, and it is already dramatically cheaper to save a kilowatt of energy than it is to generate one. Requiring that an escalating percentage of energy be supplied by renewables would catalyze further cost reductions.

Advanced Energy Performance Contracting on a utility scale, combining renewable energy revenues and efficiency savings, could finance mass retrofits on the city and utility level through market capital. These would be competitively bid by installation contractors on a mass scale with revenues obtained from utility rates. This is a means of building the renewable energy future without any tax increases, and of reducing long-term energy bills.

Impose resource royalties on all energy consumed, to build permanent sovereign funds for global investment in sustainability. The world should not be divided between a rich minority living in relative ecological and economic security, and a poor majority suffering from ecological and economic deprivation. The use of severance taxes on natural capital, undertaken by the Norway Oil Fund and Alaska Permanent Fund, is a logical way to raise revenue for ongoing capital investment in efficient renewables for the poor. Severance taxes should be imposed on both polluting and depleting fossil energy resources, as well as on renewables obtained from the global commons.

Establish a Global Per Capita Energy Standard of 70 gigajoules (19,443 kWh) and three tons of CO2 per person per year. Rich nations are far above this standard, while the global poor are not. Fees paid for excess energy use through small assessments on utility bills (about one cent per kWh) called Sustainability Assessments for Valuing the Ecosphere (SAVE) could be used to help capitalize Permanent Funds to be invested in sustainable development for the poor, administered by the United Nations.

A global per capita energy standard would have a profound impact on transportation. For example, a car that gets 30 miles per gallon releases 3.33 tons of CO2 per year per 10,000 miles (about 20 pounds per gallon of gas), already exhausting the annual per capita CO2 allowance. In contrast, an electric car using renewable grid power would consume 30,000 kWh per year to travel 10,000 miles (at three kWh per mile). This is 10,557 kWh in excess of the global entitlement, but with minimal carbon. A SAVE payment of one cent per kWh would mean an annual payment of $106 for using renewable resources to run your car. One hundred million drivers of electric vehicles would pay $10 billion per year into a global SAVE fund for renewable development.

Establish a Global Initiative for Climate Cooling (GICC) to develop mechanisms and market rules to facilitate sustainable investments in energy, cooperating with SAVE and Permanent Funds. The Global Initiative for Climate Cooling would catalyze sustainable development at all levels, from the local to the national and global, by developing appropriate market mechanisms and market rules to help finance the renewable energy transformation.

One example would be the development of renewable energy hedge agreements between energy users and energy developers. A 20-year renewable hedge would allow energy developers to obtain an assured and adequate long-term income stream to facilitate market finance, while an energy user, for example, a consortium of institutions, or housing complexes, would assure long-term reasonable energy costs with zero capital expense.

In sum, enormous economic and ecological advantage will flow to those who develop low-cost and low-pollution energy. We can make the price system work to send signals for sustainability. For example, sustainable goods and services will gain market share and become more profitable if countries adopt ecological consumption taxes, such as an ecological value-added tax. VAT is already one of China's leading revenue sources.


Hangzhou as an Example of the Ecological Challenge

The city of Hangzhou is renowned for its beauty. Tree-lined avenues flow around the iconic West Lake with its classic buildings. It is a sister city of Boston. At the same time, the streets are packed with cars—more every week. It took two hours to drive ten miles from the airport in rush hour traffic worse than Boston, and an hour back to the airport on a Sunday. Towering construction cranes are ubiquitous. The air, of course, is no longer pristine.

The Chinese leadership understands the global and domestic ecological crises and has the political power to implement long-term plans. The astounding rise of China as a global economic power is a reflection of this. And so is the rise of China as the current global carbon emissions leader, and as a customer of U.S. coal exports. At the same time, China is the leader in solar photovoltaic production and solar hot water use. Its per capita energy consumption remains low compared to the United States, though its historic contribution to total emissions is fast catching up at current rates.

The Chinese leaders I met with were willing to look at this reality and make appropriate changes. The sentiment was shared by one of the Forum organizers, Erwin Lazlo, an eminent European scholar, two-time Nobel Peace Prize nominee, and founder of the Club of Budapest. Lazlo felt that the embrace of the program I presented was an enormously hopeful sign and that we could work together on advancing it.

The WCF made clear that harmony and balance, both social and ecological, is deeply in accord with Chinese tradition. China may morph once again, from industrial to ecological leader, over the next few decades. If China succeeds in making an ecological turn, the implications will be profound. It also raises the question: If China leads will the United States follow?

Like the Arab Spring before it, an Ecological Spring may be blooming in the East.

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