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UNIVERSITÀ DEGLI STUDI DI MACERATA DIPARTIMENTO ECONOMIA E DIRITTO CORSO DI DOTTORATO DI RICERCA IN ECONOMICS AND MANAGEMENT - SOCIAL SCIENCES CURRICULUM MODELLI QUANTITATIVI PER LA POLITICA ECONOMICA CICLO XXIX TOWARD A NEW SUSTAINABLE DEVELOPMENT FOR CHINA: AN ENVIRONMENTAL MULTISECTORAL MODEL USING A SOCIAL ACCOUNTING MATRIX RELATORI DOTTORANDA Chiar.mi Prof. Claudio Socci, Francesca Spigarelli Dott: Barbara Menatta COORDINATORE Chiar.mo Prof. Maurizio Ciaschini ANNO 2017 2 Contents INTRODUCTION…………………………………………………………………………………..7 FIRST SECTION: 1. GREEN GROWTH AND SUSTAINABLE DEVELOPMENT FOR CHINA: THE NEW CHALLENGES……………………………………………………………………..….12 1.1 China: the new approaches to sustainable development…………………………12 1.2 The Chinese natural resources context and issues……………………………….16 1.2.1 Natural resources……………………………………………...17 1.2.2 Forests………………………………………………………...17 1.2.3 Land and degradation…………………………………………18 1.3 Environmental issues and management………………………………………….20 1.3.1 Air pollution…………………………………………………..22 1.3.2 Water pollution……………………………………………….27 1.3.3 Solid Waste and pollution…………………………………….29 1.3.4 Climate Change……………………………………………….30 1.4 Environmental protection-oriented policies and programs: an overview………..31 1.4.1 The New Environmental Law………………………………...36 1.4.2 Public Utilities Reform………………………………………37 1.4.3 Integrated reform plan for the promotion of the green projects………………………………………………………..38 1.4.4 National method of issuing of the Green Bonds……………..39 1.5 China's energy transition: pathways for low carbon development………………41 SECOND SECTION 2. INTRODUCTION TO MULTISECTORIAL ANALYSIS: THE CONSTRUCTION OF SOCIAL ACCOUNTING MATRIX FOR CHINA FOR THE YEAR 2011………………45 2.1 From Input-Output table to Social Accounting Matrix…………………………...45 2.2 The Social Accounting Matrix………………………..…………………………..48 2.3 Environmental Accounting Extensions Framework………………………………54 2.4 Why SAM?..............................................................................................................57 2.5 Assessment of China’s economic data and literature review……………………..58 2.6 Construction of Social Accounting Matrix for China for the year 2011….………61 3 2.6.1 Input-Output Table……………………………………………...68 2.6.2 Block of value added……………………………………………72 2.6.3 Block of institutional sectors……………………………………75 2.6.4 Block of Capital Accounts……………………………………...77 2.6.5 Block of the rest of the world…………………………………...78 2.7 Balancing procedure……………………………………………………………...78 2.8 Conclusions part I…………………………………………………………………80 3. EXTENDED MULTISECTORAL MODEL FOR ENVIRONMENTAL CHINESE ISSUES…………………………………………………………………………………………82 3.1 The impact of income on environmental issues…………………………………..82 3.2 Principles of Multisectoral analysis: Miyazawa’s model…………………………85 3.3 SAM base model………………………………………………………………….88 3.4 The extended multisectorial model……………………………………………….92 3.5 Multiplier analysis………………………………………………………………...99 3.6 Modelling of CO2 Emissions…………………………………………………….101 3.7 Recent China’s policies and plans on Energy and CO2 emissions……………...106 3.8 Policy evaluation with traditional multiplier approach…………………………108 3.9 Conclusions second section……………………………………………………...115 THIRD SECTION 4. CHEMICAL SECTOR AND NEW SUSTAINABLE OPPORTUNITIES: ICA GROUP GREEN STRATEGY IN CHINA…………………………………………………………...118 4.1 Introduction……………………………………………………………………...118 4.2 Empirical research: methodology………………………………………………..120 4.3 Ica Group: the company’s history, strategy and international expansion………..122 4.4 Why China is strategic for ICA: chemical sector and “green” opportunities…....127 4.5 The roles of cultural distance and organizational differences: Ica’s strategy……132 4.6 A strategic alliance for the Chinese market……………………………………...135 4.7 The difficulties that Ica group was facing in China……………………………..140 4.8 Conclusions third section………………………………………………………..141 REFERENCES……………………………………………………………………...………..143 APPENDIX…………………………………………………………………………………...152 4 List of Figures Figure 1. Land Characteristic…………………………………………………………….…19 Figure 2. CO2 Emissions from fuel combustion -IEA (Mt of CO2) …………….……….…24 Figure 3. Sulfure Dioxide Emissions (SO2) by Region…………………………………….26 Figure 4. Nitrogen Oxides Emissions by Region (2015)…..................................................26 Figure 5. Chinese rivers by pollution level. % of evaluated length with worse than Grade V water………………………………………………………………………………….…….27 Figure 6. Economic circular flow……………………….………………………………......51 Figure 7. Synthetic scheme of SAM…………………………….………………………….53 Figure 8: National Accounting Matrix and Environmental Account……………………….57 Figure 9. A scheme of China SAM for the year 2011……………………….……………...68 Figure 10. Aggregates from China SAM for the year 2011……………….……………….69 Figure 11. Income Approach Components of Gross Regional Product (2011) ………….…72 Figure 12. Components of value added for industry………………. ……………….…...…73 Figure 13. Primary distribution of income for institutional sectors.……………………….76 Figure 14. Composition of final consumption and gross savings for institutional sector….78 Figure 15. Environmental Kuznets curve……………………………………………..…….85 Figure 16. Representation of extended output circular flow…………….…………….…...95 Figure 17. Income circular flow used into the multisectoral model…………………………97 Figure 18. Intensity coefficient of use of CO2 from industrial sector in 2011………….…105 Figure 19. Share pollution determined by final demand…………………………….…….105 Figure 20. Reduction of China carbon intensity from 2005 levels………………….…….108 Figure 21. CO2 kt emission changes of the traditional policies for Electricity, Gas and Water Supply………………………………………………………………………………….….112 Figure 22. Level of output changes of the traditional policies for Electricity, Gas and Water Supply…….……………………………………………………………………………….112 Figure 23. CO2 kt emission changes of the traditional policies for Health and Social Work………………………………………………………………………………………114 Figure 24. Level of output changes of the traditional policies for Health and Social Work………………………………………………………………………………………114 Figure 25. CO2 kt emission changes of the combined policy…………………………….115 5 Figure 26. Levels of total output changes determined by the effect of combined policies……………………………………………………………………………………115 Figure 27. ICA GROUP Turnover in EUR 1998-2013……………………………………124 Figure 28. R&D Expenditure on GDP Italy and OECD…………………………….…….124 Figure 29. % of overseas turnover ICA GROUP………………………………….……….126 Figure 30. Countries (in blue) where ICA Group sell………………………….………….127 Figure 31. Chinese Inward and outward foreign direct investment flows……………. ….129 Figure 32. Chinese leadership in manufacturing……………………………………….….130 Figure 33. Foreign direct investment: CHINA Inward and outward flows, annual 1982- 2014 (milions of USD)……………………………………………………………...…….131 Figure 34. Hofstede’s cultural dimension – comparison…………………….……………135 Figure 35. ICA structure in China Source: ICA Group sources……………………….….137 Figure 36. Representation ICA CHINA’s market penetration strategy…………………..139 Figure 37. ICA sales forecasts China Source: ICA Group data base…..…………………140 List of Tables Table 1. CO2 emissions from fuel combustion by sector in 2014…………………….……23 Table 2. Main Data sources for China’s SAM construction……………………………….64 Table 3. Industry classification (comparison)……………………………………………...73 Table 4. Endogenous and exogenous accounts in a SAM………………………………….89 Table 5. Top Ten Sectors for CO2 emissions………………………………………...……105 Table 6. Main aggregate results through the Leontief Multiplier (milions of YUAN).......113 Table 7. Process of case study research……………………………………………………122 6 Introduction In most known definition, given by Brundtland report, sustainable development means integrating the economic, social and environmental objectives of society, in order to maximize human well-being in the present without compromising the ability of future generations to meet their needs (UN, 1987). This requires seeking mutually supportive approaches whenever possible, and making trade-offs where necessary. Sustainable development is not an activity that has to be left to the long term; rather, it constitutes a set of short, medium and long term actions, activities and practices that aim to deal with immediate concerns while at the same time address long-term issues. Achieving sustainable development requires far reaching policy and institutional reforms and the involvement of all sectors at all levels. In recent years, sustainable development has been representing an important economic policy objective for World Countries as a consequence of the strong awareness for climate changes and the ensuing environmental damage. Environmental policies generally consist on a set of measures oriented to improve efficiency on energy consumption and reduce inefficient behaviours. The use of such instruments, aimed to reduce the amount of emissions and promote environmental conservation according to international agreements, in some cases is still discouraged by politicians and governments which interpret this measures as burdens to economies. After years of difficult dialogue and strong debate with the Western Countries on issues related to environmental protection and reduction of CO2 emissions, the environmental emergency has officially entered in the China’s Government agenda. This is certainly a major step towards the achievement of a unique action against the climate change concern, however, the environmental issue in China must be faced and debated like a “cultural revolution” that engages all the actors