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China Council for International Cooperation on Environment and Development (CCICED) China’s Low Carbon Industrialization Strategy CCICED Task Force Report CCICED 2011 Annual General Meeting November 15th, 2011 CCICED LCIS Task Force Task Force Members Co-chairs*: Feng Fei, Director-General of the Industrial Economics Research Department, Development Research Center, the State Council of the People's Republic of China (DRC) Bernice Lee, Research Director for Energy, Environment and Resource Governance, Chatham House Task Force Members*: Xu Heping, Director of Research Office, Ministry of Science and Technology of the People's Republic of China Dai Yande, Vice-Director of Energy Research Institute, National Development and Reform Commission of the People's Republic of China (ERI) Su Ming, Vice-Director of Research Institute for Fiscal Science, Ministry of Finance of the People's Republic of China Zhang Xiliang, Professor of Institute of Nuclear and Low Carbon Energy Technology, Tsinghua University Wang Qingyi, Professor of China Coal Information Research Institute Knut Alfsen, Head Research Director, Centre for International Climate and Environmental Research – Oslo, Norway Tomas Kåberger, Chair, Japan Renewable Energy Foundation (formerly Director General of Swedish Energy Agency) David Strangway, former President, University of British Columbia and founder, Quest University Canada Kandeh K. Yumkella, Director General of United Nations Industrial Development Organization. Senior Advisor: Björn Stigson, CCICED Member, President of World Business Council for Sustainable Development (WBCSD) Coordinators: Wang Jinzhao, Associate Research Fellow of the Industrial Economics Research Department, DRC Felix Preston, Research Fellow, Chatham House Research support team: Liang Yangchun, Research Fellow, DRC Wang Xiaoming, Associate Research Fellow, DRC Wei Jigang Research Fellow, DRC Zhou Fuqiu, Research Fellow, ERI Meng Hui, Assistant Research Fellow, ERI Page 2 of 200 CCICED LCIS Task Force Chai Qimin, Assistant Professor at Tsinghua University Gemma Green, Program Manager, Chatham House Jens Hein, Program Coordinator, Chatham House Lucy Ellinas, Program Coordinator, Chatham House Antony Froggatt, Senior Research Fellow, Chatham House Will Blyth, Associate Fellow, Chatham House Margaret May, Publications Editor, Chatham House Natasha White, Research Assistant, Chatham House James Norman, Research Assistant, Chatham House Wang Guoqian, Associate Operations Officer, International Finance Cooperation, The World Bank Group (formerly Climate Change Adviser at DFID) Edward Clarence-Smith, Representative of UNIDO in China Morgan Bazilian, Special Advisor to the Director-General of UNIDO Dolf Gielen, Chief of the Industrial Energy Efficiency Unit, UNIDO Bettina Schreck, Assistant Industrial Development Officer, UNIDO Karen Sim, Project Officer, President's Office, WBCSD Philip Reuchlin, Assistant to the President, WBCSD Mari Kurozumi, Institution for Sustainable Energy Policy Participants from CCICED: Zhu Guangyao, Secretary-General of CCICED Arthur Hanson, CCICED Member and International Chief Advisor Shen Guofang, Chinese Chief Advisor Fang Li, Assistant Secretary-General of CCICED, Deputy Director-General of Foreign Economic Cooperation Office, MEP Li Yonghong, Director of CCICED Secretariat Yu Hai, Member of CCICED Chief Advisor’s Supporting Team Li Yong, Program Officer, CCICED Secretariat Zhang Jianyu, Coordinator, CCICED Secretariat Translation: Sam Geall, Deputy Editor, China Dialogue Tan Copsey, Development Manager, China Dialogue * Co-Chairs and Task Force members serve in their personal capacities. Page 3 of 200 CCICED LCIS Task Force Contents Key Messages ................................................................................................................. 9 Report Structure ......................................................................................................... 10 1 INTRODUCTION AND INTERNATIONAL CONTEXT ............................. 11 1.1 A changing global economic landscape ......................................................... 12 1.2 Industry and the global low carbon economy .............................................. 17 1.3 International experience of low carbon industrialization policies ............. 26 1.4 Accelerating innovation ................................................................................. 44 2 THE FOUNDATION OF AND CHALLENGES FOR CHINA'S LOW CARBON INDUSTRIAL TRANSFORMATION .................................................................. 52 2.1 Domestic Background .................................................................................... 52 2.2 A strong foundation ........................................................................................ 63 2.3 Overcoming the challenges ............................................................................ 72 3 LOW CARBON INDUSTRIALIZATION PATHWAYS ............................... 77 3.1 A key component of the low carbon economy .............................................. 77 3.2 Key dimensions: efficiency, restructuring and the circular economy ........ 82 3.3 Energy-intensive and emerging strategic industries are the two pillars .... 93 3.4 The pivotal role of innovation ........................................................................ 95 4 THE ROLE OF ENERGY INTENSIVE INDUSTRY ..................................... 97 4.1 Electric Utility Industry ................................................................................. 97 4.2 Steel Industry ................................................................................................ 102 4.3 Building Materials Industry ........................................................................ 108 4.4 Petrochemical industry ................................................................................ 113 4.5 Non-ferrous Metal industry ......................................................................... 116 4.6 Textile Industry............................................................................................. 121 4.7 Papermaking industry .................................................................................. 125 5 THE ROLE OF THE EMERGING STRATEGIC INDUSTRIES ................. 128 5.1 Energy-saving and environmental protection ............................................ 129 5.2 Low carbon energy ....................................................................................... 139 5.3 Energy efficient and electric vehicles .......................................................... 148 5.4 ICT ................................................................................................................. 157 5.5 Bio-industry ................................................................................................... 163 5.6 Advanced materials ...................................................................................... 167 6 A POLICY FRAMEWORK FOR LOW-CARBON INDUSTRIALIZATION 171 6.1 Components of the policy framework ......................................................... 171 6.2 Policies for promoting low-carbon industrialization ................................. 173 6.3 Policy roadmap ............................................................................................. 190 Page 4 of 200 CCICED LCIS Task Force 7 APPENDIX: BACKGROUND ON SCENARIO ANALYIS AND MODELLING ....................................................................................................................... 192 ENDNOTES ................................................................................................................... 197 Figures Figure 1-1: Share of global economy in purchasing power parity term ........................... 13 Figure 1-2: The Recovery of Global and Chinese Manufacturing .................................... 16 Figure 1-3: Contribution of Global Industrial CO2 Production by Industry ..................... 17 Figure 1-4: The integration of electric vehicles with other emerging pillar industries ..... 25 Figure 1-5: Manufacturing Industry in Japan: energy consumption per production ......... 37 Figure 1-6: Passenger vehicles in the IEA’s New Policies Scenario ................................ 38 Figure 1-7: Evolution in vehicle emissions standards ...................................................... 39 Figure 1-8: Growth in Global Wind By Region .............................................................. 42 Figure 1-9: Production of CO2 emissions by country, and the import and export of CO2 emissions embodied in trade ................................................................................................... 44 Figure 1-10: Understanding barriers along the innovation chain ...................................... 45 Figure 1-11: Public energy-related R&D spending in G-7 countries, 1985-2009 (Million USD 2009) ............................................................................................................................... 47 Figure 3-1: Impact of different carbon intensity policy targets on CO2 emissions ........... 78 Figure 3-2: Primary energy consumption under CI40 scenario ........................................ 78 Figure 3-3: Primary energy consumption under CI45 scenario ........................................ 79 Figure 3-4: Primary energy consumption under CI50 scenario ........................................ 79 Figure 3-5: Terminal energy demand under CI40 scenario .............................................
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