PRESS RELEASE

Strict Embargo until: 00.01hrs GMT Monday 7 March 2011

New report: China charts ‘clean industrial revolution’ to power its new economy China ‘pulling its weight’ on international climate targets though challenges remain

BEIJING, 7 March 2011: A new report by The Climate Group commissioned by the HSBC Centre of Excellence, says the Chinese government‟s decision to put a „clean industrial revolution‟ at the heart of the nation‟s 12th Five Year Plan will deliver real carbon savings that could begin to curb national emissions, unlock new investment opportunities and ensure China is seen to be “pulling its weight” on international climate targets.

The report – „Delivering Low Carbon Growth – A Guide to the 12th Five Year Plan’ – is published as China‟s National People‟s Congress (NPC) meets this week to finalize agreement on the government‟s economic roadmap to 2016.

China is now the world‟s second biggest economy and biggest greenhouse gas emitter, and the report findings show how the country‟s new national development strategy will combine ambitious growth targets – including a seven per cent GDP annual growth goal – with a need to rapidly de-carbonize its coal-based economy.

For the first time in a FYP, China has set a national carbon intensity reduction target of 17 per cent and intends to cut energy intensity by 16 per cent by 2015. The FYP will also boost investment for seven strategic new industry sectors vital to national competitiveness and sustainability paving the way for a more efficient economy and creating higher value industries in alternative energy, low carbon transport and energy efficient products.

Critically, the report concludes that, although real challenges remain, the pace of deployment of low carbon energy compares favourably with International Energy Agency‟s World Energy Outlook 2010 scenario for stabilizing atmospheric concentrations of CO2 at 450ppm by 2100, suggesting that China is „pulling its weight‟ relative to international expectations in this regard.

Changhua Wu, Greater China Director, The Climate Group says: “China has learned valuable low carbon lessons over the last five years which have given the government confidence to deepen its commitment to a clean industrial revolution. Green growth is now at the very heart of China‟s national development strategy. These ambitious new policies will create the necessary certainty for the business community to ride a new wave of green investment.”

Nick Robins, Head, HSBC Climate Change Centre of Excellence says: "What is striking about China's plans for low carbon growth is how they underpin the next phase of the country's economic development. Cutting carbon intensity is not just an environmental objective, but a way of driving up the competitiveness of core industrial sectors. Its seven emerging strategic industries have been chosen to give China an increasing technological edge as well as enable it to take a larger share of the global climate economy."

Mark Kenber, CEO, The Climate Group said: “It is hugely symbolic that China is putting green growth at the core of its national development plan and should be a wake-up call to Europe and North America policy-makers that a clean tech race is well under way. This bold policy plan unequivocally aims to set China on a clear low carbon trajectory and will ensure the country remains a major global hub for clean energy technologies for years to come. However, unabated coal consumption remains a significant reality check on China‟s low carbon vision and, as with other countries, a comprehensive long-term approach backed by tough action on the ground will be needed to ensure that China‟s green growth strategy delivers on its undoubted promise.”

ENDS

Key Report Findings:

 China’s ambition to create a low carbon economy is accelerating, and its low carbon energy plans will start to bend the nation’s carbon emissions growth curve. There are four reasons behind China‟s new „clean industrial revolution‟: the need to maintain growth and investment; the need to address very real resource limits; the need to remain economically competitive (and become more technologically advanced); and the desire to keep its house in order to be a trusted international voice on climate and energy.

 China’s approach to managing energy is evolving and will be more market-oriented. The Five Year Plan (FYP) outlines new measures including regulation, technology development and capital investment. Significantly, market mechanisms include energy price reform, carbon trading pilots, energy labelling for consumer products and support for energy services companies (ESCOs) will be actively developed in this five year period and are likely to form a key element of China‟s energy policy framework by 2015.

 China will accelerate the growth of clean energy technologies. China reached a 9.6 per cent share of primary energy from non-fossil fuel sources in the 11th five year period (2006-2010) against the target of 10 per cent. Challenges came from larger than predicted overall energy consumption and in part from delays in developing hydroelectric and nuclear power. New progress on low carbon energy is targeted to come from a four- fold growth in nuclear power (from 10 to 40GW installed) and 63GW of new hydro-electric generating capacity. 48GW of new wind capacity are also planned, more than doubling the current capacity, and solar capacity is targeted to reach 5GW total by 2015. These figures are against the backdrop of an estimated additional 260GW of coal generation - although the share of coal in the energy mix is anticipated to fall from 72 per cent to 63 per cent.

 With one eye on the export market and the other on domestic consumption, the 12th FYP also sets out aggressive growth plans for seven strategic emerging industries (SEIs) seen as critical to economic restructuring. These include important low carbon technologies like electric vehicles, next generation information technology, energy efficient products and renewable energy. Pre-commercial technologies like plug-in electric vehicles and LED lighting are likely to play a greater role in cutting emissions beyond the current plan especially as China‟s large-scale manufacturing drives down the price of these low carbon technologies for every nation.

 Strong pressure will be maintained on energy-intensive, industrial sources of carbon Industrial energy efficiency measures remain critical to success and the Special Energy Conservation Plan anticipated from the National Development and Reform Commission later this year will be significant in this respect.

 Significant barriers to success remain. Coal fired generation and heavy manufacturing still make up the lion‟s share (81 per cent) of China‟s emissions. Despite ongoing efforts to modernize energy intensive activities, growth in coal generating capacity will continue to outstrip aggressive alternative energy roll-out plans, and real capacity issues remain in government at the local level.

 China’s low carbon sector will gradually open up for foreign owned enterprises (FOEs), but competition is intensifying. Participation in national R&D programmes will gradually open up to FOEs, but access to direct funding will likely remain restricted to minority joint venture partners. FOEs should expect a strengthened intellectual property regime and a theme of “collaborative competition” will continue as Chinese state owned enterprises (SOEs) continue to globalize, and the acquisition rate of overseas technology capabilities increases.

NOTES TO EDITORS:

Spokespeople available for press and broadcast interview [from 5 March 2011]:

 Mark Kenber, CEO of The Climate Group  Changhua Wu, Greater China Director, The Climate Group  Nick Robins, Head, HSBC Climate Change Centre of Excellence

 To coordinate press and broadcast interviews please call:  Lauren Bird, The Climate Group +44 (0)7792 656 093 [email protected]  Rachael Morgan, HSBC +44 (0)7920 581 830 rachael.morgan@.com

About the Report:

This report [Delivering Low Carbon Growth – Guide to the 12th Five Year Plan] has been prepared by The Climate Group and commissioned by the HSBC Centre of Climate Excellence, building on the five-year HSBC Climate Partnership in which both organizations participate alongside WWF, Earthwatch and the Smithsonian Tropical Research Institute.

The report is a guide to the implications of China‟s 12th Five Year Plan (FYP) for the country‟s efforts to develop a lower carbon economy, considering related policies and trends in the process. The report findings are based on a review of successive drafts of the Plan, the most recent draft of which was presented on 5 March 2011 at the National People‟s Congress, supplemented by interviews and conversations (some on a non- attributable basis) with experts in the public and private sectors in China. It also builds upon earlier research into China‟s climate change and energy policy.

The Executive Summary is available for download at www.theclimategroup.org A full copy of the report will be available for download from 14 March 2011

About The Climate Group

The Climate Group (www.theclimategroup.org) is an independent, not-for-profit organization working internationally with government and business leaders to advance smart policies and technologies to cut global emissions and unlock a clean industrial revolution. Its global coalition of companies, states, regions and cities around the world recognize the economic and environmental imperatives of taking decisive action now. The Climate Group was founded in 2004 and has operations in , China, Europe, and North America.

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in . The Group serves customers worldwide from around 7,500 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of US$2,455 billion at 31 December 2010, HSBC is one of the world‟s largest banking and financial services organizations. HSBC is marketed worldwide as „the world‟s local bank‟.

Useful Links:

 For more information on China’s Clean Revolution please see The Climate Group‟s report series: China Clean Revolution Report III: Low Carbon Development in Cities (2010) China's Clean Revolution II: Opportunities for a low carbon future (2009) China's Clean Revolution (2008)

 Big Chinese companies join The Climate Group [Guardian, 24 October 2008] http://www.guardian.co.uk/world/2008/oct/24/china-mobile- climate-group

 Europe for 30%: German Federal Ministry of the Environment report, A New Growth Path for Europe - Generating Growth and Jobs in the Low-Carbon Economy, argues that bolder European climate policies would drive innovation and grow the EU economy by 0.6%

 UNEP‟s report Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication (Feb, 2011) argues that investing two per cent of global GDP (around $1.3 trillion a year) into ten key sectors – including industry, energy, buildings, and transport – would kick-start the global economy without increasing global emissions.

 HSBC says low carbon energy economy is worth $740 billion today and will be worth $2.2 trillion by 2020