DIALOGUE Greenhouse Gas Mitigation in China: Scenarios and Opportunities through 2030 Tsinghua University of China The Center for Clean Air Policy (CCAP) CENTER FOR CLEAN AIR POLICY November 2006 DEVELOPING COUNTRY ANALYSIS AND INTERNATIONAL na Acknowledgments: This report was prepared by a team from the Institute for Environmental Systems Analysis within the Department of Environmental Science and Engineering at Tsinghua University of China. The major members of the team include: Prof. Jining Chen, Dr. Can Wang, Mr. Ke Wang, Ms. Wenjia Cai, Ms. Ying Zhang, Ms. Yuan Cao. The author would like to thank Xuedu Lu, Huo Hong, Ji Zou for the information and ideas they provided. The author would also like to thank Chunxia Zhang, Dao Huang, Haiyang Gao, Yong Zhao, Hezhong Tian for their written comments on a previous draft. This work also benefited from many discussions during the following two meetings: the CCAP Dialogue on Future International Actions to Address Global Climate Change (the FAD) in Lima, Peru (October, 2005) and the Project Workshop in Beijing, China (March, 2006). The author would also like to thank Jos Wheatley and Aditi Maheshwari of the UK Department for International Development (DFID) for their generous financial support for the project. TABLE OF CONTENTS I. INTRODUCTION.................................................................................................................................................................. 5 I.A PURPOSE AND DESCRIPTION OF PROJECT........................................................................................................................... 5 I.A.1 Background ............................................................................................................................................................ 5 I.A.2 Phase I. GHG Mitigation Option and Cost Analysis .............................................................................................. 5 I.A.3 Phase II. Policy and Implementation Strategy ....................................................................................................... 7 I.B REPORT STRUCTURE......................................................................................................................................................... 8 II. COUNTRY OVERVIEW ................................................................................................................................................. 9 II.A POPULATION, ECONOMY, AND EMISSIONS ......................................................................................................................... 9 II.A.1 Population and Gross Domestic Product ............................................................................................................... 9 II.A.2 International Trade and Role/Position in the World Economy............................................................................... 9 II.A.3 Geography............................................................................................................................................................ 10 II.A.4 Poverty and Development..................................................................................................................................... 11 II.A.5 Sustainability and Development ........................................................................................................................... 11 II.A.6 Country’s Role to Date in Climate Policy Negotiations ....................................................................................... 13 II.A.7 National and Sectoral GHG Emissions and Global Contribution........................................................................ 14 II.B HISTORICAL SUMMARY & EXPLANATION OF CHINA’ NATIONAL ENERGY AND EMISSIONS PROFILE .................................... 14 II.B.1 Total annual fuel consumption by sector and fuel type......................................................................................... 14 II.B.2 Energy intensity (per unit of GDP) from 1990 to 2000 ........................................................................................ 15 II.B.3 Annual GHG emissions inventory for 2000.......................................................................................................... 17 II.B.4 Emissions Intensity (per unit of GDP and per capita) from 1990 to 2000............................................................ 17 II.C COMPARISON WITH REST OF WORLD ABOVE AREAS.......................................................................................................... 18 II.C.1 Ranking ................................................................................................................................................................ 18 II.C.2 Qualitative similarities and differences................................................................................................................ 18 II.D BACKGROUND FOR OVERALL ANALYSIS .......................................................................................................................... 18 II.D.1 Discussion of all cross-cutting macro assumptions used and sources for assumptions........................................ 18 II.D.2 Analytical approach and methodology used......................................................................................................... 20 II.D.3 Computer models and other tools used................................................................................................................. 20 II.E LIST OF SECTORS TO BE COVERED IN ANALYSIS................................................................................................................ 21 III. SECTOR ANALYSIS AND RESULTS: ELECTRICITY ........................................................................................... 22 III.A SECTOR OVERVIEW .................................................................................................................................................... 22 III.A.1 Summary............................................................................................................................................................... 22 III.A.2 Quantitative and qualitative characterization of sector ....................................................................................... 24 III.B EMISSIONS OVERVIEW OF SECTOR.............................................................................................................................. 27 III.B.1 Background and discussion of emissions.............................................................................................................. 27 III.B.2 Annual GHG emissions inventory for a recent year ............................................................................................. 28 III.B.3 Historical annual fuel consumption and GHG emissions trends over time .......................................................... 28 III.B.4 Relative contribution of each sector in 2000 ........................................................................................................ 29 III.C BACKGROUND ASSUMPTIONS FOR SECTOR ANALYSIS................................................................................................. 29 III.C.1 Baseline with policies adopted before 2000 ......................................................................................................... 29 III.C.2 Baseline with policies adopted between 2000 and 2005....................................................................................... 30 III.C.3 Description of analytical approach and methodology used.................................................................................. 32 III.D BASELINE (BUSINESS-AS-USUAL) FORECASTS FOR SECTORS ........................................................................................ 33 III.D.1 Production/output forecast................................................................................................................................... 33 III.D.2 Energy and fossil fuel consumption (by type) forecast ......................................................................................... 33 III.D.3 Annual GHG forecast........................................................................................................................................... 34 III.E GHG MITIGATION OPTIONS AND COSTS..................................................................................................................... 35 III.E.1 Selection criteria for consideration of mitigation options .................................................................................... 35 III.E.2 Overview of each mitigation option evaluated ..................................................................................................... 35 III.F ANALYSIS OF GHG MITIGATION SCENARIOS ............................................................................................................... 38 III.F.1 Marginal abatement cost curve ($/metric ton GHG reduced vs. total GHG reductions) ..................................... 38 III.F.2 Advanced Options (Mitigation) Scenario #1: All Zero- or Negative Cost Mitigation Options............................. 42 III.F.3 Advanced Options Scenario #2: All mitigation options costing less than $5 per metric ton ................................ 42 III.F.4 Advanced Options Scenario #3: All mitigation options costing less than $10 per metric ton .............................. 42 III.F.5 Advanced Options Scenario