Tuesday, November 16, 2010

CCID Consulting: "Tradeoffs" on the Way to Low-Carbon Economy in China

As China is kicking off its twelfth five-year plan, the country aims to transform its model of economic growth and build itself into an innovation-based society by means of developing a low-carbon economy, which is both a major trend in the global scenario and the approach of choice for China.

Learn from the Western counterparts and develop a low-carbon economy with Chinese characteristics

To cope with climate changes and to seek new economic growth opportunities, developed countries around the world have developed their plans for low-carbon economic growth. For example, the U.S. plans to invest $150 billion in the development of alternative energy in the next ten years, and it has set aside investment funds for renewable energy, to the tune of about $3 billion; U.K. plans to invest $100 billion in the construction of 7,000 wind farms by 2020; Germany has long been providing considerable amounts of subsidies for the development of wind and solar industries; Japan has unveiled the "New Green Policy" aiming at developing renewable energy such as geo-thermal, wind, biomass and solar energy. According to preliminary statistics, the total investment in low-carbon economic growth plans announced by major developed countries have amounted to $500 billion to date, which means that the developed countries have incorporated the "low-carbon economy" growth model into their national strategies. However, obviously, the approaches taken by these countries to achieve a low-carbon economy are closely correlated with characteristics of their own economic growth. Given the fact that the developed countries have entered the post-industrialization era, with the tertiary industry playing a dominant role in their economic structures and with limited room for improvements on industrial equipment, techniques and technologies, their low-carbon economic growth model focuses on developing renewable energy such as solar and wind energy because they have well addressed the environmental impacts of industrialization and have moved to reduce carbon emissions by adapting energy supplies.

However, as China will continue relying heavily on coal-fired power to support its high-speed economic growth and meet the huge demand for energy, the space for the growth of renewable energy is limited in China. On the other hand, the secondary industry remains the primary drive for China's economic growth, producing 70% of the country's carbon emissions. Its relatively backward existing technologies and the limited capabilities in research and development have contributed to the high-carbon feature of the Chinese economy. Due to these unique characteristics, China cannot duplicate the low-carbon economic growth model in the Western countries, but should explore the approach to a low-carbon economy in line with its own economic development status under the principle of "common but differentiated responsibilities".

Therefore, a low-carbon economic growth model that fits China's current economic development status and characteristics should include the following five aspects: First, active efforts should be made to foster industry clusters focusing on clean energy to achieve a leading position in technology; Second, efforts must be made to improve efficiency of various domestic industries and energy utilization; Third, efforts should be made to speed up the adjustment of industry and energy structure to reduce structural carbon emissions; Fourth, efforts should be enhanced to develop environmental protection industries and reduce carbon emissions in all respects; Fifth, plans for a low-carbon economy and low-carbon industries should be developed, with the plans guiding improvements on market and regulation systems.

Eliminate outdated technologies and choose low-carbon application technologies suitable for China's conditions

Following a cheerful start in the development of a low-carbon economy, the country is now facing a lack of core technologies. Taking the carbon-free technology for example, China is able to assemble wind turbines with a capacity of under 1.5MW, however, it has not conquered technical difficulties in the production of core components including bearings, converters, control systems and gear boxes. Another case in point is that although China is the world's largest photovoltaic cell producer, its production technology for silicon used in polycrystalline silicon solar cells lags far behind the U.S., Japan and Germany, with its average energy consumption 1.5 to 2 times that of the world's advanced level.

While developing independent R&D as well as introducing and absorbing of low-carbon technologies, we must take into consideration China's current conditions and avoid hasty actions that may plague the proper application and promotion of cutting-edge technologies in the country. For example, injecting carbon dioxide into oil wells not only makes it possible for carbon storage, but also improves quality and quantity of crude oil production, however, given its huge costs, this method is not suitable for China's current economic development.

China's unique conditions have determined that clean coal, solar and thermoelectric conversion, energy-efficient electronic devices, smart grids, and renewable energy should be the focus in the area of low-carbon technology. The table below shows technologies suitable for China's current conditions of economic development and the major sources of carbon emissions.

Table 1 - Key Technologies for China to Achieve a Low-Carbon Economy

Given the fact that China is relatively rich in coals and poor in gas energy, the coal-focused energy pattern is unlikely to change anytime soon. In the medium and long run, developing clean coal-based power generation will be key to a low-carbon economy in China, and IGCC technology will become the mainstream method for coal-fired power generation. With fast development and localization of super-critical and ultra super-critical units, China is now able to mass produce these new types of machines which boast higher power generation efficiency and lower coal consumption, and has laid a solid foundation for the development of IGCC systems and poly-generation technologies.

Meanwhile, enhancing efforts in developing new energy cars is important for the supply of low-carbon energy and energy conservation in transportation. It is also conducive to balancing energy demand and supply and improving the environment. In addition, making greater efforts in developing smart grids and supporting development of new energy could improve the national grid ability in large-scaled optimization of resource allocation and enable long-distance and large-scaled supply of power to meet the power demand of rapid economic growth.

Sacrifice short-term benefits and choose a low-carbon future for China's sustainable growth

China has become the largest carbon emitter, the second largest energy user, and one of the most polluted countries in the world. Given its extensive model of economic growth and lack of environmental protection awareness over the years, Chinese economy has been facing daunting challenges of sustainable growth. As such, it is imperative for China to abandon short-term benefits and pursue a low-carbon economy with Chinese characteristics. "China must strive to develop a low carbon-based industrial system and consumption model, actively participate in international cooperation to address climate change, and push for new global progress in response to climate change," emphasized Premier Wen in his government work report delivered at the Third Plenary Session of the 11th National Congress.

Developing a low-carbon economy means China would abandon its current model of high energy consumption for high-speed economic growth; it means the transformation of economic growth model and economic restructuring and upgrading; it also means that greater attention will be paid to long-term development and benefits. Although the road to low-carbon "tradeoffs" is long, Chinese economy is bound to find its own low-carbon economy model which will lead China to a green future.

About CCID Consulting Co., Ltd.

CCID Consulting Co., Ltd., the first Chinese consulting firm listed in the Growth Enterprise Market (GEM) of the Stock Exchange of Hong Kong (stock code: HK08235) and the first consulting firm which gets ISO 9001 international and national quality management system standard certification, is directly affiliated to China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu with over 300 professional consultants after many years of development. The company’s business scope has covered over 200 large and medium-sized cities in China. With its powerful industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrade, development strategy and planning, marketing strategy and research, HR management, IT programming and management services. The company's customers range from industrial users in electronics, telecommunications, energy, finance and automobile to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming China's No.1 advisor for enterprise management, No.1 consultancy for government decision and No.1 brand for informatization consulting.

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