China has a track-record of making changes rapidly. Within just the past decade or two, the world’s most populous country has become its biggest market for passenger cars, its biggest e-commerce market, its biggest exporter — and its biggest source of carbon emissions. So it should come as no surprise that China has now also assumed a leadership position in the green-investment arena.
China is ploughing billions into clean energy, promoting the use of electric vehicles, investing in low-emissions infrastructure for its fast-growing cities, and widening the options for green financing. Efforts to decarbonise and green China’s economy permeate the very fabric of its economic endeavours.
While they aim to tackle pollution and climate change, they also dovetail with Beijing’s goal of taking the economy up the value chain, boosting home-grown high-tech industries and the high-end jobs that come with them, and paving the way for more sustainable, balanced and ecologically-aware economic expansion.
They are also consistent with China’s increasingly central role in the world economy, and its growing willingness to speak out on global issues. China’s “green” motivations are easy enough to understand. For decades, China’s headlong, double-digit economic growth came at the cost of its environment — with air, water and soil pollution to match.
The fact that many of China’s low-lying urban areas — including the mega-cities of Shanghai and Guangzhou — are vulnerable to the effects of rising sea levels and intensifying weather conditions adds another dimension to the need to act. At the same time, China’s more and more educated, articulate and confident citizens are increasingly demanding that the benefits of economic growth come without the pain of environmental degradation.
To their credit, the Chinese authorities have recognised the need for action. They have declared a “war on pollution”, and over the last few years have been charting a clear path to a low-carbon economy, pledging under the current Five-Year Plan to incorporate ecological conservation “into every aspect … of economic, political, cultural and social development”.
The plan’s wide-ranging environmental targets include a 15 per cent reduction in energy consumption per unit of GDP; a 23 per cent improvement in water efficiency; a new 5 billion tonne cap on total energy consumption; and an overall 18 per cent reduction in carbon intensity.
In January, just as the US looked poised to take a very different approach on climate change, China said it would plough 2.5 trillion renminbi (about Dh1.32 trillion; $360 billion) into renewable energy by 2020. The National Energy Administration’s 2016-20 plan aims to lower the share of coal in the nation’s energy mix from about 64 per cent now to 58 per cent, and to raise the share of non-fossil fuel energy to at least 15 per cent.
While that percentage is still relatively low, it represents a clear commitment to becoming a world leader in green energy.
The changes are already well underway. China installed almost three times more wind power capacity — 23.3 gigawatts — than the United States last year, taking its total wind power capacity to about one-third of the global total. The country’s photovoltaic capacity more than doubled last year, turning China into the world’s biggest producer of solar energy by capacity.
On the low-carbon transport and infrastructure front, meanwhile, China has built more than 20,000 kilometres of high-speed rail lines in the past few years. The plan is to extend the network to 45,000 kilometres by 2030. Likewise, the authorities’ support for electric vehicles means China is likely to become the world’s largest market for such vehicles within the next few years.
A strong green element also runs through China’s “Belt and Road” initiative, which will see billions of dollars ploughed into improving infrastructure links across more than 60 countries in Asia, Europe and beyond.
Last but not least, China has made significant progress in tackling barriers to private-sector investment in a more sustainable economy, including allowing overseas financial institutions to issue green bonds in China. The country has become the main driver of growth in the global market for green bonds.
More than $33 billion (Dh121 billion) worth of Chinese green bonds were issued last year. That is well over one-third of the global total — and it is up from just $1 billion in 2015.
On the regulatory front Green Bond Guidelines announced by the People’s Bank of China in late 2015 encourage independent assurance and regularly audited disclosure, and are a good step forward. We can expect further editions of the guidance to provide greater clarity, tighter definitions and even more transparency.
Of course, the changes in China’s energy mix and electricity pricing regime, its car fleet or its capital markets cannot happen overnight. As the persistent high air pollution in Beijing, Shanghai and other cities in recent months shows, it will take years to clean up China’s environment and truly “green” its economy.
But China’s policymakers are committed to the fight. They have not just the motivation, but also the means, and the opportunity to capitalise on China’s current economic transition to deliver substantial green progress in the coming years.
That is good news — not just for China, but also for the rest of the world.
The writer is Chief Executive, Greater China at The Hongkong and Shanghai Banking Corporation Ltd.
