Analysis of Impact Factors on China s CO 2 Emission Trends During 1971J2005

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1 Impacts and Adaptation Article ID: (2009) Suppl Analysis of Impact Factors on China s Emission Trends During 1971J2005 Feng Xiangzhao 1, Wang Xuechen 2 1 Policy Research Centre for Environment and Economy, Ministry of Environmental Protection, Beijing , China; 2 China Meteorological Administration, Beijing , China Abstract: China s emissions change during 1971J2005 was analyzed by using Kaya Identity in combination with macroeconomic background evolution. The study indicates that the increase of emission is mainly due to rapid economic development and population growth. And that to a large extent, the decrease in energy intensity and the decarburization of energy structure in China jointly limit the augmentation of overall emission at a higher rate. So the improvement in energy efficiency and the diversification of energy structure by using more renewable energy are considered to play an important role in realizing the binding target of 20% reduction in energy consumption during the 11th Five-Year Plan. Key words: Kaya Identity; emission; economic growth; energy intensity; primary energy structure Introduction Since the 1990s, climate change and global warming have received more and more attention from the international community. The Forth Assessment Report (AR4) of IPCC released in 2007 further stresses that human activities, such as use of fossil fuels and change in land use, are considered as one of the major driving forces which lead to high concentration of greenhouse gases (GHG) in the atmosphere and then induce global warming [1]. When the Annex I countries (mainly referring to the developed countries) under the UNFCCC began to mitigate their emission according to the binding requirements of Kyoto Protocol, major developing countries such as China and India are facing an increasingly international pressure on GHG emission reduction [2]. Since the late 1970s, Chinese economy has been growing at a higher rate. Meanwhile, energy demand in this country has been continuously increasing, and so far, China has become the second largest energy consumer in the world [3]. The relevant statistics shows that China is currently the second largest emitter of GHG in the world, only behind the United States. In addition, it is due to such a primary energy consumption structure dominated by the coal that many research institutions at home and abroad predicted that China would catch up the United States possibly in 2015J2025 and become the largest emitter all over the world [4]. Even some radical analysts consider that China has been actually the largest emitter in terms of. Here, our study will make use of Kaya Identities, take into account major changes in China s macroeconomic environment in the period of 1971J2005, and carry out structural analysis on various factors influencing China s emission. Based on these, we will try to explore how to reduce the GHG emission in China and to realize a sustainable development strategy for the economy-energy-environment comprehensive system. 1 Kaya Identity and its policy implications Since the 1980s, many researchers at home and abroad have successively developed various models to conduct quantitative analysis on emissions, and these models could be extensively used to help different countries or regions formulate the corresponding policies of climate and energy. Among these models, Kaya Identity is undoubtedly considered to be one of the most extensively used models, and it was proposed by Japanese professor Yoichi Kaya at Received: October 23, 2008 Corresponding author: Feng Xiangzhao, feng_xiangzhao@yahoo.com.cn 2009 Editorial Office of Available at emissioninperspective.html 66

2 a seminar organized by IPCC in 1989 [5]. Kaya Identity establishes the logical link of various economic factors, policy and demographic factors with the emission resulted from human activities, through the following simple mathematical formula: = ======= ====== POP POP where the parameters of,, and POP respectively represents the carbon dioxide emissions from fossil fuel combustion, the total primary energy consumption, the gross domestic product and the population of a country or region; and the terms of /, /, /POP are called the carbon intensity of primary energy structure, the energy intensity of and per capita, respectively. According to the calculus knowledge, the above formula can be translated into d (ln ) = d ( ln ) =d ( ln ) =========== d ( ln ) d ( ln POP ) POP It is worth noting that in practice, the values in both sides of the above identity are usually unequal due to the adoption of mathematic approximation. That is to say, there is a residual between the values in the left and right sides of equation (2), even if for a given very short period [3] ; one cannot make a good explanation for the changes in emissions with the presence of the residual. The author simply modifies the above identity to remove the residual which is temporarily unable to be explained, and to make better use of the Kaya Identity in analyzing the trends of emission in China. We assume parameters C 0 and C 1 respectively to be the emissions in the base year and targeted year T, and term C to be the change in emission between the two years; then equation (1) can be rewritten as follows: C = I C I E = G= P (3) where I C = /, I E =/, G=/POP, and P=POP. Equation (3) indicates that changes in emission result from the joint effect of the four factors: carbon intensity of energy structure, energy intensity of, per capita (1) (2) and population. Besides, we need to redefine the terms of I C, I E, G and P as follows. I C representing the change in emission in the carbon intensity of primary energy structure and the other three factors in the right side of equation (3) do not change. I E representing the change in emission in the energy intensity of economic activities and the other three factors in the right side of equation (3) do not change. G representing the change in emission in the per capita and the other three factors in the right side of equation (3) do not change. P representing the change in emission in the population and the other three factors in the right side of equation (3) do not change. 2 Data sources and decomposition results In this paper, all the data in emission are from a series of statistical books about emission from fossil fuel combustion [6], which were published by International Energy Agency (IEA) starting in the mid-1990s. The two socio-economic indicators of and population used are from the relevant statistical data of World Bank and State Statistics Bureau of China [7J8]. As for energy data, the study mainly uses the information from the Statistical Review of World Energy annually published by the British Petroleum Corporation (BP) [9], and such choice can provide a set of complete data to help us carry out our study by producing appropriate time series. In order to better observe the change in emissions in China since 1971, the study chooses every five years as an analysis unit, which matches very well the actual policy backgrounds of Five-Year Socio-Economic Development Plans formulated by Chinese government. For example, the period from 1996 through 2000 is well corresponding to the Ninth Five-Year Plan period. In a certain sense, such a decomposition unit can help us understand the implementation effect of various policies developed by the The data from 1971 to 2004 is from IEA, and the data in 2005 is estimated by the author, referring to the recommended methodology by IEA 67

3 Feng Xiangzhao et al.: Analysis of Impact Factors on China s Emission Trends During 1971J Changes in emissions/ M t J500 C I C I E G P J J J J J J J J2005 Year Fig. 1 Decomposition results of China s emission by Kaya Identity government during every Five-Year Plan period. In addition, an important prerequisite for the analysis is to assume that the change in emission between the first year of every Five-Year Plan and the last year is considered to be equivalent to the change during the proposed five-year period. At first, we use equation (2) to verify the changes of emissions in China during the period 1971J2003 and also to check whether there is a residual or not. During the proposed period, the annual average change rate of each term in the right side of equation (2) is as follows: d ( ln ) Z=MKVTBI=d ( ln ) = J4.44%, d ( ln ) = 7.12%, d ( ln POP ) = 1.39% POP So that we can have the following result: d ( ln ) Z=MKVTB J4.44% % % = 5.04% However, according to the same statistical source published by IEA, the emissions in China have actually increased by an average annual rate of 4.66%, instead of the calculated 5.04%. That is, there is a residual of 0.38% between the real data and the calculated one. And so, the study will make use of the modified Kaya Identities equation (3) to carry out the decomposition analysis without residuals. With the decomposition analysis results, further discussion about the seven five-year periods related to the study is in the next section. 3 Analysis of the decomposition results Figure 1 shows that change in emission during the period 1971J2005 is obtained by using the modified Kaya Identity. The proposed period is just corresponding to seven Five-Year Plan sub-periods in China. (1) The period 1971J1975 (Fourth Five-Year Plan) This is a very special period in the modern history of China. It covers part of the known Cultural Revolution Era, in which Chinese economy increased slowly at an average rate of 5.9%. Meanwhile, the family planning policy towards the population has not been carried out yet, compared with the other proposed periods of the study; and the population grew at a relatively high speed. Another important feature for this period is that the emission was at a lower level, and increased by 268 million tons (MTN) from 1971 through The contribution of various factors to the emission was respectively +5% for carbon intensity of energy structure, +11% for energy intensity of economic activities, +51% for per capita and +33% for population. (2) The period 1976J1980 (Fifth Five-Year Plan) In 1978, China began to carry out the open policy and to implement economic system reform. In such circumstances, China started to enter into a new era of economy growth. In this period, the family planning policy has been put in practice and the population grew progressively at a low rate. During the period, the emission in China had an increase of 285 MTN, among which except the emission reduction of 222 MTN due to improvement of energy intensity, the per capita, carbon intensity and population contributed an emission increment of 67%, 18% and 15%, respectively. (3) The period 1981J1985 (Sixth Five-Year Plan) The economy began to grow rapidly, at an average annual rate of 10.8% in this period. The energy intensity of economic activities constantly declined together with the 68

4 low-growing in population. During this period, the net increase in emission amounted to 485 MTN, much more than the increment in the two previous periods. The optimization in energy intensity gained an emission reduction of 271 MTN; but the increase of per capita income contributed an increase of 81% in terms of emission. Besides, the contribution rate from population is +14% for the increase in emission; and a little change in carbon intensity played a marginal role (+5%) in the increase in emission. (4) The period 1986J1990 (Seventh Five-Year Plan) Because of the rising pressure in inflation (with an inflation rate of about 20%, particularly in 1988), the economy began to develop at a relatively lower rate. In 1989, the growth rate of in the country is only 3.8%, even lower than that in 1988 (4.1%). The persistent decline in energy intensity resulted in a mitigation volume of 197 MTN in emission. Besides, the optimization of the primary energy consumption structure also began to contribute to the reduction of emission (over 60 MTN). As for the demographic factor, the contribution to the emission increment augmented relatively, from 14% in the Sixth Five-Year Plan period to 23% in this period. A rise in per capita leaded to an increase of 77% in emission. (5) The period 1991J1995 (Eighth Five-Year Plan) This period is so far considered to be the fastest five years for economic development since the foundation of the People s Republic of China. During the period, the economy grew rapidly at an average annual rate of 12%. With the gradual deepening of economic system reform, particularly since the clear positioning in the Constitution in 1993 for building up the socialist market economy with Chinese characteristics, Chinese government progressively strengthened the legislation in energy-saving policies, and the formulation of energy-savings standards and energysavings design specifications as well. The improvement in energy intensity gained more than before. With the rapid economic development, the energy demand in China, particularly the demand towards oil, was increasing a lot. In 1993, China started to become a net importer of petroleum products. As far as the primary energy consumption structure is concerned, the share of coal declined from 77% in 1977 to 75% in 1995 and accordingly the share of oil gained a rise from 17% to 18% during the same period (see Table 1). Besides, as the phase I of Qinshan Nuclear Power Plant came into operation in 1991 and then Daya Bay nuclear plant in 1993, the nuclear energy was first shown in the primary energy structure in China. All Table 1 Primary energy consumption structure in China (unit: %) Year Coal Oil Natural gas Nuclear Hydro Sources are adapted from two websites: and these above facts are used to explain the optimization of energy intensity. As for the emission increment during this period, the rise in per capita contributed to a share of 89%, and 11% for the demographic factor. The emission reduction mainly resulted from the improvement in carbon intensity and in energy intensity. The energy intensity accounted for a share of 95% in emission mitigation, and 5% for the carbon intensity. (6) The period 1996J2000 (Ninth Five-Year Plan) Due to the negative impacts of the financial crisis happened in Southeast Asia and macro regulation & control measures legislated by Chinese government, the economy in this country continued to grow, at a mild average rate of 8.3% annually. To our joy, the primary energy consumption gained a decline of 5% from 1996 to In 1999, the energy consumption began to increase slightly. From 1996 through 2000, the emission in China dropped by 12% from BTN to BTN. The abnormal change featuring rapid economic development together with energy consumption decline and emission mitigation caused widespread concerns among domestic and international research institutions. During this period, the central government speeded up the economic reform. In particular, many policies aiming to help state-owned enterprises out of difficulties were developed. The regulation usually named closing &

5 Feng Xiangzhao et al.: Analysis of Impact Factors on China s Emission Trends During 1971J2005 suspending 15 kinds of small factories with higher energy consumption, higher pollution and low efficiency, was issued by the State Council and other associated ministries. To a certain extent, the development of such regulation is considered to be able to reduce the vicious competition and the blind investment in relevant sectors and to create favorable conditions to help those state-owned enterprises out of difficulty. Meanwhile, more and more pressure on local environment pollution and the over-production of coal leaded to the decline of demand towards coal. The situation featuring over-supply in coal market spread in the whole country. In addition, because the Energy Savings Law went into force in 1998, the coal producer had to make more efforts to improve the coal quality to meet the demand of consumers, such as an increase of washing coal supply, and the adoption of clean coal technologies. All these facts can help us understand that it is the great improvement in carbon intensity of energy structure and the certain optimization in energy use efficiency that resulted in the mitigation in emission. During the period, due to the strong exploration and utilization of clean energy, we witnessed that the primary energy consumption structure had been undergoing significant decarbonization (as shown in Table 1). Such positive change leaded to the reduction of 402 MTN in emission. Meanwhile, the emission was mitigated by 794 MTN because of great improvement in energy intensity. Notwithstanding influenced by the financial crisis in Southeast Asia, China took many positive policies & measures to stimulate domestic demand and to keep its economic development in a safe state. All these actions and measures contributed to an increase of 698 MTN in emission, among which increase in per capita contributed a share of 87% in emission increment. As for the demographic factor, it accounted for a share of 13% with the rest emission increment of 100 MTN. (7) The period 2001J2005 (Tenth Five-Year Plan ) As the international economic situation improved and China successfully jointed the WTO in the end of 2001, China s economy began to accelerate at a higher growth rate. In particular, the annual growth rates of 2003, 2004 and 2005 are respectively 1%, 10.1% and 10.2%. Such rapid economic growth mainly resulted from huge increase of fixed assets investment in some sectors, such as steel, cement and aluminum. It is the overheated investment in these basic industries that greatly increased the energy demand in the country. The decarbonization of the primary energy structure was being promoted positively. In the late 2003, the central government put forward the strategy of positively developing nuclear power. As of September 2005, 14 out of totally 26 power generation units in the Three Gorges Hydropower Engineer, equivalent to a total installed capacity of 9.8 gigawatts, had started operating. In February 2005, Chinese government adopted the Renewable Energy Law. However, relatively speaking, clean energy such as hydropower and nuclear power grew slower than other fossil fuels, which to a certain extent offsets the environment benefits gained by the improvement in energy structure. At the same time, we recorded the fact that the energy intensity in the country was constantly deteriorating. Taking the steel industry as an example, we find that the overheated investment made the demand towards coke grow explosively, and that the quality of the coke coal was declining persistently. In fact, the energy consumption of steel per ton was decreasing before 2003; however, the indicator increased 11 kg standard coal in That is why Chinese government began to strengthen macroeconomic regulation and control from the two important sources of land and bank credit to suppress the overgrowth of economy Analysis results (Fig. 1) indicate that, due to the excessive growth in energy demand, the positive effect from the decarbonization of energy structure was naturally offset. And so the emission was augmented by BTN during the period, of which the carbon intensity accounted for a share of 6% in the emission increment and the sudden deterioration of energy intensity leaded to an increase of 209 MTN in emission (representing a share of 11% in the total increment). Due to the fact that the overheated economy spread in the whole country featuring the excessive investment in some basic industries started since 2002, the economic factor played a dominant role, accounting for 76% of emission increment. As for the population, it always represented a marginal contribution with 6% of emission increment. 4 Conclusions and suggestions We can reach the following conclusions from the above Due to the limit of emission data, the author only chooses to conduct a comparative analysis between 2001 and 2003, and to carry out a qualitative description on the emission change between 2004 and

6 decomposition analysis: (1) It is various human economic activities that mainly induce the increase in emission [1]. Since the 1970s, the rapid economic development has played a dominant role for the increase of emission. According to the estimation of the study, the economic activities of near 30 years in China contributed about 86% of the emission increment during the same period. As a developing country, China acknowledges that it is an important task to reduce the emission, but China will not choose to give up economic development strategy, rather to realize the socalled target of emission mitigation. Because we clearly understand that only in the condition of a developed economy, we can have enough human resources and economic resources to make sure the realization of emission mitigation strategy. That is, economic development is an important guarantee to protect the environment. Therefore, what is essential is to earnestly implement the scientific development concept, to deeply understand the dialectical relationship between environment and economic development and ultimately to make sure the realization of the strategic target of the socio-economicenvironment sustainable development. (2) The improvement of energy efficiency facilitates the mitigation of emission. The above analysis shows that about 89% of emission reduction during the proposed period resulted from the persistently decline of energy intensity of economic activities. Therefore, we see that some policies & measures aiming to promote technological progress, to accelerate industrial restructuring, to further perfect various energy-savings regulations and to strengthen the build-up of energy-savings management system, will help us reduce the emission and alleviate the negative impacts of climate change [10]. (3) The gradual optimization of primary energy structure also played an important role in reducing the emission. In our study, the optimization contributed about 11% of mitigation. And so, the policies and measures facilitating to develop clean coal technologies and other clean fuel ones, to speed up the exploration and utilization of renewable energy, and to promote the legislation of relevant laws & regulations on renewable energy, will constitute main elements of emission mitigation in future China [10]. (4) The population which accounted for an accumulated contribution of 14% in our analysis is always one of the important factors to induce emission. And so, it will bring us significant contribution to the emission mitigation in future if the population develops at a lower rate. The above conclusions further verify main arguments shown in the AR4 released by IPCC: human economic activities are major driving forces towards global warming; future GHG emission depends on the choices of socioeconomic development pathway; the improvement in energy efficiency and the decline in carbon intensity of energy balance are important choices to stabilize the concentration of in the atmosphere and to address climate change; the sustainable development and the GHG emission reduction can be mutually promoted. Recalling the economic development history in the past 30 years in China, we find that the major inducing factors of the augmentation in emission are the continual rapid economic development and the increase in population, and that the improvement in energy efficiency and in carbon intensity of primary energy balance to a large extent curb the excessive increase of emission. It is worth noting that, although our economic development has made significant achievements in the world, the growth mode featuring large investment, high energy consumption, high pollution level and low efficiency does not essentially change so far. We are facing an increasing pressure on energy, resource and environment. So there are two binding targets firstly put forward in the Eleventh Five-Year Plan issued by Chinese government in 2005; they are respectively to reduce the energy consumption per unit by 20% and to reduce the emission of major pollutants by 10% during the period. The above analysis shows that, to realize the target of reducing the energy intensity by 20%, we will not only need to further improve energy efficiency and to optimize energy consumption balance, but also need to strengthen energy-savings management, to speed up the paces of industrial structure adjustment, and to promote the exploration and utilization of renewable energy by developing various clean fuel technologies and making use of various incentive policy instruments. Meanwhile, we are also aware that to reduce the energy intensity is of multiple realistic implications, such as to mitigate the emission in China, to help China establish a good international image in terms of climate change, and to fulfill the strategic target of the sustainable development of the economy-energyenvironment comprehensive system in China. 71

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