Inscription: On October 24, 2021, the Peking University Development Institute held the 58th session of the China Economic Observation Conference, and the guests discussed topics such as double carbon targets and energy reform. This article is based on a speech by Wang Min, Associate Professor (Long-term Appointment), Assistant Dean and Deputy Director of the Environmental and Energy Economy Research Center of Peking University.
We mainly study carbon emissions and market-oriented response policies based on China's economic outlook and development laws. Today I would like to introduce you to some facts about global climate change.
In August 2021, the ipcc (United Nations Intergovernmental Panel on Climate Change) Sixth Climate Change Assessment Report Working Group I report was released. Some of the content is worth paying attention to. For example, the current concentration of carbon dioxide in the global atmosphere has reached the highest level in 2 million years, and the surface temperature has reached the highest level in 120,000 years. If all countries take moderately aggressive carbon reduction measures to achieve a global "carbon peak" by 2050, global temperatures will rise by 2.1-3.5 degrees Celsius by the end of the century. Global CO2 emissions totaled 34.4 billion tonnes in 2019, with the top six economies being China (9.8 billion tonnes), the United States (5 billion tonnes), the European Union (2.9 billion tonnes), India (2.5 billion tonnes), Russia (1.6 billion tonnes) and Japan (1.1 billion tonnes). China's carbon emissions in 2019 are about the sum of two, three or four carbon emissions. From the cumulative data, China's carbon dioxide emissions from 1965 to 2020 were 221 billion tons, accounting for 17% of the total global emissions in the same period, second only to the United States' 277.7 billion tons in the same period. The above facts are an important background for President Xi Jinping's "double carbon" goal in 2020 (achieving "carbon peak" in 2030 and "carbon neutrality" in 2060).
This data is very important for us to understand the "double carbon" goal and to understand the global climate change issue. This year is the first year of China's double carbon target, and the global economic recovery has once again led to a significant increase in energy demand, but many regions have controlled the energy demand and carbon emission growth in their jurisdictions by suspending the approval of "two high" (high energy consumption, high emission) project approvals and administrative interventions to pull the gate and cut the electricity.
In order to achieve the double carbon goal, we must first make a judgment on the future economic growth and the total trend of carbon dioxide emissions in China. From a global perspective, countries closely related to carbon emissions have laws in their economic development, urbanization and industrial structure changes.
Theoretically, the four factors of economic aggregate, industrial structure, technical level and energy structure determine the total amount of carbon dioxide emissions. Among them, the first three factors are the main variables affecting the total energy demand, and the relationship is as follows: the higher the total economic volume, the higher the total carbon emissions; the higher the proportion of industrial GDP in the industrial structure, the higher the total carbon emissions; and the technical level determines the energy consumption per unit output. The last factor, that is, the energy structure determines the ratio of high carbon (black) energy to low carbon (green) energy when meeting the total energy demand.
< h1 toutiao-origin="h6" > total economic growth</h1>
The research group of "China 2049" of the Peking University Development Institute has done a prediction study on the future long-term economic growth trend of China based on the theory of growth convergence.
From 2021 to 2030, the average annual growth rate of China's potential real GDP will be 5%, and the total GDP will reach 170 trillion yuan by 2030, about 1.67 times that of 2020.
From 2021 to 2060, the average annual growth rate of China's potential real GDP will be 3.5%, and the total GDP will reach 420 trillion yuan by 2060, about 4.12 times that of 2020.
In the past 10 years, due to the synergistic effect of environmental remediation, the total carbon dioxide emissions brought about by each additional 1 trillion GDP in China have increased from about 0.9 billion tons in 2011 to about 0.22 billion tons in recent years. This also means that if the other three factors are given the same and only economic aggregate growth is taken into account, the total amount of carbon dioxide emissions will increase from about 9.9 billion tons in 2020 to 11.4 billion tons in 2030 and 16.9 billion tons in 2060, an increase of 1.5 billion tons and 7 billion tons respectively.
< h1 toutiao-origin="h6" > industrial structure changes</h1>
Changes in the global industrial structure have their own development laws.
Historically, when gdp per capita reaches 15,000-20,000 PPP (purchasing power parity) international dollars, the share of industrial GDP will peak at around 40%. The United States reached this peak in the mid-1950s and the European Union reached this peak in the mid-1960s, but in the next 50 years, the share of industrial GDP in these developed countries fell from about 40% to 15-20% or 25-30%. For example, the proportion of industrial GDP in industrial powerhouses such as Japan and Germany fell to 25-30%, while the United States, Britain, France, etc. fell to 15-20%. Because carbon emissions are mainly derived from industrial production, it is crucial for us to study carbon emissions by analyzing the laws of change in the industrial structure.
In the past 10 years, China's industrial structure has undergone drastic adjustments, and the proportion of industrial GDP has declined off a cliff. In 2011, China's per capita GDP was 10,000 PPP international dollars, and the proportion of industrial GDP at that time was 46.5%; by 2020, China's per capita GDP was 16,000 PPP international dollars, and the proportion of industrial GDP fell to 37.8%, that is, China's industrial GDP accounted for 9 percentage points in the past 10 years. In other countries, the share of industrial GDP in the United States and the European Union has fallen by about 9 percentage points from peak to about 30 years, while the new high-income country south Korea has fallen by only 5 percentage points since its peak in 1991.
Obviously, in the past 10 years, in addition to the impact of changes in resident demand, factor prices, comparative advantages of production and other factors on changes in industrial structure, government mandatory administrative interventions such as capacity reduction and environmental control have also played a greater role. The 9 percentage point drop in industrial GDP in 10 years is a warning that China's economy may have a tendency to de-industrialize prematurely. Therefore, in the future, we must beware of continuing to achieve the "double carbon" goal through mandatory administrative intervention.
At present, China's per capita GDP level is low, only $10,000 at nominal exchange rates. According to the calculations of my colleague Wang Xun, by 2060, China's per capita GDP will probably only reach the level of 60% of the United States. Therefore, when we respond to the "double carbon" goal in the future, we must still achieve the organic combination of economic development and low carbon goals at a lower cost.
In 2030, China's share of industrial GDP will probably fall by 5 percentage points to about 33%, which is similar to the current level of South Korea. This decline is already close to the upper limit, otherwise it will lead to premature deindustrialization. Based on data from the past few years, my rough estimate is that every 1 percentage point decline in industrial GDP can lead to a reduction in carbon dioxide emissions by about 500 million tons, so by 2030, the decline in industrial GDP will lead to a decline in carbon dioxide emissions by about 250 million tons.
Look at the carbon emissions of industrial segments. In 2020, the three industries with the largest carbon emissions in China are thermal power, steel and cement, accounting for 44%, 18% and 14% of the country's carbon emissions, respectively. China's steel and cement production is staggering, accounting for about 57% of the global total, and mainly to meet our domestic needs. Of these, 64.7% of steel production is spent in the construction industry, and cement production is all used in the construction industry. Therefore, a large amount of carbon emissions in our country are derived from the demand for buildings.
The demand for construction is obviously due to ultra-high-speed urbanization. China's population is huge, and since the reform and opening up, the urbanization rate has reached an unprecedented growth rate in human history. In the early 1990s, China's urbanization rate was 26%, while the data of the seventh census in 2020 has reached 63.8%. China's urbanization rate has grown the fastest in the past 20 years, with an average increase of 14 percentage points per 10 years. Based on China's huge population base, 14 percentage points involve the urbanization process of nearly 200 million people, and the corresponding building demand has naturally surged. The data shows that the construction area of houses in the country has increased from 660 million square meters in 2000 to 9.3 billion square meters in 2020, an increase of nearly 15 times in 20 years, and this is still an annual flow rather than stock data. Therefore, the rapid growth of carbon emissions that we have experienced in the past is closely related to industrialization and ultra-high-speed urbanization.
However, urbanization has its own laws. From the perspective of the global urbanization development law, the economies that have successfully industrialized have gone through the development stage of rapid urbanization, but once the urbanization rate reaches the range of 70% to 75%, it will enter a slow growth stage until it is stable at a level of about 80%. Given that China's current urbanization rate is 63.8%, it is predicted that after entering the peak of 70-75% by 2030, the growth rate of urbanization rate will face an inflection point and decline. This will lead to a significant decline in the overall demand for steel and cement in our country at that time.
In view of this, we should be confident that we will achieve a "carbon peak" in 2030.
< h1 toutiao-origin="h6" > technology upgrade and replacement</h1>
China's production technology based on coal input has ranked at the international advanced level.
Over the past 15 years, each of our Five-Year Plans has set specific targets for energy conservation and emission reduction. By the end of 2020, the number of coal-fired units with ultra-low emissions in the country has reached 950 million kilowatts, accounting for 88% of the total installed capacity of coal-fired power. The comprehensive energy consumption of steel enterprises tonned steel in China has also dropped from 640 kilograms of standard coal in 2006 to 545 kilograms of standard coal in 2020, which is not only lower than the world average of 678 kilograms of standard coal per ton of steel, but also close to developed countries such as Japan. Under the current technology of steelmaking using coal energy, the space for a significant reduction in energy consumption is very limited. The new dry production technology basically adopted by China's cement industry has also reached the global leading level, and the space for emission reduction is also limited.
This means that the only way to continue to expand the space for energy consumption decline is through a clean alternative to energy inputs. At present, the alternative technology of China's energy inputs has developed by leaps and bounds. Coal power can be replaced by natural gas, nuclear power, hydropower, wind power and photovoltaics, blast furnace converter steel smelting can be replaced to a certain extent by electric furnace steelmaking, hydrogen steelmaking, and the fuel in the cement production process can be replaced by industrial waste, biofuels and electricity. Energy substitution is essentially a problem of energy structure transformation. However, it should be noted that due to the cost and supply constraints of alternative energy, there is an upper limit to the clean alternative space for coal fuels. As a well-stocked, reliable and low-cost energy input, coal cannot and does not need to be completely replaced.
< h1 toutiao-origin="h6" > energy structure adjustment</h1>
From the perspective of China's energy structure in 2020, coal, oil, natural gas, nuclear power, hydropower, wind power and photovoltaics accounted for 56.6%, 19.6%, 8.2%, 2.2%, 8.1%, 2.8% and 1.6% of the total primary energy consumption, accounting for 63.2%, 0.1%, 3.2%, 4.7%, 17%, 6% and 3.3% of the total power consumption. Overall, compared to the world's major economies, coal accounts for too much of primary energy consumption, and natural gas and nuclear power have accounted for too little. Relatively low-carbon non-fossil energy accounts for about 15.7% of total primary energy consumption, and this proportion still has room for improvement.
There is a substitution and competitiveness between different energy sources. Given the total energy demand, the relative prices of different energy sources determine a country's energy mix. Energy prices, on the other hand, are determined by a country's resource endowments and international supply and demand. The current situation of China's resources is "lack of oil and gas", and coal reserves are extremely rich, so the energy structure of coal is also the result of the development of natural laws and economic laws. "Double carbon" is mainly to reduce the use of coal. From the experience of the United States and EU countries, the transformation of the energy structure will depend on natural gas and nuclear power development in the short term. At present, China's nuclear power technology has been very mature, but there has been a lot of discussion about nuclear power technology non-market or non-safety factors, and the development is slow.
At present, the cost of coal power, natural gas, nuclear power, and hydropower is relatively fixed, especially the cost of nuclear power is difficult to reduce with the improvement of safety requirements. However, new energy has a very strong economy of scale advantage, that is, the larger the installed capacity of new energy, the lower the cost. From 2010 to 2020, the global cost of levelized electricity for photovoltaic power plants, onshore wind power, offshore wind power and solar thermal power generation will fall by 85%, 56%, 48% and 68% respectively, and will continue to decline in the next decade. This year, the state has eliminated subsidies for photovoltaic power plants and onshore wind power. It is expected that in the next 10 years, the cost of wind power and photovoltaic power generation will most likely be less than 2 cents per kWh of electricity, and it will also have a competitive advantage at the power generation end. According to the law of the market, once the price of which type of energy is low, this type of energy can occupy an important position in the energy structure.
When President Xi Jinping proposed the "double carbon" target last year, he also proposed a target of 25% of non-fossil energy in 2030, that is, to increase by 9.3 percentage points on the current basis. But there are many challenges to achieving this goal. From 2010 to 2020, the proportion of non-fossil energy in China increased by about 7 percentage points, of which nuclear power, hydropower and wind and photovoltaic contributed 1.56, 1.67 and 4 percentage points respectively. Achieving the target of 9.3 percentage points means that wind power and photovoltaics will play a greater role. However, in the past 10 years, China's wind and photovoltaic development has started from scratch, and the current installed capacity has reached a very high level. The proportion of non-fossil energy sources that need to increase by 9.3 percentage points in the next 10 years faces certain challenges.
< h1 toutiao-origin="h6" > 2030, 2060 carbon emission outlook</h1>
Based on the above analysis, our forecast for China's CO2 emissions in 2030 is as follows:
First, the growth of the total economic volume will increase carbon dioxide emissions by 1.5 billion tons;
Second, a decline in the share of industrial GDP would reduce CARBON dioxide emissions by 250 million tons;
Third, an increase in the share of non-fossil fuels to 20% or 25% will reduce carbon dioxide emissions by 480 million tons or 1.04 billion tons;
Fourth, China's total carbon dioxide emissions in 2030 will be 10.7 billion tons or 10.1 billion tons.
Considering that since 2016, China's newborn population has dropped from 17.9 million cliffs to 12 million in 2020. The newborn population in 2021 is likely to be less than 10 million. This means that from 2021 or a few years thereafter, China's total population will enter a long-term negative growth stage. By 2030, as China's total population declines and the growth rate of urbanization rate declines and tends to zero, the output and carbon dioxide emissions of the steel and cement industries will decline significantly, and the total energy demand will also enter a slow growth stage.
In fact, with the development and change of the growth rate of urbanization rate, the total energy consumption of advanced economies such as the European Union and the United States has experienced a development trend from rapid growth to slow growth and finally negative growth. The total primary energy consumption of the European Union and the United States experienced rapid growth of 4.14% and 2.94% per annum between 1966 and 1979, and then entered a slow growth stage of 0.52% and 0.83% per annum respectively, until it peaked in 2006 and 2007.
China's energy demand grew by 9.4 percent in 2001-2011, largely due to the high economic growth brought about by the WTO accession dividend, before falling to 2.9 percent between 2012 and 2020. Considering the growth rate of urbanization and the decline of the total population, the growth rate of Energy Demand in China after 2030 will not be higher than 1%. Therefore, the external environment for China to achieve "carbon peaking" in 2030 is relatively relaxed, and there is no need to respond to "carbon peaking" in a sporty manner.
After 2030, under the trend of low or even negative growth of total energy demand, relying on the high proportion of fossil energy substitution formed by the continuous decline in the cost of wind power, photovoltaics, hydrogen energy and energy storage, the large-scale application of carbon capture, utilization and storage technology around 2050, and the role of agricultural and forestry carbon sinks, the realization of the "carbon neutrality" goal in 2060 is also a high probability event.
In summary, we believe that it is not appropriate or necessary to control aggregate energy demand through administrative intervention as a means of achieving the "double carbon" goal. In fact, under the premise of fully respecting the laws of economic development and carbon emission development, using market and price mechanisms to solve the problem of excessive growth in energy consumption and carbon dioxide emissions is a better strategy to achieve the "double carbon" goal.
Finishing: He Youxi | Editor: Wang Xianqing Bai Yao