China’s Top Officials Clash Over Environment and Economics

China’s economic planners have wrested control over policy from bureaucrats in the environmental department, potentially jeopardizing efforts to meet emissions pledges made by Xi Jinping before the United Nation’s General Assembly in 2020. Addressing climate change is a central plank of China’s domestic and international policy—Xi attended a White House climate summit this April—but it is unclear whether Chinese leaders have the political will, or capacity, to achieve their lofty reform goals. At The Wall Street Journal, Sha Hua and Keith Zhai reported on the developments in China’s bureaucracy, where officials have watered down landmark emissions caps to protect economic growth:

Officials at China’s main economic planning agency, the National Development and Reform Commission, have limited the initial scope of a national carbon-trading system, which is set to go into full operation later this month after pilot projects in eight Chinese cities.

[…] After Mr. Xi’s pledge in September, one of his top lieutenants, Vice-Premier Han Zheng, called in October for environmental officials to accelerate the launch of a national carbon market and formulate a carbon road map, signaling to Chinese policy observers that they would be charged with drafting the plans for meeting the targets.

But in March when China’s cabinet enumerated the bodies charged with drafting the road map, the economic planning agency was listed first—not the environmental officials. Beijing also set up a group of high-level members last month to cut across bureaucratic structures, issue guidance and oversee the road map. Three out of the five members of its leadership were senior economic cadres.

[…] The scheme will, for instance, involve only about 2,200 companies in the power sector, which is responsible for an estimated 30% of China’s total emissions, instead of the 6,000 companies from eight sectors that were in the initial proposal. [Source]

For The Economist’s Chaguan column, David Rennie wrote about the perhaps dubious claim that one-party rule is better suited to combating climate change than multiparty democracy:

To hear China’s Communist Party tell it, the nifty thing about autocracy is that it lets rulers plan for the long term. Apologists for one-party rule hail China’s leaders as enlightened technocrats who think in centuries, while decadent Western democracies struggle to see beyond the next election cycle.

[…] In fact, Chinese climate policy is a mess of contradictions.

[…] China’s political system, for all its multi-decade plans, is run by officials who may stay in a given job for five years, and whose next promotion depends on economic growth now. Zhang Lei, the chief executive of Envision, a big wind-energy and battery company, is confident that top-down orders can overcome local inertia. “The most important thing is that President Xi has made a huge commitment and continues to push that agenda,” says Mr Zhang. [Source]

Environmental reforms come at steep economic costs that are often concentrated in areas that are already economically stagnant and facing huge population declines as a consequence. Efforts to curb steel capacity risk triggering inflation and slowing economic growth. Some officials do not have the appetite for cuts. In northern Hebei’s Tangshan, the home of China’s steel industry, officials have eased restrictions on steel output to reinvigorate the economy—highlighting the challenge of implementing enduring environmental reform. At NPR, Emily Feng reported on Datong, Shaanxi Province, where coal is still king:

“One narrative is generated by high-level political announcements to achieve zero carbon within the next four decades,” says Li. “The other narrative is that we will still need to use coal because it ensures energy security. Which one of these two narratives prevail in the end?”

Currently, China appears to be pursuing both paths, in order to meet growing domestic demand for electricity. Inner Mongolia and Shaanxi, two of China’s major coal-producing provinces, will increase energy production — much of it coal-fired — by 1% and 4% per year. To make its commitment to go carbon-neutral in less than four decades, China will need other provinces to increase their capacity in renewable energy.

[…] Last year, the provincial government ordered five of its biggest coal companies to merge into one state-run conglomerate, the Jinneng Holding Group. The group has a combined output of 420 million tons of coals a year, according to an industry association, making it one of the world’s biggest coal producers.

The merger is supposed to make the bloated coal sector more efficient and keep coal prices high by coordinating output. In practice, miners say that the merger has resulted in less work as mines reduce shifts because national and local environmental regulations have tightened, making it difficult to get new licenses and expensive to open new mines and upgrade existing ones. [Source]

New environmental regulations do not guarantee better outcomes. In fact, a 2018 policy change designed to encourage the growth of the environmental impact assessment (EIA) industry created conditions ripe for exploitation by unscrupulous EIA companies. From Huang Yanhao and Wang Xintong of Caixin through Nikkei Asia, a report on Jin Haiyan, an EIA engineer who filed over 1,600 reports in a single four-month period—a feat deemed “absolutely impossible” by industry insiders:

They said that the likely explanation for Jin’s output was her employer was “selling qualifications,” a longstanding practice in many industries in China in which an accredited company or individual allows another — usually unlicensed — company to make use of its qualification to engage in business that requires one. Typically, this is done in exchange for a payment to the license holder or their employer.

[…] The result was an explosion in the number of EIA companies. At the end of 2018, China had 921 registered licensed EIA institutions, according to data from the MEE. However by October 2020, there were more than 6,000 EIA companies registered on the EIA Credit Platform.

In 2019, a regulation took effect that allowed EIA companies to have only one registered EIA engineer on staff to compile reports, lowering the threshold for entering the market.

[…] To survive the fierce competition in the market, EIA institutions had to cut costs or sidestep regulatory requirements, he said. One tactic was simply not to employ licensed EIA engineers. [Source]

Conversely, when regulations work as intended, some outsource pollution to developing nations rather than submit to stringent domestic rules. From Bloomberg News, a report based on leaked documents showing that a Chinese-backed coal plant in Bangladesh covered up environmental impact assessments that showed it to be a polluter:

“Bangladesh lacks meaningful environmental regulation, as do many other countries hosting China-backed energy projects,” said Lauri Myllyvirta, lead analyst at CREA and author of the report. “Yet the Chinese government and state-owned financiers have failed to put in place environmental and social safeguards that would prevent project developers from exploiting weak or non-existent regulator oversight.”

[…] The plant will emit five times the level of sulfur dioxide and 10 times as much nitrous oxide as would be allowed in China, according to CREA.

[…] China’s financing of overseas energy projects has declined and some of its decisions have run into opposition. Last year, more than 20 non-governmental organizations called on Chinese banks to withdraw financial support for a coal-fired power plant under construction in Turkey. China also financed $260 million for a coal-fired power project in Pakistan. [Source]

China potentially stands to lose trillions of dollars of economic productivity over the coming decades due to rising sea levels and annual floods triggered by climate change. At The Financial Times, Steven Bernard and Christian Shepherd:

Trillions of dollars of economic activity along China’s east coast, including $974bn in Shanghai alone, are exposed to oceans rising as a result of climate change this century, according to Financial Times analysis of unpublished data.

[…] Among industrial landmarks found in the highly exposed areas are the headquarters of Alibaba; China’s largest ecommerce platform in Hangzhou city; the Suzhou industrial park that is home to Panasonic’s new China headquarters; and Tesla’s Shanghai gigafactory.

[…] Guangzhou and Dongguan, both in southern province’s , sit at the top of a global ranking of flood-vulnerable cities from Maplecroft, a research firm based in Bath, UK. [Source]

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