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Exploring key energy reforms to fight pollution

LIN BOQIANG | 2018-11-22 | Hits:
(Chinese Social Sciences Today)

Technicians check liquefied natural gas facilities in Nantong, Jiangsu Province. By the end of 2020, China aims to increase non-fossil energy to 15 percent of total primary energy consumption and raise the share of renewable energy in production, according to the 13th Five-Year Plan (2016–2020). Photo: CHINA DAILY


As the economy grows and urbanization and industrialization speed up, China, as a major energy consumer, faces tremendous ecological challenges. To start with, China’s coal-dominated energy consumption structure and growing energy demand have exacerbated carbon emissions and air pollution.

At the same time, energy prices do not reflect the external costs of resource scarcity and environmental pollution, requiring large cross-subsidies. The lack of price incentives for consumers leads to relatively low energy efficiency, which is not conducive to the effective allocation of energy resources and ecological and environmental protection.
Also, due to the lack of environmental pollution accountability mechanisms and supporting laws and regulations, the growing environmental cost has become a financial burden that local governments cannot bear.

Therefore, the rational development, allocation and use of energy resources is the key to comprehensively strengthening ecological protection and fighting pollution. China cannot follow the Western path of pollution first and treatment later.

In this regard, the 19th CPC National Congress Report has stated that pollution prevention and control is one of China’s major risks and that tough steps must be taken to resolve the problem. In the first stage from 2020 to 2035, there will be a fundamental improvement in the environment, and the goal of building a beautiful China will be fundamentally attained.
Key aspects for coordinating the development of the economy and environmental protection are discussed below.


Clean energy
As an important way to adjust the energy structure, the “coal-to-electricity” project is deemed to be beneficial to environmental protection. The project refers to the conversion of coal-fueled heating to electricity-fueled heating for households. Coal used to generate electricity in designated power plants is relatively clean and has low emissions of sulfur oxides, nitrogen oxides and soot compared to home coal use, which will help improve energy efficiency to a certain extent and reduce air pollution.

From the perspective of energy conservation, emission reduction and environmental protection, the government can give appropriate subsidies towards the replacement of coal heating with electricity, encouraging consumers to switch from high pollution and emission coal consumption to clean electricity consumption, so as to improve urban air quality.

In 2017, China’s energy structure is as follows: coal accounting for 60.4 percent, oil 18.8 percent, natural gas 7.0 percent, hydropower 9.2 percent, nuclear power 1.9 percent, wind power 1.9 percent, solar energy 0.8 percent, and others such as biomass energy accounting for a very small proportion.

Given China’s energy endowment and energy security, the share of oil and hydropower in total energy consumption will remain stable for a long time. Major changes in energy restructuring will mainly occur in the reduction of coal and the increase of cleaner natural gas and other clean energy such as nuclear power, wind power and solar power.

Natural gas is more effective in replacing coal in the short to medium term because of its large share in energy consumption and its contributions to the overall efficiency of the energy system.
To avoid the rapid increase of natural gas dependence, China should not only increase the development of domestic conventional natural gas, but also encourage the development and utilization of unconventional energy resources such as shale gas and coal bed methane (CBM).
In the early stage of facilitating shale gas, the government can engage enterprises to participate in technological innovation, stimulate technological progress through competition, and reduce development and utilization costs.

Moreover, to develop CBM, it is necessary to solve its overlapping mining rights, interest disputes and mining costs with the coal industry. At present, the development of CBM technology is approaching maturity, so a mining rights management mechanism in the CBM industry must be stipulated in a timely manner.


Energy price reform
Energy price is another key factor influencing energy consumption and improving energy efficiency. For a long time, energy price has not fully reflected the scarcity of energy costs and environmental externalities. Because it is hard for the public to understand the actual cost of energy, they are more sensitive to price rises, so energy market price reform is happening slowly.

In fact, much of the increase in air pollution comes from burning fossil fuels. Hence, a key step in fighting pollution prevention and control is to make energy prices reflect external environmental costs and resource scarcity costs, effectively changing the relatively inefficient consumption of energy in China.

At present, the energy industry as a whole is in a state of relative excess capacity, and the short-term price rises serving energy price reform are limited. More marketization reform that could have an effect while the energy price is not so high could minimize negative impacts on economic growth and social stability.

With the increasing impact of pollution problems, such as smog, on people’s lives, the public are more willing to choose clean and environment-friendly energy. Energy price reform will help to share the cost of pollution control and be more easily accepted by the public.

The government therefore should seize the opportunity to accelerate energy price marketization, enhance the competitiveness of clean energy and promote energy structure adjustment.

On the whole, clean energy, which has greater development potential, still accounts for a small proportion of the total energy in China, making it difficult to replace coal while meeting the growth of energy consumption.

Also, as the external costs of energy such as environmental pollution, resource scarcity, energy security and intergenerational impacts cannot be fully embodied in prices, policy design needs to show more support toward energy conservation and emission reduction efforts.


Polluters pay
A basic principle must be clarified in the fight against pollution, that is, that those who pollute bear full responsibility for the effects of their activities. Due to difficulty in assessing the consequences of environmental pollution and loss, the pollution-first-treatment-later strategy not only brings huge economic losses to society but also harms our offspring’s living space.
In this light, to build a beautiful China, we need to speed up the ecological compensation mechanism, adhering to the “polluter pays principle,” to stop the destruction of the ecological environment at the source, restore the original environment, and avoid further ecological deterioration.

In this way, enterprises can be forced to consider the cost of pollution control during production, thereby improving their environmental awareness, effectively advancing energy conservation and environmental protection technology, and promoting green industrial transformation and upgrading. Only by strictly abiding by the above principles can we achieve the equitable distribution and use of environmental resources across generations and break the long-standing dilemma of “the enterprises pollute, the public hurts, and the government pays.”


Public transportation
With the rapid growth of the automobile industry, vehicle emissions have become one of the major sources of urban smog, seriously affecting the public’s health and quality of life.
According to the ministry of environmental protection, 31 percent of Beijing’s smog comes from vehicle emissions. In Shanghai, 29.2 percent of the smog is caused by motor vehicles, ships, planes and non-road mobile machinery.

According to the International Energy Agency, the transportation sector currently accounts for nearly a third of the world’s energy consumption emissions, and it is expected that by 2030, energy consumption emissions from transportation will exceed 50 percent.

That said, the use of electric rail transit should become the main form of public transport. Improved rail transit will not only ease traffic congestion, but also effectively reduce the external dependence on oil consumption and air pollution.

As of today, there are as many as 15 cities in China with a population of more than 10 million. In the long run, tackling traffic congestion and air pollution in China’s big cities requires policy support to accelerate the development of urban rail transit.

First, the government should clarify the approval standards of rail transit projects and simplify the process as much as possible. Second, government funding alone will find it difficult to meet the needs of massive rail transit projects, so private enterprises should be encouraged to cooperate with the government to realize more flexible financing. Third, rail transit projects are expensive and will struggle to attract investors without a reasonably rewarding pricing mechanism. Therefore, the investment needs a reasonable pricing mechanism as a guarantee to realize the rapid development of rail transit.

To sum up, fighting pollution will require the public to proactively participate in environmental protection, strengthen ecological awareness, and consciously practice a green and low-carbon lifestyle.

Only through the joint efforts of the government, enterprises and the public can we improve energy efficiency, rationally allocate energy resources, and promote China’s green and low-carbon transformation, thus realizing the strategic goal of a beautiful China.


Lin Boqiang is from the Institute of Chinese Energy Policy at Xiamen University.

(edited by YANG XUE)