Nature and Biodiversity

China has abandoned 103 coal power plants. Here's what else is changing

A woman walks past trees reflected on a lake in front of a construction site of a residential compound on a hazy day in Wuhan, Hubei province March 6, 2015.

China accounts for 36% of total global investment in renewable power Image: REUTERS/Stringer

James Pennington
Associate Director, Circular Economy Lead, Deloitte
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In recent years, images of China often depict smog-filled cities and coal-fired power plants. It is true that a breakneck speed of development over more than three decades has led to a series of environmental challenges, with cities such as Beijing often subjected to pollution levels multiples higher than the recommended limit. Other environmental issues, including the effects of climate change, water pollution, high use of natural resources and the pollution of arable land, also pose challenges for the world’s most populous nation.

In previous decades, the environment had been seen to take a back seat in Chinese policy-making in favour of the very real challenge of sustaining economic growth and raising living standards. However, the severe impact of air pollution on health and a global drive to fight climate change has seen China emerge as an international leader in the environmental space. Moreover, as others are progressively backing away from their leadership position, China has shown an increasing willingness to collaborate with the rest of the world in order to achieve climate goals.

The World Economic Forum is now working with the Chinese government on these issues. At Davos this year, the Forum signed an MOU with the China Council for International Cooperation on Environment and Development (CCICED) an organization which gives policy recommendations to China’s State Council. The collaboration will explore how circular and sharing economy models can create a more resource-efficient society in China, also focusing on other areas including oceans, the potential of new technologies for the environment, and climate change. (The "circular economy" refers to a shift from the linear model of making products then throwing them away, so that everything is designed to be recycled or re-used.)

As is the nature of the Chinese system, direction and policy action starts at the top. At the 2017 Annual Meeting of the World Economic Forum in Davos, president Xi Jinping signaled that China would stick with the multilateral process and others should also, saying “The Paris Agreement is a hard-won achievement... All signatories should stick to it instead of walking away from it, as this is a responsibility we must assume for future generations”. As the world’s biggest emitter of greenhouse gasses and the world’s second largest economy China’s newly accepted leadership sends a strong signal to the global community.

Actions speak louder than words, and China has been pushing forward action on the ground to back up the words of the President. China has been shifting away from its reliance on coal, which according to government statistics accounted for 65% of its energy in 2015, a 3.7% drop from the previous year. This has been happening faster than expected: in 2016 China decided to stop building 103 coal-powered power plants that were in the construction or planning phase. As Nuer Bekri, the government official in charge of Chinese energy policy, said in Davos: “last year we canceled 7.2 million KW of coal energy, we are also suspending, cancelling and delaying coal generation… that approach will create a larger market space for other sources of energy.” He also noted a willingness to cooperate globally, saying: “we will have to enhance international collaboration in the energy field.”

The government sets the direction, but implementation lies with the private sector. As Qiao Baoping, CEO of Guodian, China’s largest (and the world’s second largest) power generator, said in Davos: “Commitments are made by the Chinese government, but they are filled by Chinese businesses such as mine.” The company now has 16GW of hydro generation capacity and 25.7GW of wind power capacity, more than any other company globally, enough to power nearly 30 million US homes. According to UN Environment, in 2016 China increased investment in renewables (excluding hydro) by 17% to $102.9 billion, or 36% of total global investment. The country now possesses more than 25% of total global renewable power capacity.

Spinning wind turbines are pictured behind part of the Great Wall of China from the border of Inner Mongolia Autonomous Region and Shanxi province October 11, 2010.
Winds of change: Turbines next to the Great Wall of China Image: REUTERS/Joel Boh

Another important area for China is the use of raw materials. Throughout its decades of fast growth, China has imported vast amounts of raw materials, contributing to a global commodities boom. This has left a lot of room for improvements in resource efficiency: China uses around 2.5 kg of materials per dollar of economic growth compared with around half a kilo in OECD countries. The country has embraced the circular economy - a model in which nothing is wasted and all consumer and industrial outputs are re-used as valuable resources. In 2009, China became the first country to introduce a circular economy promotion law, to increase the re-use and recycling of materials.

Businesses are also implementing this, as explained by Yu Xubo, CEO of COFCO - the country’s largest food manufacturing, trading and processing company. “We stick to a re-use and recycle model. Take hog farming for example, we use the bio-gas for energy and we use the bio-slurry [...] as organic fertilizer”. Models such as this can increase agricultural productivity in a country with 22% of the world’s population and only 7% of its arable land. The circular economy is also gaining traction in China’s many "circular industrial symbiosis parks," in which companies use the waste of other manufacturers as raw material inputs into their process. For example, in the Suzhou New District, circuit boards are crafted from copper off-cuts from other heavier industries.

As China’s economy grows there is a strong policy push to move from an economy focused on investment in infrastructure and exports to one driven by domestic consumption. As China “rebalances” its economy, it will explore new models of consumption that can provide for its many consumers without destroying the environment. In recent years, technological and business model innovation has given rise to the sharing economy, which has become a strong force in China. The industry is thought to be worth $220 billion domestically and is predicted to grow at 40% per year, according to the State Information Agency in Beijing. It is thought that the sharing of goods, such as pooling taxi journeys, or sharing products and homes, could pave the way for a less resource-intensive form of consumption.

A policeman directs the traffic at a busy street of downtown Shanghai December 5, 2012. While the opportunities are vast in China's estimated $50 billion auto insurance industry, there are roadblocks aplenty - from poor driving standards to a new generation of car owners unfamiliar with the concept of buying protection against accidents and repairs. In 2010, China reported 3.9 million road accidents that killed 65,225 people and injured 254,075. For comparison, there were 30,797 fatal crashes in the United States in 2009, according to the National Highway Traffic Safety Administration, which has almost 2.5 times as many registered vehicles as China. REUTERS/Carlos Barria (CHINA - Tags: TRANSPORT SOCIETY) - RTR3B827
Change of direction: Ride-sharing could cut congestion in China Image: REUTERS/Carlos Barria (CHINA - Tags: TRANSPORT SOCIETY) - RTR3B827

A World Economic Forum study in collaboration with MIT found that home-sharing could have the potential to provide extra capacity without building hotels, especially around large events when cities experience a surge in visitors. Using Airbnb data from the Rio Olympics it was found that home sharing created the equivalent of 257 average-sized hotels during the Games. Similarly, China’s largest ride hailing company, Didi, matches riders going in the same direction. In 2015 it pooled an average of 1.5 million rides a day, saving 510 million litres of fuel.

These steps will be vital as China continues to grow. The environmental challenges faced by the country are those facing many other developed and developing nations. New ways of working between governments, businesses and civil society are critical to create the systemic changes needed to safeguard our global commons. The examples above are just the first step of a much bigger global transformation that all stakeholders should embrace.

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Nature and BiodiversityGeographies in DepthClimate ActionCircular Economy
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