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Chinese Economic Growth Chinese Economic Growth and Atmospheric Pollution:and Atmospheric Pollution:
An OverviewAn OverviewJie HeJie He
CERDI, ClermontCERDI, Clermont--FerrandFerrand
David RolandDavid Roland--HolstHolstUC BerkeleyUC [email protected]@berkeley.edu
1 February 20061 February 2006
He & RolandHe & Roland--Holst Holst 221 1 FebruaryFebruary 20062006
MotivationMotivation
Why we should care about this:1. Chinese GHG emissions are already a
significant regional externality and could be decisive on a global basis.
2. China’s energy demand is “rocking the tanker.”3. Because of its status as a populous DC, what
happens in China in terms of sustainable living is of special significance.
He & RolandHe & Roland--Holst Holst 331 1 FebruaryFebruary 20062006AOD (Unitless)
Source: Y. Kaufman: 2001, NASA-GSFC
Aerosol Optical Depth : April 2001NASA-TERRA Satellite; MODIS Inst
He & RolandHe & Roland--Holst Holst 441 1 FebruaryFebruary 20062006
Source: Novakov, Ramanathan, Hansen, .. Sathaye, GRL, 2002
He & RolandHe & Roland--Holst Holst 551 1 FebruaryFebruary 20062006
Three Focal PointsThree Focal Points
1. Where is China along the path of energy dependence?
2. How might energy prices and policies influence its course?
3. How can we decompose the ensuing environmental effects?
He & RolandHe & Roland--Holst Holst 661 1 FebruaryFebruary 20062006
Energy and GHG Trends in ChinaEnergy and GHG Trends in China
Two contending perspectives: 1. Optimists point to falling coal intensity in
the late 1990s and massive technology infusion across the economy.
2. Others see resurgence of coal and overwhelming demand shifts in recent years, driven mainly by final consumption and completion of the process of modernization.
He & RolandHe & Roland--Holst Holst 771 1 FebruaryFebruary 20062006
Reported Growth Rates of GDP and Commercial Reported Growth Rates of GDP and Commercial Energy Use in ChinaEnergy Use in China
Source: Logan:2001
He & RolandHe & Roland--Holst Holst 881 1 FebruaryFebruary 20062006
Chinese Steel: An Optimistic ViewChinese Steel: An Optimistic View
He & RolandHe & Roland--Holst Holst 991 1 FebruaryFebruary 20062006
Chinese Steel: Reality Chinese Steel: Reality –– Now below average, Now below average, growing fast, and headed much highergrowing fast, and headed much higher
• Per capita consumption up 2.5 times in last decade• Likely to more than double again in coming decade• Even 15% annual growth would still be less than Korea in 1992
Steel Production
Oil Consumption
Country 1992 2001 2000China 59 132 905Korea 499 809 2071Japan 635 575 4136France 382 390 4366United States 330 373 8141
Annual Kilograms Per Capita
He & RolandHe & Roland--Holst Holst 10101 1 FebruaryFebruary 20062006
Per Capita Steel and Energy(Chinese levels = 100)
100
200
300
400
500
600
700
800
900
1000
China Korea Japan France United States
Countries
Nor
mal
ized
Qua
ntity
Steel Oil
Mountain
Hill
Industrialization may be energy-intensive, but affluence is much more so.
He & RolandHe & Roland--Holst Holst 11111 1 FebruaryFebruary 20062006
China: The Worlds 3China: The Worlds 3rdrd Largest Car Market by 2010Largest Car Market by 2010
He & RolandHe & Roland--Holst Holst 12121 1 FebruaryFebruary 20062006
Demographics of Vehicle DemandDemographics of Vehicle Demand
He & RolandHe & Roland--Holst Holst 13131 1 FebruaryFebruary 20062006
Coal Coal atat the the FoundatonFoundaton, , OilOil atat the the MarginMargin::EnergyEnergy Composition by TypeComposition by Type
A. Energy preduction structure
0
20000
40000
60000
80000
100000
120000
140000
160000
1978
1985
1990
1992
1994
1996
1998
2000
2002
Year
Ton
of e
quiv
alen
t coa
l
B. Total energy consumption
0
20000
40000
60000
80000
100000
120000
140000
160000
1978
1985
1990
1992
1994
1996
1998
2000
2002
Year
Ton
of e
quiv
alen
t coa
l
hydropow er
natural gas
crude oil
coal
He & RolandHe & Roland--Holst Holst 14141 1 FebruaryFebruary 20062006
TippingTipping the Trade Balance:the Trade Balance:EnergyEnergy DemandDemand and and SupplySupply CompositionComposition
-30000
-20000
-10000
0
10000
20000
3000019
80
1986
1988
1990
1992
1994
1996
1998
2000
Year
MTE
C
total export
total import
totalconsumptiontotalproduction
He & RolandHe & Roland--Holst Holst 15151 1 FebruaryFebruary 20062006
Macro Macro EfficiencyEfficiency DeterminantsDeterminants
0
500
1000
1500
2000
2500
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Year
Per c
apita
ene
rgy
cons
umpt
ion
and
prod
uctio
n (k
g eq
uiva
lent
oil/
pers
on)
GD
PPC
and
indu
stria
l GD
PPC
(199
5 U
SD)
Per c
apita
SO
2 em
issi
on (g
/per
son)
Energyproduction Energyconsumption GDPPC
industrialGDPPCSO2 emission
He & RolandHe & Roland--Holst Holst 16161 1 FebruaryFebruary 20062006
China: Per Capita Waste Gas Emissions China: Per Capita Waste Gas Emissions (1,000 cubic meters)(1,000 cubic meters)
Source: Aufhammer et al: 2003
He & RolandHe & Roland--Holst Holst 17171 1 FebruaryFebruary 20062006
Projections to 2025Projections to 2025
• We use a recursive dynamic CGE model to forecast trends for China over the next two decades.
• Around a calibrated baseline of consensus GDP growth, we evaluate the effects of rising oil prices.
He & RolandHe & Roland--Holst Holst 18181 1 FebruaryFebruary 20062006
Sectoral Output CompositionSectoral Output Composition
0%
20%
40%
60%
80%
100%
Perc
enta
ge
1997 2000 2003 2006 2009 2012 2015 2018 2021 2024
Year
Service
Construction
Manufacture
Agriculture
He & RolandHe & Roland--Holst Holst 19191 1 FebruaryFebruary 20062006
InvertedInverted Kuznets Kuznets CurveCurve??Real GDP and SO2 Emission TrendsReal GDP and SO2 Emission Trends
0
1000
2000
3000
4000
5000
6000
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Year
Rea
l GD
P (1
0^9
USD
) SO
2 em
issi
on(1
0^4
Tons
)
0
2
4
6
8
10
12
SO2
emis
sion
inte
nsity
(k
g/10
00US
D) SO2
RealGDP
SO2intensity
He & RolandHe & Roland--Holst Holst 20201 1 FebruaryFebruary 20062006
CO2 as the CO2 as the HiddenHidden Dragon:Dragon:Final Final ConsumptionConsumption TrendsTrends
0%
20%
40%
60%
80%
100%
Perc
enta
ge
1997 2000 2003 2006 2009 2012 2015 2018 2021 2024
Year
Service
Construcution
Manufacture
Agriculture
He & RolandHe & Roland--Holst Holst 21211 1 FebruaryFebruary 20062006
IllsIlls of Affluenceof Affluence
0
1
2
3
4
5
6
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Year
Emis
sion
inte
nsity
(Kg/
1000
USD
)
Agriculture
Manufacture
Construction
Service
Mfg reverses course because of electricity production.Services are about transportation.
He & RolandHe & Roland--Holst Holst 22221 1 FebruaryFebruary 20062006
Real Sources Of Emission Real Sources Of Emission IntensityIntensity
0
50
100
150
200
250
Year
Coa
l int
ensi
ty (T
CE/
mill
on U
SD)
0
50
100
150
200
250
300
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
Ye a r
Petr
ol a
nd c
oke
inte
nsity
(TC
E/m
illon
USD
)
AgricultureManufactureConstructionService
020406080
100120140160180
19972001200520092013201720212025
Year
Oil
inte
nsity
(TC
E/m
illon
USD
)
He & RolandHe & Roland--Holst Holst 23231 1 FebruaryFebruary 20062006
Composition of Environmental Incidence:Composition of Environmental Incidence:Primary Drivers and the Pollution Troika Primary Drivers and the Pollution Troika
Economic sources of pollution can be decomposed into three parts:
1. Growth effects – expanding the envelope of economic activity. China’s successes here are now legendary, and becoming almost surreal.
2. Composition effects – shifting patterns of supply and demand around the surface of the envelope. Things will get much worse before they get better.
3. Technological change – efficiency gains, bending the envelope. Here is the only unequivocally good news, driven mainly by coal use/distribution constraints and technology transfer.
He & RolandHe & Roland--Holst Holst 24241 1 FebruaryFebruary 20062006
Divisia Divisia DecompositionDecomposition ResultsResults• SO2 emission variation during 1997-2025.
Scale effect
0
5000
10000
15000
20000
25000
agricult u
reManu factu
ring
Constructio
nServ ices
Composition effect
-5000
0
5000
10000
15000
20000
25000
agricultu
reManu factu
ring
Constructio
nServ ices
Technique effect
-15000
-10000
-5000
0
5000
10000
15000
20000
250001997-2003
2003-2015
2015-2025
He & RolandHe & Roland--Holst Holst 25251 1 FebruaryFebruary 20062006
SO2 emission changes for some manufactures
Composition effect
-200
200
600
1000
1400
1800
2200
Oil
Petro
l and
cok
e
Elec
trici
ty
Text
iles
Wea
ring
appa
rel
Leat
her p
rodu
cts
Che
m. P
rod
Oth
er m
iner
al p
rods
Ferr
ous
met
als
Mot
or v
ehic
les
Oth
er tr
ans.
equ
ips
Elec
troni
c eq
uipm
ent
Oth
er m
ach
& eq
uip.
Land
tran
spor
t
Sea
trans
port
Air t
rans
port
Sectors
17094 5751 3303
Divisia Divisia DecompositionDecomposition
He & RolandHe & Roland--Holst Holst 26261 1 FebruaryFebruary 20062006
CrudeCrude OilOil Absorption TrendsAbsorption Trends
0
100
200
300
400
500
600
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Year
Oil
cons
umpt
ion
and
impo
rt (1
0^6
USD
)
0
10
20
30
40
50
60
70
80
ratio
of i
mpo
rt (p
erce
ntag
e)
oil import
total oilconsumption
import ratio intotalconsumption
He & RolandHe & Roland--Holst Holst 27271 1 FebruaryFebruary 20062006
ConclusionsConclusionsChina’s economy has attained levels of growth and modernization that
seemed beyond imagining only a generation ago. Along with its many successes in improving material living standards, however, have come new risks to sustainability and environmental quality.
• Without more effective emission control policies, China’s economic growth will give rise to very significant SO2 emission problems, especially in the period of 2015-2025.
• After a period of industrialization, structural transformation inducesrapid expansions of energy-intensive final demand, mainly privateelectricity, heating, and transport services.
• To meet the needs of a consumer society, SO2 emissions shift from the other manufacturing and service sectors into intermediate energy generation (electricity generation and petrol and coke sectors), and petroleum refining.
• Coal will be significantly replaced by relatively cleaner intermediate energy sources such as electricity, oil products and natural gas in manufacturing.
• Higher crude oil price may slow or even reverse this trend.• Even these pessimistic results understate the the problem, since final
consumption emissions are not even considered.• What is to be done? A very good question.
He & RolandHe & Roland--Holst Holst 28281 1 FebruaryFebruary 20062006
Quo Quo VadisVadis??