Strictly Confidential © 2014 China: Toward Efficiency, Inclusive and Sustainable Urbanization Green Urbanization in China Gailius J. Draugelis Program

Strictly Confidential © 2014Strictly Confidential © 2014

China: Toward Efficiency, Inclusive and Sustainable Urbanization

Green Urbanization in China

Gailius J. DraugelisProgram Leader Energy, Environment, Agriculture & Climate ChangeChina and MongoliaThe World Banke. [email protected]

Strictly Confidential © 2014

Background

A joint report with the Chinese State Council Development Research Center (DRC)

July 2014 launch

7 Chapters

• Urbanization & Economic Growth

• Planning & Connecting Cities for Greater Diversity & Livability

• Inclusive Urbanization and Rural-Urban Integration

• China’s Urbanization and Land: A Framework for Reform

• China’s Urbanization and Food Security

• Financing Urbanization

• Green Urbanization


Clear Water, Blue Skies – Still Distant

Source: State Council 2013 (in CAAC 2013 and Background Note on AQM).

Air pollution declined

Improvement started to slow down

Air pollution costs rising

Particulate Matter Pollution and Estimated Health Damages

in Urban China, 2004-2010

Source: Renmin University, n.d. based on China Environmental Yearbooks and World Bank estimates. Note PM10 = fine sustpended partculates less than 10 microns in diameter, population weighted city averages


Clear Water, Blue Skies – Still Distant

In 2012, according to Ministry of Environmental Protection (MEP):

57% of 198 cities: “Bad” or “Extremely Bad” groundwater

30% major rivers “polluted” or “seriously polluted”, unfit for drinking or direct human contact

430/657 cities face water shortages (2009)

Municipal waste 2x 2003-2010 (2.6 billion tons)


Resource Consumption and GHG Emissions:

Equally Pressing Issues

Lock-in effects on resource consumption

In some cities, per capita emissions already high


Why?

Fast economic growth outpaced improvements

in efficiency

Larger and denser urban population + greater complexity = increasing exposure and costs of air and water pollution (soil, too)

Technical/engineering solutions without institutional and economic supportive policies

Environmental management by jurisdiction, not by scope or scale of the problem

Governance paradox: ‘advanced legislation, but weak enforcement’

Source: IEA, World Energy Statistics and Balances (database), doi:101787/data-00510-en.Note: CO2 = carbon dioxide


Matching ‘Green Governance’ with China’s Green Ambitions

Increase resources for environmental management and services

• Public funding, staffing and authority

Strengthen incentives for green governance by local governments

• Cadre evaluation system – more weight for environmental outcomes

• Increase cadre tenure – adjusts tendency to focus on short term

Facilitate public participation by introducing more channels

• Direct participation – ENGO role in policy, advocacy, monitoring

• Formal complaint/legal – eventually allow citizens, NGOs, and local governments to bring cases for major violations

• Public disclosure – mandates for public disclosure, more resource to respond to requests

Use sharper instruments to achieve policy objectives more efficiently


Efficient Policies with Sharper Instruments

Pricing Reform (efficiency)

• Cost reflective, externality costs internalized (all sectors)

Regulations

• Strengthen incentives for compliance

Investments and Transfers

• Targeted sector policies (e.g. revenue recycling) and social protection rather than low prices


9

Prices Increased Significantly, Some Reflect Financial Costs


10

Address Cross Subsidies, Internalize Externality Costs


11

Use Targeted Sector and Social Protection Policies, Rather Than Low Prices


Multi-Sector Approaches Are Needed

Infrastructure and energy policies that align environment objectives with economic and social goals must complement green governance


13

Manage Differently Across Regions and Sectors

Compact urban form

Higher density requires strong environmental management because more people are exposed in a smaller area

Integrate urban energy analysis in urban planning

• Avoid – reduce demand• Capture – local clean sources• Shift – import clean

Empty columns are heat demand. Filled columns are local energy potential (geothermal, solar, etc.)

Local Energy Potential Mapping in Rotterdam Neighborhood

Sources: (right) Stremke and Dobbelsteen (2013)

Revise urban planning rules

Link goals – sector planning goals and specific environmental and emission targets

Assess total energy performance, i.e. by neighborhoods (e.g., USGBC ratings)

Tools – energy mapping, abatement cost curve


14

Airshed is basis for approach

Action plans guided by rigorous and comparable pollution abatement studies for Chinese cities

Integrated, multi-pollutant AQM approach, including CO2, to realize co-benefits and save time and resources in planning

Adapt differentiated, time-bound targets for regions or provinces to meet air quality standards – Different cities face different challenges to achieving CNAAQS classes. Some cities achieve more – others less.

Pilot in Jing-Jin-Ji Region

Effectively Managing Air Quality across City Borders

Figure 1: Framework for comprehensive integrated air quality management.

Figure 2: Possible geographic reference for air quality modeling in the Jingjinji region in China (part 2).

Share of Regional SO2, NOX, Industrial PM and Industrial VOC Emissions

by Province or Megacity (2010)


15

Urban Transportation - Reduce Reliance on Private Cars

Integrate land use planning and transport – compact, mixed land use and transit oriented development

Road pricing and parking charges – congestion and air pollution

Modal shift to public and non motorized transportation

Congestion pricing, priority for public transit, integration of services

Design complete streets (safe and efficient travel for all modes)

Revenue recycling – dedicated and predictable funding (fees on private cars)

Pilot metropolitan transit authority – coordinating planning, investment and operations of all transport modes


16

Urban Transportation - Reduce Transport Emissions

0%

10%

20%

30%

40%

50%

60%

70%

CO HC NOx PM

Heavy Freight Medium Freight Light Freight Mini Freight

Large Passenger Medium Passenger Small Passenger Mini Passenger

Em

issi

on C

ontr

ibut

ion

by V

ehic

le T

ype

Heavy freight is largest source of NOx and PM…

15%

27.60%

67.40%

99%

82.40%

69.60%

29.50%

0.00%2.60% 2.80% 3.10% 0.00%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CO HC NOx PM

Diesel Vehicle Gasoline Vehicle Natrual Gas Vehicle

Em

issi

on C

ontr

ibut

ion

by F

uel T

ype

Diesel vehicles are largest sources of NOx & PM…

48.350.7

40.0

48.9

21.6 19.6 21.327.0

13.9 13.2 13.0 10.715.3 15.8

25.3

13.3

0.9 0.7 0.4 0.10

10

20

30

40

50

60

CO HC Nox PM

Emiss

ion Sh

are (%

)

pre China I China I China II China III China IV and above

Em

issi

on C

ontr

ibut

ion

by

Em

issi

ons

Sta

ndar

d

… and old vehicles perform poorly too.

0

0.5

1

1.5

2

2.5

3

3.5

4

PM (0.001g/km) NOx (0.1g/km) CO (g/km)

CHINA IV

Euro VI

Light Duty Cars

0

0.5

1

1.5

2

2.5

3

3.5

4

PM (0.01g/Kwh) Nox (g/Kwh)

CHINA IV

Euro VI

Heavy Duty Trucks

Light Duty Cars

Est

imat

ed P

ollu

tion

Red

uctio

n To

Eur

o V

I st

anda

rd

Heavy Duty Trucks

…and can be much cleaner.


17

Urban Transportation - Reduce Transport Emissions

Accelerate low-sulfur diesel and gasoline production

LSD - RMB 9.6 billion, 2.5 – 8.1 fen per liter or 0.33% and 1.08% of retail value

ULSD - RMB 16.5 billion, 5 fen per liter of gasoline and 13.6 fen for diesel (ICCT)

Differentiated pricing to induce switching

Accelerate transition to Euro VI emission standards for heavy duty vehicles

Rapidly phase out high emission vehicles

Higher vehicle registration fees (lower charges for low emission) and as in EU consider fees on vehicle CO2 emissions, consider low emission zoning

Complete emission control enforcement framework

No clear authority to recall vehicles, impose fines, no MEP authority to supervise and conduct own in use testing or assess penalties


18

No Modern City Relies on Coal as much as Chinese Cities Do

Coal Consumption in Four Provincial Level Cities (M tons) Reduce energy

demand as priority (avoid), use clean energy (shift)

26.3%

26.4%

32.2%

14.0%

1.1%

Beijing(52.7% coal)

Coal

Coal (from imported electricity)

Oil

Natural Gas

Nuclear

Renewables

42.9%

8.4%

40.6%

6.5% 0.4% 1.2%

Shanghai (51.3% coal)

62.5%

4.9%

10.5%

9.5%

0.0% 12.7%

Chongqing(67.4% coal)

Coal dominates the urban energy supply mix. Coal use is steady or rising.

Source (top): World Bank estimatesSource (bottom): NBS, China Energy

Statistical Yearbook


19

Industry’s Critical Role in Greening Urbanization in China

Industry’s high share in urban energy consumption Differs from other countries


20

Rebalance Mandates and Markets for Industry Energy Efficiency

Cities are a source of policy and technology innovation for industry

Demand for heavy industry expected to slow, but a ‘long tail’ of inefficient plants still exists

Allow firms to meet targets by direct investment or trading, but must complete data and MRV system.

By 13FYP, establish coordinated carbon pricing policy with thorough study of interactions between EE, RE and cap and trade systems to avoid dilution.

Make compliance easier – combine higher fuels prices with dedicated funding (recycling), build EE services industry (auditors, MRV, ESCOs, financing), energy manager certification, EMS.

Cities can use 3rd parties in delivering energy savings programs, monitoring, and need greater human capacity building to provide services to enterprises.


21

Leading by Doing: Serve the People in Greener Buildings

Local governments should take the lead in promoting EE in a wide range of (highly visible) public institutions. Can help create market for EE services.

Technical – establish good energy use statistics, energy auditing guidance, benchmarking (leading to certification)

Incentives – low energy prices, reputational incentives, benefit sharing, CBB

Scope 1&2 GHG Emission Reduction Target

•Submitted comprehensive inventory as 2008 baseline for Scope 1&2 GHG Reduction Target of 16.4% by 2020

Scope 3 GHG Emission Reduction Target

•Submitted comprehensive inventory as 2008 baseline for Scope 3 GHG Reduction Target of 3.8% by 2020

Reduction in Energy Intensity

•Reduction in energy intensity in goal-subject facilities compared with 2003: 37.9% and on track for 30% by 2015

Use of Renewable Energy

•Use of renewable energy as a percent of facility electricity use: 1.4%

Reduction in Potable Water Intensity

•Reduction in potable water intensity compared with 2007: 0.4% increase and not on track

Reduction in Fleet Petroleum Use

•Reduction in fleet petroleum use compared to 2005: 57% and on track for 20% by 2015

Green Buildings

•Sustainable green buildings: 3.32% of buildings sustainable 3.51% GSF of inventory sustainable, as reported in FRPP

U.S. Departmentof J ustice

FY2010 OMB Scorecard onSustainability/Energy

Score: GREEN

Score: GREEN

Score: GREEN

Score: RED

Score: RED

Score: GREEN

Score: RED

Financing – Dedicated funding, ESCOs for various PPPs (SuperESCO model, multi-year ESPC contracting). Detailed rules needed. Pilots encouraged.

‘One Stop Shop’ at large city or provincial level for supporting use of ESCOs in public institutions

Green Buildings require stronger supply chain (design, materials, construction, market awareness)

Source: Adapted from U.S. Department of Justice FY2010 OMB Scorecard on Sustainability/Energy.


22

Phase Out Harmful Building Materials to Clean the Air Indoors

Expand scope of product labeling to VOC emissions from building materials and furniture for more transparency.

Clarify standards (e.g., exposure periods and allowable levels for VOCs in building design and acceptance standards are not the same).

Strengthen coordination and enforcement. Initiate phase outs.

Source: Liu W.W. et al (2012)

Concentrations of formaldehyde (left) and benzene (right) in buildings in various cities and regions


23

Minimize direct use of coal by expanding access to gas and clean energy sources…and standards enforcement (green governance)o Priority – residential, commercial, heating

Gas sector reform –upstream competition with pricing reform, 3rd party access

Power sector reform to expand RE, more efficient sector, urban energy security o 2002 State Council Decree No. 5

o 4 additional actions:

• two-part generation tariff

• transparent transmission and distribution pricing

• adjust incentives in favor of distributed generation

• discourage local fees/sourcing requirements

District heating sector reform – heat regulation, consumption-based billing

Secure Clean Energy Sources and Shift Away from Coal


24

Integrate Water Resources and Pollution Management

Clean water for China’s urban billion means ensuring efficient, safe, and secure water supply and effectively controlling discharges, especially non-point sources.

Reform water rights to control overuse of water. Must control 2 of 3 elements: Amount withdrawn (conventional permitting system) Amount consumed (for crops, evapotranspiration or ET measured by satellite) Amount returned to local water system

Integrated Environment and Water Management Planning At the basin and local city level Establishes target ET and carrying capacity (EC) of rivers Links stakeholders in a joint-decision making conference Monitors local level IEWMPs Decisions such as use of payments for ecological services to address non point source pollution challenges can be coordinated this way


25

Modernize urban water utility management Adjust water prices to improve sustainability of supply and treatment services Introduce asset management Pilot Water Boards in metropolitan areas, aggregating services in small towns Adopt transitional arrangements for meeting wastewater standards so as to

improve coverage. Review design standards to avoid wasteful investment.

Water and Wastewater tariffs (USD/m3)

Source: Global Water Intelligence (2011)

CopenhagenBerli

nZu

rich

Luxe

mbourg

Sydney

Paris

Singapore

London

Barcelona

New York

Stock

holmRome

Mosco

wKiev

Hong Kong

Beijing

Kuala Lumpur

New Delhi

Riyadh

$0.00

$2.50

$5.00

$7.50

$10.00

$0.54

Integrate Water Resources and Pollution Management


26

Manage Solid Waste Better – Reduce, Recycle, and Dispose

Urban residents make up 55% of the population but generate about 80% of the total waste amount (1.1 kg per person per day vs. 0.3 kg for rural people).

70% of waste is formally collected and 54% is properly disposed of in landfills, incinerated, or composted. Only 15% is recycled.

Source: World Bank and DRC estimates based on Statistical Yearbook 2011 (NBS) and statistical data from cities and county towns

Total waste in urban areas Million tons per year

generated by households 281

formally collected and transported 219

collected informally and recycled 48

disposed of in harmless manner 177

NOT properly collected and disposed 56

20% of waste is not properly collected and disposed.

By 2030, the amount of solid waste generated nationally is expected to double.


27

Getting the fundamentals right …

Improve operational financing – system is currently funded almost entirely by government subsidies, with waste charges covering only 10% of costs, and needs about 200 billion RMB per year in near term and 400 billion RMB per year by 2030.

Introduce basic international data monitoring and financial accounting practices

Master planning – new infrastructure is over-dimensions and poorly balanced across the waste chain, integrate into land use planning

Introduce standards to achieve scale economies – encourage small cities to cooperate

Recycling efficiency – evaluate options to improve technical and financial operations without negatively affecting informal systems

Product stewardship – voluntary programs and incentives for manufacturers take ownership of full lifecycle chain of their products including packaging and final disposal

Clarify regulatory authority and oversight to control waste disposal

Site-specific operating permits for each function or facility needed

Test, treat and disposal of ash from incinerators needed

Clean up of unsanitary landfills (can be repaid from land value after clean up)

Manage Solid Waste Better – Reduce, Recycle, and Dispose


28

Cities where a billion people want to live and work

Inertia is caused by institutional rather than technical barriers – increase resources, revising cadre evaluation and tenure system, opening channels for public participation, rebalancing environment policy instruments toward more market based tools, enforcing sharper regulations and reforming environmental management so problems are managed at the scale they are created and exist.

Without strengthening ‘green governance,’ changes will be difficult –applying these principles in sector policies encourages cleaner, efficient growth.

Market and price instruments provide the strongest incentives to go green, and are needed in all sectors. Sustainable sector policies are compatible with greening.

China has important advantages – can capitalize on other countries’ experience, large clean tech opportunities, strong and determined leadership.


Documents

Strictly Confidential © 2014 China: Toward Efficiency, Inclusive and Sustainable Urbanization Green Urbanization in China Gailius J. Draugelis Program