Michael Burnham, E&E senior reporter

The silver lining of the global economic crisis may be a greener China this year, but the long-term forecast is less clear.

China claims it met its five-year plan’s pollution targets for the first time in 2008, as domestic energy demands dipped and global demand for Chinese manufactured goods slumped. Economists are forecasting weaker gross domestic product (GDP) growth in 2009, suggesting China will reduce its sulfur dioxide and other industrial pollutants further.

For a developing economy, a lower GDP — the goods and services a country produces — generally means less emissions of carbon dioxide and other greenhouse gases. That should be the case in coal-fired China, but a surge of government stimulus spending on energy-intensive cement and steel infrastructure could merely slow the country’s CO2 growth, some experts caution. To prevent developing nations’ GDP from turning a darker shade of brown, Britain’s Prime Minister Gordon Brown and others are urging the world’s 20 largest economies to coordinate a green New Deal.

Graphic courtesy the United Nations’ World Economic Situation and Prospects 2009 report.

U.N. economists project China’s GDP will grow 8 percent this year, down from a seven-year low of 9 percent last year. If recessions deepen in Europe and the United States, China’s GDP could rise 7 percent this year.

The economy is certainly slowing, but I do not expect emissions to fall, especially in light of the economic stimulus package in which China will build its way out, said John Romankiewicz, a Beijing-based analyst with New Carbon Finance.

China’s $586 billion stimulus is aimed at boosting domestic demand for manufactured goods and raw materials. Premier Wen Jiabao vowed recently the plan would help China achieve 8 percent growth this year — a rate some international observers see as critical to staving off a massive surge in unemployment and social unrest.

Crisis in China means danger and opportunities, World Bank Chief Economist Justin Lin told a Johns Hopkins University audience last week. Effective government policies, he said, could help China maintain 9-10 percent annual growth after the crisis, for a decade or more.

GDP and emissions

China, the world’s top emitter of greenhouse gases, has so far resisted multilateral efforts to place a cap on its CO2 for fear it would stifle development.

The country’s central government, rather, is using internal targets and quotas to reduce the energy intensity and pollution of its economy, said Zhou Dadi, a former director general of the National Development and Reform Commission’s Energy Research Institute and a current fellow with the Carnegie Endowment for International Peace.

We will consume much less per capita energy and emit [less] greenhouse gas emissions to realize our modernization, Zhou vowed during a climate summit in Washington last week.

It is difficult to measure how the targets and quotas, combined with the global economic slowdown, are affecting China’s environmental footprint; 2007 is the most recent year for which internationally vetted CO2 emissions data are available for China, and the country’s GDP did not decline precipitously until the final quarter of last year (Greenwire . June 16, 2008).

But decades of economic and environmental data suggest that the economy’s effect on developing countries’ C02 will be far greater than its effect on that of post-industrial nations.

Overall, the same fall in GDP in China will have more than twice the impact on emissions as an equal fall in the United States, noted Samah Elsayed, a World Resources Institute analyst who charted the emissions and GDP of the United States, United Kingdom, China and three other countries over four and a half decades.

The World Bank estimates that developing countries will grow 4.5 percent this year — down from 7.9 percent in 2007 — while the United States, United Kingdom and other wealthy nations will struggle with recessions.

Industrial operations accounted for about half of China’s GDP and a quarter of the United States’ in 2005, according to the World Resources Institute, a Washington, D.C.-based think tank. Comparatively, the service sector, which includes everything from banking to retailing, accounted for 76 percent of the United States’ GDP and 40 percent of China’s.

Industry accounted for 27 percent and services 70 percent of GDP in Europe. Indeed, Elsayed found that the United Kingdom’s emissions stayed relatively constant during the previous four decades, even as its GDP more than tripled.

New Carbon Finance estimates that Europe’s greenhouse gas emissions dipped 3 percent in 2008 as power plants switched to natural gas from coal. The weakening global economy and Europe’s commitment to the Kyoto Protocol were major catalysts, analyst Milo Sjardin explained.

People are thinking about things other than consuming, factories are producing less, and that causes a drop-off in CO2 emissions, Sjardin said.

Carbon remains a wild card in China, but the country appears to have beaten its 2006-2010 development plan’s energy and pollution targets, according to new government data.

Silver lining?

The five-year plan calls for cutting energy consumption 20 percent per unit of GDP by 2010 while reducing sulfur dioxide and other air pollutants 10 percent. For China to hit the targets, provinces must reduce their collective energy consumption about 4 percent per GDP unit annually, compared to 2005.

China fell short of the mark in 2006 and 2007, as GDP growth soared into double digits (Greenwire . June 17, 2008). The Red Dragon was able to cut its energy consumption nearly 4.6 percent per GDP unit last year and cut its SO2 emissions 7 percent from 2005 levels, according to preliminary data published last month by the National Bureau of Statistics.

A welder within China Energy Recovery Inc.’s Shanghai factory works on a boiler, which is designed to help industrial manufacturers capture and convert wastewater and steam into energy. China aims to cut the energy intensity of its gross domestic product 20 percent by 2010. Photo by Michael Burnham.

The reductions came as China’s overall energy consumption rose 4 percent from the prior year to 2.85 billion tons of standard coal equivalent, the government noted. It is not a trivial statistic, as energy consumption rising or falling is also a bellwether for greenhouse gas emissions, analysts say.

Bill Chameides, a veteran China observer and dean of Duke University’s Nicholas School of the Environment, suspects China’s emissions growth rate slowed with the global economy last year but absolute emissions increased. He, too, considers China’s stimulus a wild card.

Christopher Flavin, president of the Worldwatch Institute, a Washington-based think tank, sees a bright side.

A lot of carbon-intensive stuff won’t get built in China, Flavin said. There are a tremendous number of problems created by this economic crisis, but it does have a silver lining.

Even more sanguine is Trevor Houser, a visiting fellow with the Peterson Institute for International Economics. He predicts China will use less fossil energy in 2009.

What’s driving the slowdown in China is not so much a slowdown of exports to the United States but a slowdown of domestic investment in infrastructure, noted Houser, an author of several books and papers on the topic. That slowdown of domestic infrastructure investment means less steel, aluminum and cement.

Houser suspects China’s CO2 emissions dropped significantly in the final quarter of 2008 and may drop further this year.

This crisis provides them an opportunity to improve their climate profile, Houser added. They can catch their breath and invest in alternatives to coal.

‘Green New Deal’?

To prevent a deep, global recession and the worst effects of climate change, British Prime Minister Brown is urging the United States to help forge a green New Deal and successor to the Kyoto Protocol (Greenwire . March 4). The International Energy Agency is also calling for a Clean Energy New Deal, which would require about $9.6 trillion in energy efficiency and cleaner power generation during the next two decades.

U.S. Treasury Secretary Timothy Geithner heads tonight to London, where he is expected to urge finance ministers from the European Union, China and other G-20 members to coordinate action to ensure that developing countries hit hard by the crisis remain stable.

A global fiscal stimulus should be about 2 percent of world GDP — about $1.2 trillion, International Monetary Fund Managing Director Dominique Strauss-Kahn suggested in December. Geithner called the figure a reasonable benchmark to guide countries’ individual efforts through 2010.

We need to bring the world together to put in place a very substantial, sustained program of support for recovery and growth, Geithner told reporters yesterday.

A report from the London School of Economics’ Grantham Research Institute on Climate Change and the Environment contends that actions to mitigate climate change should form a central part of a global fiscal package aimed at moderating the economic slowdown. Such a stimulus may warrant $400 billion of extra public spending on green energy and development projects worldwide during the next year or so.

It is. important to ensure that investments in public infrastructure undertaken as part of the fiscal stimulus enhance the economy’s capacity to adapt to climate change, the report concludes. Installing infrastructure that ‘locks in’ high greenhouse gas emissions for many years to come will increase the difficulties of reducing emissions in the future and blunt the incentives for technological improvement and innovation.

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