Young China Watchers (YCW): Many provincial and local governments in China are facing pressure to maintain economic growth while tackling pollution. Are China’s broader economic goals compatible with its ambitions to transition into a low-carbon economy?
Mark Clifford (MC): Absolutely. I think the economics have become very clear that China can grow more rapidly if it shifts away from fossil fuels towards clean tech sources of energy such as hydropower, wind, and solar. These are cost-effective—not as cheap as coal, but that’s because the true costs of coal are not usually included. Outdoor air pollution, of which coal is a primary component, kills 1.6 million people every year in China. When we look at the health impacts and broader costs, it is clear that not only can China afford to go towards a greener energy path, it can no longer afford this heavy reliance on fossil fuels.
That’s the macro-picture. Although provincial and local-level officials have been told that environmental factors will become more important in their job and performance assessments, they tend to very focused on the short-term: immediate jobs, immediate economic growth, and putting up dirty industry whether it’s factories or a coal-fired power plant. It’s going to be interesting to see how this tension between Beijing and local governments plays out, especially concerning the more than 200 coal-fired power plants approved by local and provincial authorities that are yet to be built. It’s yet unknown whether Beijing can keep this building frenzy under control because it’s clear that China already has a looming excess supply of electricity generating capacity.
YCW: The Chinese government has invested heavily in developing one of the largest clean tech sectors in the world. Yet, you say that China’s “’top-down” approach has its limits. What needs to change?
MC: Every country’s energy policy is deeply embedded within its political and social structure. China has been lauded by many environmental campaigners for its ambitions to have one of the world’s largest cap-and-trade programs. And yet, the amount of bureaucratic discretion and lack of transparency suggests that it may have been more effective to go the tax route and let people make their own decisions.
Prices tend to drive people and companies’ behavior more effectively than regulations; for example, a carbon tax is more effective than a cap-and-trade system. Many resource prices in China are distorted: Electricity prices are far below global norms, which means it is used wastefully and—given coal-fired power plants still produce two-thirds of the country’s electricity—drives excess use of coal. If China could start disentangling itself from the policies and regulatory complexities and rely principally on prices, I think that’s the single most important thing that it could do.
This interview was originally published on the Young China Watchers’ blog. The rest of the interview can be accessed here.