Key Factors in the Low-Emission Pathway

In the modelling analysis, key areas for CO2 emissions include economic development optimisation, energy efficiency improvements, renewable energy and nuclear development, carbon capture and storage and change of lifestyle and consumption. Efforts in the IPAC modelling study were based on the possibility of key assumptions by taking a broad look at driving forces, technology, the environment, social development and so on. In the enhanced low-carbon scenario, in order to reach the peak by 2030 and then start to decrease in CO2 emissions, several key challenges have to be overcome:

Change in economic structure. There was much discussion during the scenario building with the invited economics experts, as well as reviews of related studies. The GDP growth used here is the most commonly used result obtained from economic research teams, especially concerning pre-2030. Economic structural change in the three industrial sectors also presents a middle line, based on the literature reviewed. However, there is little research quantitatively detailing structural change within secondary industry. Here, based on the available research, we

Fig. 2.5 Structural change in second industry (Source: Author's research result)

applied our own IPAC-SGM model to simulate structural change in secondary industry, as shown in Fig. 2.5.

The share of GDP from energy-intensive industry (middle part in Fig. 2.5) would reduce due to demand change. China's GDP will surpass that of the United States between 2020 and 2030, as such huge amount of GDP cannot rely on the existing economic trend involving heavy industry-driving development and raw material production. Based on a bottom-up study on the demand of energy-intensive products, it was found that many energy-intensive products will peak during 2020– 2025, assuming that in the future the export of energy-intensive products will increase little, when it is already a major part of global output (see Table 2.1). This was learnt by looking at infrastructure development, including building construction, roads, railways, airports, etc., and final consumption needs, which consumed more than 95 % of cement and more than 55 % of steel (Kejun 2011). This analysis shows that the output of most of the energy-intensive products will peak before 2020.

Energy-intensive products consume nearly 50 % of energy in China, and provided that there is no significant increase in energy-intensive product production and that the growth rate thereof is much lower than GDP, the energy use increase associated with these energy-intensive products would also be limited. This would contribute greatly to decreased energy intensity per GDP and also contribute to reduced CO2 intensity.

As regards improving energy efficiency, during the 11th Five-Year Plan (2006–2010), energy efficiency was improved significantly (State Council 2011; Mark et al. 2010; Kejun 2009). In consideration of what occurred in energy efficiency during the 11th Five-Year Plan, and compared with energy conservation efforts over the last several decades and efforts made by other countries, China could be seen as having taken unprecedented action on energy conservation. Specifically, it:

– Made energy conservation policy one of the top national and top policy priorities.

– Made the energy intensity target a key indicator for local government officials.

– Involved a high number of new policies—nearly one a week from 2007 to 2008—on energy conservation from central government, in addition to local government energy policies.

– Initiated the Top 1000 Energy-Consuming Enterprise Programme, which focused on improving energy efficiency of China's largest 1000 companies which in total account for one third of China's total energy use.

– Closed small-sized power generation facilities and other industries, which was a bold measure that could have led to social unrest, unemployment and loss of profit for stockholders.

From the technical viewpoint, the above energy efficiency measures represent big achievements. China has released a total of 115 state key energy-efficient technology promotion catalogues in three batches and specially promoted seven energy-efficient technologies in the iron and steel, building material and chemical industries. Unit energy use per tonne of steel products, copper and cement decreased by 12.1 %, 35.9 % and 28.6 by 2010, respectively. By 2010, almost all advanced technologies on energy saving in industry were adopted in China. In the steel-making industry, the penetration of coke dry quenching (CDQ) increased from 30 % to more than 80 %. Use of top gas recovery turbines (TRT) increased from 49 to 597 sets. The share of furnaces with capacities above 1000 m3 increased from 21 to 52 %. The share of new advanced rotary kilns in cement manufacturing increased from 39 to 81 %. The use of coke dry quenching in coke making increased from less than 30 % to more than 80 %. Heat recovery in cement manufacturing increased from nearly 0 to 55 %. Unit energy use for power generation supply decreased from 370 gce/kWh to 333 gce/kWh.

Owing to the widespread use of advanced high energy efficiency technologies, costs have been greatly reduced over the last several years—to the point at which some high energy efficiency technologies are even cheaper than old technologies, such as dry rotary kilns in the cement industry and super critical and ultra-super critical power generation technologies.

Such progress in energy efficiency improvements in China brings with it more opportunities for further steps in energy efficiency improvements, as follows:

– A deeper public and governmental understanding of the importance of energy efficiency. As discussed above, energy efficiency and conservation policies are one of the key issues in government—both national and local.

– Improvements in energy efficiency have been acknowledged as a means to

increase economic competitiveness. Experience from other countries shows that higher energy efficiency is related to increased national economic competitiveness.

– Progress in technology towards high energy efficiency has led to new manufacturing markets for Chinese technologies. Lower cost, advanced technologies have already rapidly penetrated within China, which has profited industry. In the meantime, the international market also has a very large potential for new technologies, which will benefit not only the manufacturing industry but also energy efficiency improvements and GHG mitigation in developing countries.

It is anticipated for energy efficiency to continue improving from 2010 to 2020 in a similar manner in the 11th Five-Year Plan, based on the IPAC modelling results.

– Renewable energy development

China is the fastest-growing country for new energy and renewable energy. In order to improve the quality of the environment and promote new industry, China has extended great efforts to promote renewable energy, particularly over the past several years, and especially in wind and solar—from 2005 to 2010 the average annual growth rate exceeded 50 % annually (CEC 2011). Based on China's plans for renewable energy, by 2020 renewable energy will represent 15 % of total primary energy, which includes renewable energy not included in national statistics on energy, such as solar hot water heaters and rural household biogas digesters. Another related target is a share of non-fossil fuel energy of 15 % of the total primary energy by 2020, which includes both commercial renewable energy and nuclear energy.

– Nuclear energy development

It is expected that a nuclear energy installed capacity of over 58 GW will be realised by 2020 based on new nuclear planning, which is much larger than that original planned (40 GW).

Since the Fukushima nuclear accident in Japan, there has been much discussion

on nuclear development in China; however, China has little choice in light of future power generation. Over the last several years, coal-fired power generation has increased rapidly, with an annual newly installed capacity of more than 60 GW. However, as is well known, compared to nuclear, coal-fired power generation causes high environmental and human damage. Based on the expected high demand due to energy use in China, by 2050 there is no future major role for renewable energy. Therefore, nuclear power generation will play an important role in China's future energy system by 2020.

– Carbon capture and storage (CCS)

China will have to use CCS for the next several decades if coal use continues on its present course. Even with the enhanced low-carbon scenario, coal use will be at around 1.8 billion tonnes by 2050. CCS is essential for China to enable deep cuts in CO2 emissions after 2030. Based on the study IPAC team involved for CCS implementation in China, the learning effect will have to be big to foresee the cost reduction in future. The total cost to apply CCS for 100 coal-fired power plants is not very high and will raise the price of grid electricity by 3 cent/kWh. In the enhanced low-carbon (ELC) scenario, CCS was adopted as one of the key mitigation options.

For CO2 emissions, removed CO2 emissions are given in Fig. 2.6. The key assumptions are given in Tables 2.2 and 2.3 (Kejun 2011). A lower removal rate for different power generation technologies is assumed because technological development is not yet mature at the beginning of adoption of CCS.

In the 2-degree scenario, compared with the enhanced low-carbon scenario, further implementation of renewable energy and replacing coal with natural gas were considered. For economic structural change, energy efficiency stays the same in the 2-degree scenario. Based on this, it is possible for China to peak in CO2 emissions before 2025 and then start deep cuts in CO2 emissions.

In the 2-degree scenario, renewable energy is much more extended from the enhanced low-carbon scenario. In the enhanced low-carbon scenario, power generation from renewable energy (including large hydro) will be around 34 %, and nuclear energy will account for 35 % by 2050. Installed capacity for wind, solar and hydro will be around 450 GW, 360 GW and 510 GW by 2050, respectively. In the 2-degree scenario, power generation from renewable energy could reach 48 % of the total power generation, leaving only 17 % for coal-fired power generation. Installed capacity for wind, solar and hydro is 930 GW, 1040 GW and 520 GW, respectively, by 2050.

Another key factor is the increasing use of natural gas in China. In the enhanced low-carbon scenario, natural gas use will be 350 BCM by 2030 and 450 BCM by 2050. In the 2-degree scenario, natural gas would be around 480 BCM by 2030 and 590 BCM by 2050. If natural gas is combined with renewable energy, coal use in

Fig. 2.6 CO2 removed by CCS in power generation sector (Source: Author's research result)

Table 2.2 Removal rate for CO2 by CCS in ELC scenario, %

Source: Author's research result

Table 2.3 Power generation capacity with CCS in ELC scenario

Source: Author's research result

China by 2050 will be lower than 1 billion tonnes. If so, CCS could be used for all coal-fired power plants and half of natural gas power plants.

Then, CO2 emissions in China could reach a peak before 2025, and the reduction in CO2 emissions by 2050 would be more than 70 % compared with that in 2020.

The renewable energy scenario in the 2-degree scenario is feasible owing to the recent progress in renewable energy development in China; the actual cost learning curve for wind and solar is much stronger than the model used. Technology perspective studies were also one of the key research areas in the IPAC modelling team, which has performed detailed analysis on selected technologies such as

Fig. 2.7 Technology learning curve used in IPAC-AIM/technology model and data for 2010 (Source: Author's research result)

electric cars, nuclear energy, renewable energy and electric appliances (Kejun et al. 2009, 2012; Kejun 2011). Figure 2.7 presents the cost learning curve used in the model compared with actual data by 2010. Such technological progress results in a big drop in the cost of wind power and solar power within 2 years. Presently, in the coastal area, the cost of power generation for some wind farms can already compete with coal-fired power plants.

The progress in end-use technologies also moves faster than assumed by the model. Electric appliances such as LED TVs, higher-efficiency air conditioners and high-efficiency cars already had a higher penetration rate by 2011 than the model assumed. If policy is correct, a lower energy demand in the 2-degree scenario will be much more feasible by 2020 and after.

In the meantime, rapid GDP growth provides strong support for low-carbon development in China. In the 11th Five-Year Plan period (2006–2010), the annual GDP growth rate is 11.2 %, but is 16.7 % if calculated based on current value (China Statistic Yearbook 2013 2013). It is expected that by 2015, GDP in China could reach 75 trillion Yuan (at current value), newly added accumulated GDP will be 450 Trillion Yuan and cumulative GDP will be 860 Trillion Yuan. The investment needed in all modelled studies is very small compared with GDP and is normally 2–4 % or less. Regarding investment in China, new and renewable energy is one of the key sectors to be promoted within government policies and planning; thus there could be much more investment in renewable energy in the future, based on the fact that China was already the biggest investor in renewable energy as of 2010 and accounted for 24 % of the world's total.

Reviewing the progress in renewable energy planning in China, the target for renewable energy has been greatly revised upwards in recent years. Renewable Energy Planning 2006 set the targets for wind at 30 GW and solar at 2 GW by 2020. By 2009 the National Energy Administration (NEA) announced that installed wind power generation will be 80 WG by 2020, and then in 2010 the NEA stated that installed wind power generation will reach 150 GW and solar at 20 GW by 2020. As of the end of 2011, targets for wind of 200 to 300 GW and solar of 50 to 80 GW were under discussion.

Based on the conclusion from Chinese Academy for Engineering, China's grid could adopt such renewable energy power generation in the short term.

Policy Options

In the modelling analysis, several policy options were simulated, one of the key ones being carbon pricing. Introducing carbon pricing, including a carbon tax or emission trading, could be an effective way to control CO2 emissions in China.

Another key policy option is setting more caps for CO2 emissions in China, which has been an effective way to limit CO2 emission increases in recent years.

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