Editor’s note: China unveiled its official climate plan in June 2015. It confirmed that the country expects emissions to peak by 2030 and possibly sooner, and that non-fossil sources will make up 20 percent of China’s energy mix that year. It also sets targets for carbon intensity and forest stock.
Over the past 23 years, I’ve seen the most populous country on Earth transform itself from a largely traditional, rural society with cities full of bicyclists to a modern nation of megacities and cars. I’ve seen air pollution and environmental degradation soar.
But I’ve also found a growing resolve among Chinese leaders to tackle these challenges.
A new, incentives-based environmental protection law just went into effect, and China is preparing to roll out the world’s largest carbon market. This is a country with a can-do attitude, a society I believe is headed in the right direction.
New legislation imposes stiff fines for polluters
On Jan. 1, 2015, China’s first amendment to its environmental protection law in 25 years took effect. It’s transformational in scope.
The law now has provisions for penalties and for public interest litigation against polluters, and it requires a nation-wide implementation of an environmental permit system, which is the basic legal instrument for control.
It’s a project we worked on for more than 10 years. It took a lot of effort and a lot of engagement with everyone from the Ministry of Environmental Protection and all the way to the top.
I even had the opportunity to sit down, face to face, with former Premier Wen Jiabao two years ago and recommend to him that the penalty provisions be changed. I made the same recommendation to Premier Li Keqiang in early 2014.
By the end of April that year, the law was changed.
We had looked at the existing law, thought about it from the standpoint of the real incentives to enterprises, and really tried to bring a modern theory of environmental enforcement to China.
Before the reform, the highest fines for violating the law were capped at $160,000 total, which was no serious deterrent for large companies, in my view. On January, 2015, penalties became cumulative, which means they run from the day of violation to the date of compliance.
Progress continued in August of this year, when China’s Air Pollution Prevention and Control law was amended for the first time in 15 years to also impose a daily penalty. Previously, the cap for air pollution fines had been $80,000. The amended air law will become effective on January 1, 2016.
For the first time in China, it’s now more expensive to continue to emit beyond legal limits than to control emissions.
China is embracing cap-and-trade
Our involvement with China’s carbon market goes back to the first trip I took to Beijing in 1991 to discuss cap-and-trade for sulfur dioxide, and the work the United States was doing at the time to address acid rain.
We opened our first office in the city soon after - and as our work in China deepened, we found a way to partner with Chinese colleagues to do some local experiments to test out various types of emission trading strategies.
I was invited to take the results of those tests and personally brief China’s then-environment administrator, Xie Zhenhua. I thought we’d meet for 15 minutes, but it turned into an hour-long session.
Mr. Xie really got the idea; he was on fire about it. Several years later, after he took office as China’s climate minister, carbon emissions trading pilots were launched in China.
Next: A national carbon market
One thing I’ve learned about China is that business there is intensely personal, based on relationships that are built up over time establishing mutual interests.
We conducted the first, voluntary carbon-dioxide trades in China with a multinational looking to offset all its corporate emissions, followed by a trade with a domestic Chinese company. Each time a transaction was completed, we were able to talk with Minister Xie and tell him what we had learned.
Eventually, China got to the point where it wanted to develop its own mandatory trading program. Today, Environmental Defense Fund is collaborating with China’s National Development and Reform Commission to conduct training for all seven carbon market pilots operating in the country.
The next step will be China’s launch of a national market in 2016. This market will be critical for China to meet its goal to have emissions peak by 2030 - a goal we believe requires the country to, at a minimum, cap carbon dioxide emissions at 2015 levels by 2020 for sources responsible for at least half of such emissions.
No doubt, China will have to make some tough decisions to bend the curve on carbon.
Today, you see many of the same forces at stake in China as you do in the United States. People are worried about jobs, competitiveness and the cost of pollution controls; and some question whether the problem is real.
But the Chinese are bullish on their ability to tackle big challenges, given what’s been accomplished in modern China. With this perspective, they also think that environmental problems can be solved.
The market will be their tool to do so, and the will is now there.