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Focus: Beijing goes green

2 December 2013

In brief: The level of air pollution in its major cities illustrates the environmental price China has paid for its economic growth over the past 30 years. Recently, a number of administrative authorities at the Beijing municipal level have enacted policies and directives aimed at curbing pollution, and these are representative of the direction in which China is heading. Partner Kate Axup (view CV), Senior Associate Justin Chin and Lawyer Shona Shang look at these changes.

How does it affect you?

  • One consequence of China's recent suite of clean air policies is that a large number of coal-fired generation facilities have been identified for closure, conversion to coal gasification or retro-fitting, for the purpose of reducing emissions. For example, the recent Beijing municipality's clean air action plan identifies an estimated 520 coal-fired boilers for closure, conversion or retro-fitting.
  • In addition to generation facilities, 10,000 enterprises (ranging from state-owned to small and medium enterprises) will undergo energy conversion programs across the nation. The aim of these programs is to improve energy efficiency and reduce emissions.
  • The sheer scale of China's clean air policies and associated programs gives rise to opportunities for clean energy technology and renewable energy companies looking to participate in potentially the greatest environmental transformation in the country's history.

Background

In recent years, Beijing's air pollution levels have attracted headlines around the world and generated much debate within China.

The Standing Committee of the PRC National People's Congress (the chief administrative and policy authority in China) issued the national 12th Five Year Plan in 2011 ( the 12FYP). The 12FYP sets out China's social and economic policies for the period 2011-2015. The 12FYP provides a broad policy framework across many issues of national significance (including the environment) but leaves the details of implementation to policy makers at the provincial level.

In terms of the environment, the 12FYP was supplemented by the issuance of a number of policy instruments and action plans in 2012 and 2013.1 Local governments in China are implementing the 12FYP through municipal action plans that give specific consideration to local practices and conditions.

Beijing Clean Air Action Plan

The scope of the environmental changes to be effected by the 12FYP was further reinforced by the Beijing municipality's clean air action plan, issued on 2 September 2013 (the BCAP). The BCAP identifies 84 environmentally specific tasks and involves more than 30 responsible bodies in their implementation. Following the issue of the BCAP, a substantial number of environmental directives have been issued for the purpose of meeting local and national emissions targets.

The BCAP allocates clear responsibilities to various government departments and officials for each of the environmental targets and directives contained in the BCAP. In addition, an accountability system, involving the imposition of penalties such as the withholding of promotions, has been put in place at the municipal level for the purposes of enhancing energy conservation monitoring and enforcement.2

Although the BCAP is not a legal instrument, it serves as the primary guidance tool for law makers and administrators at the Beijing municipal level. It is common practice in China for new laws or amendments to existing laws to be passed to implement policies such as the BCAP. While this has not yet occurred in Beijing, we will continue to monitor the legislative changes that may arise as a result of the BCAP.

 

Environmental targets


The 12FYP describes China's climate and energy goals at a national level and sets out a number of specific environmental targets. For example, the 12FYP provides that China is targeting, by the end of 2015, a 16 per cent reduction in energy intensity (measured by dividing energy consumption by GDP) and a 17 per cent reduction in carbon intensity (measured by dividing greenhouse gas emissions by GDP). A further national target is a 670 million ton reduction in the country's consumption of coal.3

The BCAP seeks to effect these national targets by mandating action at the municipal level. It sets out a series of targets to be achieved in the immediate term (ie by the end of 2015) and for the medium term (to be achieved by the end of 2017).

A number of the targets included in the BCAP relate to coal consumption and coal-fired generation in the Beijing municipality, and targets relate both to a reduction in the overall quantity of coal consumed in Beijing, when compared with 2012 levels, and an overall reduction of coal-fired generation in the city's electricity mix. For example, the BCAP aims to see, by the end of 2015, the city's consumption of coal reduced by 8 million tons, compared with the 2012 consumption levels of approximately 23 million tons.4 This is to reduce by a further 5 million tons by the end of 2017, by which point coal consumption should have halved when compared with 2012 levels.

The BCAP recognises that coal-fired generation is not the only source of Beijing's air quality problems, and includes a target of having fewer than 6 million vehicles registered in the city. This is certainly an aggressive target given that, as of July 2013, 5.35 million vehicles were already registered.5

 

Implementation

At the national level, the National Development and Reform Commission, the macroeconomic management agency under the State Council, has extended the 'Top 1000 Program' – a program under which the 1,000 largest enterprises in China6 (comprising mainly state-owned enterprises) were set emission and energy targets – to the top 10,000 enterprises. The top 10,000 enterprises (ranging from state-owned to small and medium enterprises) together were estimated to have consumed 60 per cent of China's total energy utilisation in 2010.

At the Beijing level, the BCAP identifies a series of practical steps and programs in order to meet the BCAP targets within the stipulated time frames. Many of these are centred around the attempt to shift the city's traditional reliance on coal as a source of both electricity generation and heating.

For example, the BCAP provides that, by the end of 2015, all coal-fired boilers within the urban areas of Beijing (ie within the six ring roads of the city) are to be removed and a series of coal gasification conversion projects are to be completed. From 2013 onwards, no new coal-fired generation facilities are to be constructed and, by the end of 2017, several key liquefied natural gas facilities and transmission line projects for the purpose of transporting 'clean' energy from the western provinces of China to Beijing are to have been commissioned.

In terms of improving energy efficiency generally, the BCAP states that higher energy efficiency standards will be applied to all new buildings from 2013 onwards and that 150 million square metres of existing residential buildings in Beijing will achieve these higher standards by 2015.


The way forward

The recent suite of environmental policies issued in China is a reflection of the importance that the PRC State Government and municipal governments are placing on the issue of pollution, energy consumption and the environment. As a result of these policies, it is estimated that China will, through to 2035, add more renewable energy to its electricity mix than the US, the EU and Japan combined.7

While the policy documents discussed above are high-level, the scale of the conversion, retro-fitting and replacement activities that are being planned in China as a result of the 12FYP and the BCPA is vast.

The continued implementation of the 12FYP will result in a greater emphasis on other environmental programs, such as the implementation of a domestic emissions trading scheme. A number of pilot programs are in the process of being rolled out across the country. As recently as last week, pilot emissions trading schemes commenced in Shanghai and Beijing, in addition to the program that has been operating in Shenzhen since 2012.

Footnotes
  1. These policy instruments are: (i) the 'Comprehensive Work Plan on Energy Conservation and Emissions Reduction ' and the policy supplement issued on 31 August 2011 and 6 August 2012 respectively; (ii) the 12th Five Year Plan supplement on 'Prevention and Control of Pollution in Key Areas' issued on 29 October 2012; (iii) the 'Action Plan on Air Pollution Prevention' issued on 10 September 2013; and (iv) the 'Implementation Rules of the National Action Plan' issued on 27 September 2013.
  2. A similar accountability system was established at the national level under the 12FYP.
  3. Comprehensive Work Plan on Energy Conservation and Emissions Reduction in the 'Twelfth Five-Year Plan' Period, issued by the State Council on 31 August 2011.
  4. Beijing Energy Consumption Report, jointly issued by the Beijing Municipal Commission of Development and Reform and the Beijing Statistics Bureau on 4 September 2013.
  5. As reported by the Beijing Traffic Management Bureau.
  6. The top 1,000 enterprises have been estimated to have collectively consumed one-third of China's total energy utilisation in 2004.  
  7. World Energy Outlook 2013, published by the International Energy Agency on 12 November 2013. 

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