Green Infrastructure Finance
Green Investment Climate Country Profile – China
East Asia and Pacific Region
Copyright Š2013 International Bank for Reconstruction and Development/The World Bank East Asia and Pacific Region/Water and Energy Management Unit (EASWE) 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org
All rights reserved This volume is a joint publication of the staff of the International Bank for Reconstruction and Development/ The World Bank and the Australian Agency for International Development (AusAID). The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of The World Bank, its Board of Executive Directors, the governments they represent, or AusAID. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Moreover, the statistical database and other country-related information is time sensitive and subject to updates and/or changes. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to the work is given. For permission to reproduce any part of this work for commercial purposes, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; Telephone: 978-750-8400; Fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Task Team Leader, Aldo Baietti: The World Bank, 1818 H Street NW, Washington, DC 20433, USA; e-mail: abaietti@worldbank.org.
Design: Miki FernĂĄndez, ULTRA Designs, Inc., miki@ultradesigns.com
Table of Contents Acknowledgements................................................................................................................................................ iii List of Abbreviations and Acronyms.......................................................................................................................iv 1. Statistical Overview........................................................................................................................................... 2 2. Energy................................................................................................................................................................ 4 3. Green Policies and Incentives............................................................................................................................ 6 4. Green Programs and Institutions.................................................................................................................... 15 5. Green Regulatory Framework........................................................................................................................ 17 6. Investment Trends and Challenges................................................................................................................. 18 7. Concluding Remarks........................................................................................................................................ 23 8. Summary of Policy Instruments...................................................................................................................... 26 9. Annex............................................................................................................................................................... 27 10. References........................................................................................................................................................ 53 List of Tables and Figures: Table 1: Electricity Generation Sources (% of total).............................................................................................. 5 Table 2: Key Green Targets in China’s 12th Five-Year Plan..................................................................................... 7 Table 3: Mandatory RE Development through RPS............................................................................................. 10 Table 4: Clean Energy Stimulus Fund Spent and Remaining, 2011 (US$ billion)................................................ 11 Table 5: Summary of Key Features of the Two Solar Subsidy Programs............................................................. 12 Table 6: FiTs Levels in China................................................................................................................................... 13 Table 7: Number and Distribution of CDM Projects............................................................................................. 13 Table 8: S&P’s Credit Rating................................................................................................................................... 18 Table 9: Investments in PPI - 2003 to 2011 (current US$ millions)....................................................................... 19 Table 10: Global G20 Clean Energy Investment, 2006-2011................................................................................ 21 Table 11: CDM Approved Projects by Scope......................................................................................................... 39 Table 12: Resources and Environment Goals and Targets of China’s 12th FYP.................................................... 50 Table 13: China’s 12th FYP and Provisional Sectoral Targets................................................................................ 51 Figure 1: Total Primary Energy Supply.................................................................................................................... 4 Figure 2: China Energy Efficiency Policy Framework (a)........................................................................................ 6 Figure 3: China Renewable Energy Policy Framework (b)..................................................................................... 8 Figure 4: Energy Savings from 11th FYP Programs and Policies based on 2006-2008 Estimates...................... 15 Figure 5: Global Competitiveness Index............................................................................................................... 18
www.worldbank.org
www.ausaid.gov.au
Green Infrastructure Finance
Figure 6: FDI in China, 2001-2011.......................................................................................................................... 19 Figure 7: China RE Investment............................................................................................................................... 20 Figure 8: Private Investment in New or Additional RE Capacity (US$ million)................................................... 21 Figure 9: Breakdown of RE Investments (US$ million)......................................................................................... 21 Figure 10: Energy Intensity Evolution, 1980-2010................................................................................................ 49 Figure 11: Total Primary Energy Supply Evolution............................................................................................... 49
ii
The World Bank – AusAID
Green Investment Climate Country Profile - China
Acknowledgements
T
his country profile has been prepared by the East Asia and Pacific Region of the World Bank. The work was led by Aldo Baietti, Lead Infrastructure Specialist (EASWE) under the overall guidance of John Roome, Sector Director (EASSD) and Charles Feinstein, Sector Manager (EASWE). The team and co-authors included Andrey Shlyakhtenko and Roberto La Rocca (EASWE) from the World Bank. The team wishes to acknowledge the peer reviewers and other contributors inside and outside the World Bank Group including, Gailius Draugelis, Lead Energy Specialist, Ximing Peng, Senior Energy Specialist, Gerald Ollivier, Senior infrastructure Specialist, Yanqin Song, Energy Specialist (EASCS), Alexander Jett, Research Analyst (TWISI), John Probyn (PPIAF), Bastiaan Verink (TWISI), Dafei Huang (EASCS), Yan Li, Banuchandar Nagarajan, Amar Causevic (EASWE), Zhang Fang (Local Consultant) and 10EQS, Ltd. Edward Charles Warwick edited the report. Finally, the team wishes to acknowledge the generous support from the Australian Agency for International Development (AusAID) provided through the World Bank East Asia and Pacific Infrastructure for Growth Trust Fund (EAAIG).
The World Bank – AusAID
iii
Green Infrastructure Finance
List of Abbreviations and Acronyms BAU
Business-as-Usual
BEV
Battery Electric Vehicle
BIPV
Building-integrated Photovoltaic
CBM
Coal-bed Methane
CBRC
China Banking Regulatory Commission
CDM
Clean Development Mechanism
CERs
Certified Emission Reductions
CHEEF
China Energy Efficiency Financing Project
CHUEE
China Utility-based Energy Efficiency Program
CIT
Corporate Income Tax
CO2
Carbon Dioxide
CPI
Corruption Perceptions Index
CRESP
China Renewable Energy Scale-up Program
EE
Energy Efficiency
EMCO
Energy Management Company
EPB
Environmental Protection Bureau
EPCs
Energy Performance Contracts
ESCOs
Energy Service Companies
ETS
Emissions Trading Systems
FDI
Foreign Direct Investment
FiTs
Feed-in Tariffs
FYP
Five-Year Plan
GDP
Gross Domestic Product
GHG
Greenhouse Gas
GEF
Global Environmental Facility
GW
Gigawatt
ha
Hectares
HFC
Hydrofluorocarbon
IFC
International Finance Corporation
Kgoe
Kilogram(s) of Oil Equivalent
kW
Kilowatt
kWh
Kilowatt Hours
MEP
Ministry of Environmental Protection
MIIT
Ministry of Industry and Information Technology
iv
The World Bank – AusAID
Green Investment Climate Country Profile - China
MOF
Ministry of Finance
MOLAR
Ministry of Land and Resources
MOST
Ministry of Science and Technology
MRV
Monitoring, Reporting and Verification
Mt
Metric Ton
Mtce
Metric Tons of Coal Equivalent
Mtoe
Million Tons of Oil Equivalent
MW
Megawatt
M&A
Merger and Acquisition
m
Cubic Meters
NDRC
National Development and Reform Commission
NEA
National Energy Administration
NEC
National Energy Commission
NPC
National People’s Congress
N 2O
Nitrous Oxide
PBOC
People’s Bank of China
PFC
Perfluorinated Compound
PHEV
Parallel Hybrid Electric Vehicle
PM
Particulate Matter
PPAs
Power Purchase Agreements
PPIs
Public-private Investments
ppm
Parts per Million
PV
Photovoltaic
P2E2
Pollution Prevention and Energy Efficiency
RE
Renewable Energy
RPS
Renewable Portfolio Standard
R&D
Research and Development
SEPA
State Environmental Protection Administration
SERC
State Electricity Regulatory Commission
S&P’s
Standard & Poor’s
tce
Tons of Coal Equivalent
UHV
Ultra-high Voltage
UNFCCC
United Nations Framework on Climate Change Convention
US$
United States Dollar
VAT
Value Added Tax
W
Watt
¥
Renminbi
3
The World Bank – AusAID
v
Green Investment Climate Country Profile - China
China is the third largest and the most populous country in the world. It is characterized by diversified climatic regions, with tropical areas in the south and subarctic regions in the north. Over the last three decades, China has leaped from a poor country into the world’s second-largest economy after the United States. At the same time, the resource intensive growth has led to substantial negative consequences. China has shown its commitment to low carbon development, but the next twenty years will be crucial for the country to seize the opportunity for making additional in-roads in greening its economy as well as demonstrating global leadership. Since 2009, China has been leading the international clean energy race, both in terms of total installed capacity and absolute investments.
The World Bank – AusAID
1
Green Infrastructure Finance
Indonesia
Philippines
Vietnam
China
Rep. of Korea
Singapore
Malaysia
1. Statistical Overview
847
225
124
7,318
1,116
240
278
242
95
88
1,344
50
5
29
49.9
48.7
30.4
49.2
82.9
100
72
5.1
4.5
6.4
9.6
3.4
5.8
4.5
24.7
50.9
48.8
16.5
34.7
108.3
51.8
5.4
4.7
18.7
5.4
4.0
5.2
3.2
Agriculture
15
12
21
10
3
0
11
Industry
47
33
41
47
39
28
44
Services
38
55
38
43
58
72
45
Energy production (Mtoe)8
352
24
77
2,085
44
0.03
90
Energy use (Mtoe)
202
39
64
2,257
229
19
67
Net energy exports/imports (Mtoe)9
147
(19)
11
(185)
NA
(51)
18
71
90
98
99
100
100
99
Electric transmission and distribution losses (%)
9.4
12.1
9.6
4.9
3.7
5.2
3.8
Energy intensity (kgoe/US$1,000 2005 PPP)
230
126
274
273
184
80
191
Macro Indicators GDP (current US$ billion)1 Population (million)
2
Urban population (% of total)
3
Economic Indicators Constant GDP 10 Year CAGR (%)4 Public debt (% of GDP)
5
Inflation, consumer prices (annual %)
6
Sector mix (% of GDP)7
Energy Indicators 8
Electricity access (% of population)
10 11
12
CO2 emissions (Mt of CO2)
376
71
114
6,832
515
45
208
Electricity tariffs (US$/kWh)14
0.07
0.14
0.05
NA
0.13
0.22
NA
6,095
348
165
126,215
139
NA
4.4
13,i
Fossil fuel endowment
15
Coal (2008, million short tons)
3.9
0.1
4.4
20.4
0
0
4
141.1
3.5
24.7
107
0.3
0
83
Coal and peat
15.1
15.2
19.7
67.2
28.3
0
15.8
Crude oil
Oil (2012, billion barrels) Natural gas (2012, trillion cubic feet) Total Primary Energy Supply (%)16
26.5
19.3
4.2
16.8
39.5
61.4
35.5
Oil products
6.7
14.3
21.2
0
0
0
0
Natural gas
17.4
8.3
11.1
3.3
13.8
38.4
43.4
0
0
0
0.8
16.8
0
0
Nuclear Hydro
0.5
2.2
4.0
2.4
0.1
0
0.9
Geothermal, solar, wind
7.9
22.9
0
0.5
0.1
0
0
i CO2 emissions from fuel combustion only.
2
The World Bank – AusAID
Indonesia
Philippines
Vietnam
China
Rep. of Korea
Singapore
Malaysia
Green Investment Climate Country Profile - China
26.0
17.9
39.3
9
1.3
0.2
4.5
0
0
0.5
0
0
0
0
Renewables
13.3
32.6
36
17.5
1
0.1
6.3
Oil
22.8
8.7
2.5
0.4
4.4
18.8
2.0
0
0
0
1.9
32.7
0
0
Natural Gas
22.1
32.1
43.4
1.4
15.6
81.0
60.7
Coal
41.8
26.6
18
78.8
46.2
0
30.9
S&P’s Credit Rating (Foreign Currency)18
BB+
BB+
BB-
AA-
A+
AAA
A-
Doing Business Ranking
129
136
98
91
8
1
18
CPI Transparency Ranking
100
129
112
75
43
5
60
FDI, net (% of GDP)21
1.6
0.3
6.8
2.2
(1.9)
8.5
1.6
37,113 45,114
8,328
78,438
NA
NA
46,401
Energy Indicators (cont.) Combustible renewable and waste Electricity and heat Electricity Sources (%)
17
Nuclear
Investment Climate 19 20
PPI (US$ million)22,ii PPI renewable energy (US$ million)
22
Lending interest rate (%)
23
Lending - deposit spread (%)24 Liquid assets to deposits and short term funding (%)
25
3,876
3,844
1,839
8,380
NA
NA
198
13.2
7.7
13.1
5.9
5.4
5.6
5
6
4
2
3
2
5
3
30
29
35
20
8
37
27
ii Investments amounts include greenfield projects, concessions and management, and lease contracts.
The World Bank – AusAID
3
Green Infrastructure Finance
2. Energy
C
hina’s economy has been growing at a rapid pace over the past three decades with an average growth rate of nearly 10 percent per year. Today, according to the International Energy Agency China is the largest energy consumer in the world.26 Since late 1980s, energy consumption has increased five-fold to fuel an economy that increased eighteen-fold.27 Second factor behind the rise in energy consumption was urban population boom. Population in the cities has more than doubled since the start of the Open Door Policy in 1979.
Figure 1: Total Primary Energy Supply Crude Oil 17%
Natural gas 3% Nuclear 1% Combustible renewables and waste 9%
Renewables 12%
Hydro 2%
Coal & Peat 67% Other RE 1%
Source: International Energy Agency, 2009.28
About 70 percent of China’s current energy consumption is supplied by coal. China is also the world’s leader in coal production, accounting for nearly half of the world’s total coal production in 2011. Despite its abundant reserves, in 2009 China became a net importer of coal due to bottlenecks in domestic production and a rise in domestic prices. Crude oil is the second largest source of China’s energy supply. In the early 1990s China has turned from a net exporter of oil to the second largest importer in the world. In 2013 China actually surpassed the United States as the world largest importer of crude oil.29 Its dependency on oil imports is expected to increase further in the coming decade.30 Natural gas consumption has also increased rapidly in recent years and China now is seeking to increase its natural gas imports via pipeline and shipment of liquefied natural gas. Renewable sources account for a relatively small percentage of China’s overall energy supply, but the installed capacity of renewable energy (RE) is growing both in absolute terms and at the fastest pace in the world. China is now the world’s biggest CO2 emitter given its large energy consumption and heavy dependency on fossil fuels. With a large manufacturing sector, China’s energy-intensity levels are also among the highest in the world at more than two times the world’s average.
4
The World Bank – AusAID
Green Investment Climate Country Profile - China
Table 1: Electricity Generation by Source (% of total) China is the second largest electricity producer in the world. Rapid growth in elec2003 2005 2007 2009 iii tricity demand has spurred significant 15.0 16.1 15.1 17.5 Renewables investments in generation capacity, which Oil 3.0 2.5 1.0 0.4 has more than doubled from the 2005 levels, Nuclear 2.3 2.0 1.9 1.9 26 and is expected to double again by 2030. Natural gas 0.3 0.5 0.9 1.4 Currently, China has second largest electricCoal 79.4 78.9 81.1 78.8 31 ity generation capacity in the world.32 Over Source: International Energy Agency, 2009. the past years, the Government has made a considerable efforts to expand the share of RE in its generation mix and it has the world’s largest and fastest growing installed capacity of RE (including hydro). Going forward, China has considerable potential in both energy efficiency (EE) and emission reduction.
iii In historical context hydro is the most important RE electricity generation source in China. Hydroelectric power represents more than 90 percent of RE electricity generation (99 percent in 2003, 98 percent in 2005, 98 percent in 2007 and 95 percent in 2009).
The World Bank – AusAID
5
Green Infrastructure Finance
3. Green Policies and Incentives
I
n 2009, China made a significant pledge within the framework of the Copenhagen Accord to lower its carbon intensity per unit of GDP by 40-45 percent by 2020 from the 2005 levels by 2020 and to increase its share of non-fossil fuels in the primary energy consumption to around 15 percent by 2020.33 The Government has demonstrated strong commitment to meet these goals. Figure 2: China Energy Efficiency Policy Framework (a) Planning Space National Government Copenhagen Accord Commitments National Five-Year Plan Mandatory Targets Local Government
Green Credit Guideline
Financial Market
Industries
Fiscal Incentives (tax incentives, capital subsidies, low-interest financing, etc.)
Codes and Standards
Appliance standards, auto efficient standards, etc.
Programs
Ten Key Programs, Top 1000 Programs, small plant closure, etc.
7 Strategic Industries
Financing Incentive Space
Regulatory S.
Program S.
Source: Authors, 2012.iv
Five-Year Plan (FYP) China’s FYP is the Government’s primary vehicle in setting growth targets, mapping out development strategies, and launching social and economic initiatives and reforms. China’s 11th FYP (2005-2010) places EE as one of the highest national priorities. Under the plan, the Government introduced environmental targets, including a 20 percent reduction of energy intensity by 2010, and setting a RE target of 15 percent by 2020.v To achieve these targets, the 11th FYP devised a series of top-down administrative programs, including closing down thousands of small, outdated and inefficient industrial and thermal plants, retrofitting facilities in energy-intensive iv Authors compilation based upon review of several research documents, governmental websites and interviews. v The estimate includes hydro. However, if hydro is excluded the target is three percent.
6
The World Bank – AusAID
Green Investment Climate Country Profile - China
industries, improving building EE, implementing appliance standards, etc. The Plan also assigned mandatory energy intensity reduction targets at the provincial level, while holding provincial governments accountable to deliver those targets. In the 11th FYP, investments in energy conservation amounted to US$120 billion, of which 79 percent was from the private sector, 12.7 percent from the central government, 6.4 percent from the local governments, and 1.9 percent from global finance.34 Meanwhile, total investments in RE reached US$124.4 billion in the 11th FYP period.35 Table 2: Key Green Targets in China’s 12th Five-Year Plan Percentage of non-fossil fuel in primary energy consumption Carbon intensity (CO2/GDP) Energy intensity (energy/GDP) Energy saving and environmental protection Natural gas as % of energy supply Nuclear as % of energy supply Hydro, installed capacity Wind, installed capacity Solar, installed capacity Biomass
CBM Shale gas Nuclear installed capacity BEV and PHEV fleets New building efficiency
11.4% 17% 16% total output value will reach ¥4.5 trillion by 2015 share of value added as a % of GDP will be 2% 8% 3% 290 GW 104 GW onshore and 5 GW offshore wind power proportion of the total power generation to be 3% 21 GW, including 10 GW for distributed PV power generation 13 GW new installed capacity for power generation annual gas supply of biomass energy to reach 22 billion m3, biomass molding fuel to reach 10 million tons and bio-liquid fuel to reach 5 million tons CBM output to reach 30 billion m3, and installed capacity to be 2.85 GW 6.5 billion m3 production 40 GW of new additional capacity 500,000 vehicles 65% energy consumption reduction compared with 1980 building stock
Source: Authors, 2012. vi,vii
The 12th FYP (2011-2016) placed unprecedented emphasis on sustainable growth. The environmental targets set for the period include a 16 percent reduction in energy intensity by 2015 and setting a RE target of 11.4 percent by 2015. Central to the 12th FYP is China’s new ‘green’ industrial strategy that focuses on the development of seven new strategic industries namely: (i) alternative energy; (ii) biotechnology; (iii) new generation information technology; (iv) high-end equipment manufacturing; (v) advanced materials; (vi) alternative fuel cars; and (vii) energy saving and environmental vi Authors compilation based upon the information acquired from the Tufts University’s Professor Kelly Sims Gallagher “International Energy Policy” course. vii Renminbi (¥) exchange rate is approximately ¥6.230 = US$1.
The World Bank – AusAID
7
Green Infrastructure Finance
protection. The Government will provide substantial public investment in these sectors over the Plan period (2011-2016), with the expectation to leverage investments from both the private sector and local governments.36 The total value added output of these new industries is expected to grow to eight percent of China’s GDP by 2015, and to 15 percent by 2020. In the 12th FYP, energy conservation investment demand will increase to about US$193 billion, which will help China to save 383 Mtce, and RE investment demand is expected to be US$281.3 billion, at about US$56.3 billion per year.34
Mandatory Targets at the Provincial Level In response to the mandatory targets set by the 11th FYP, several provincial governments, such as Hubei Province, established EE funds through a levy on electricity consumption. The provincial governments, in turn used these funds to provide incentives and subsidies to enterprises that implement EE measures.
Renewable Energy Law (2005) and Amendment (2009) China is one of the first developing countries that implemented a Renewable Energy Law. The Law was first promulgated by the National People’s Congress (NPC) in February 2005 and became effective in January 2006. It put forward a comprehensive RE policy framework, and institutionalized a number of policies and instruments for China’s RE development. Figure 3: China Renewable Energy Policy Framework (b) Planning Space National Government Copenhagen Accord Commitments National Five-Year Plan Mandatory Targets Local Government
Green Credit Guideline
Financial Market
Energy Market
Renewable Energy Law
Fiscal Incentives
Programs
(tax incentives, capital Guaranteed Off-take Feed-in Tariff subsidies, low-interest financing, etc.)
Financing
Generation
Renewable Portfolio Standard
Equipment Manufacturer Incentive Space
Regulatory S.
Program S.
Source: Authors, 2012.viii
viii Authors compilation based upon review of several research documents, governmental websites and interviews.
8
The World Bank – AusAID
Green Investment Climate Country Profile - China
A key component of the Renewable Energy Law is the provision for a mandatory grid connection and off-take of all power generated from renewable sources. In 2009, the Law was amended with strengthened requirements in this area. In spite of the clear legal provisions, off-take uncertainties remain a major challenge for renewable development in China, due to cash flow strains of the grid operators, and a reluctance of the renewable developers to enforce their rights.37
Energy Conservation Law (1997) and Amendment (2007) China published its Energy Conservation Law on November 1, 1997. The Conservation Law was updated by the NPC in 2007 and the amendment became effective on April 1, 2008. The Law requires state council and local governments to include energy conservation measures into their economic and social development plans, and report on an annual basis to the People’s Congress or its Standing Committee on energy performance. Additionally, the 2007 amendment requires establishing the system for tracking and evaluating energy-saving targets. The performance of local governments and officials on energy-saving targets will be assessed. The amendment further clarifies the regulatory frameworks for energy conservation in industry, building, transportation and public institutions, etc. In industry, it proposes to: (i) improve the structure of each sector; (ii) promote energy-saving technologies; and (iii) encourage the diffusion of advanced energy-efficient motors, boilers, and pumps, etc. It also requires grid operators to provide grid connections for power generation from co-generation, waste heat and pressure, and other waste resources. In the building sector, it stipulates real estate development companies to explicitly declare energy-saving measures to customers. It also aims to improve road structure and to establish energy-saving transportation systems by encouraging the development, production and usage of energy-saving and environment-friendly vehicles and improving public transportation. Additionally, the amendment demands that public institutions issue annual energy consumption reports and set energy consumption standards. Public institutions are also required to give procurement priority to energy-saving products and equipment.
Medium and Long-term Development Plan for Renewable Energy in China The Medium and Long-term Development Plan for Renewable Energy in China was issued in 2007. It established specific targets for each type of RE. The measures include the establishment of a sustainable and stable market demand for RE, the improvement of the market environment, the construction and extension of grids, the development of renewable power tariff and cost sharing policies, the creation of additional fiscal and tax incentives, and the acceleration of technology improvement and industry development.
Renewable Portfolio Standard (RPS) To ensure stable and sustainable market demand for RE, the Government requires utilities to achieve minimal levels of RE (non-hydropower) generation. The RPS introduced installed capacity and power generation goals that must be achieved until 2020. In sum, generation companies with installed capacity greater than 5 GW (i.e., Huaneng, Huadian, Guodian, China Power Investment and Datang), should source at least eight percent of capacity and three percent of power generation from non-hydro RE sources by 2020.38
The World Bank – AusAID
9
Green Infrastructure Finance
Table 3: Mandatory RE Development through RPS Generation Company
Installed Capacity 2011 (GW)
3%
4%
5%
6%
7%
8%
Datang
111.09
3.33
4.44
5.55
6.67
7.78
8.89
Guodian
106.72
3.20
4.27
5.34
6.40
7.47
8.54
Huaneng
125.38
3.76
5.02
6.27
7.52
8.78
10.03
Huadian
94.10
2.82
3.76
4.71
5.65
6.59
7.53
China Power Investment
76.80
2.30
3.07
3.84
4.61
5.38
6.14
514.09
15.42
20.56
25.70
30.85
35.99
41.13
Total Source: Authors, 2012.
39, ix
In 2011 the total installed capacities of the five generation companies amounted to about 515 GW, translating to a minimal RE installed capacity requirement of 15.4 GW. In 2011 alone, China added 20 GW in wind installed capacity, bringing its total installed capacity in wind to 64 GW by the end of that year from a meager 1.25 GW in 2005. Among all non-hydro-based RE sources, wind power usually provides the least cost solution, therefore, often considered the “go-to” source by the big generation companies in meeting their renewable targets.40
Green Credit Guidelines In early 2012, the China Banking Regulatory Commission (CBRC) issued the Green Credit Guidelines to promote green credit growth among Chinese banks and other financial institutions.41 The guidelines also require banks to reduce their lending to energy-intensive industries with high levels of pollution.42 The guidelines require banks to carry out an evaluation of clients’ environmental risks when determining their access to credit, and to reduce funding to excessive energy consumption projects. While it is still too early to assess the impact of the new guidelines, they nevertheless provide a clear policy direction for banks with respect to clean energy.
Green Stimulus Package In 2009, governments throughout the world allocated more than U$194 billion for clean energy efforts in stimulus plans, but only 10 percent of that amount reached the sector. In 2010, stimulus funding for clean energy efforts more than tripled to US$74.5 billion, led by sharply increased funding for projects in five G-20 countries: the United States, China, Germany, Japan and South Korea. Thirty-seven percent of stimulus funding spent by the end of 2010 was directed to EE programs, 21 percent to RE, 17 percent to smart grids, and 19 percent for research and development (R&D) efforts.
ix Authors compilation based on the data obtained from Fan et. al academic article “Renewables portfolio standard and regional energy structure optimization in China” and Zhang’s book Energy and Environmental Policy in China: Towards a Low-Carbon Economy.
10
The World Bank – AusAID
Green Investment Climate Country Profile - China
Table 4: Clean Energy Stimulus Fund Spent and Remaining, 2011 (US$ billion) Total 65.6 46.2 32.4 15.1 11.1
2010 26.3 32.0 10.2 8.9 3.2
2011 15.7 12.0 6.3 6.2 2.6
Remaining 23.6 2.2 15.8 0.0 5.3
10.5
8.9
1.4
0.1
Australia
3.9
1.6
0.0
2.2
United Kingdom
3.4
1.3
1.4
0.8
Brazil
2.4
0.2
–
2.3
France
2.1
2.1
–
–
Canada
0.6
0.1
0.5
–
194.0
95.4
46.3
53.2
United States China Korea, Rep. of Germany European Union Japan
Total Source: Pew Charitable Trust, 2012.
43
In response to the 2008 global financial crisis, the Government of China launched a massive US$586 billion (¥4 trillion) stimulus, of which US$46.2 billion was devoted to clean energy development. The amount had to be disbursed over two years. The Government’s green stimulus package is the second largest in the world, only behind the United States. The Government was also the quickest in disbursing its green stimulus funds, in the form of fiscal incentives (including subsidies, grants, tax incentives, concessional loans, etc.) to catalyze investments from the private sector and the local governments. The Government’s fiscal incentives have spurred active developments in the equipment manufacturing space, where both private funds and the capital markets are eager to participate. In half a decade, China turned into the world’s manufacturing powerhouse of RE equipment, supplying nearly half of the global demand for wind turbines and solar panels. Unlike the wind power sector where the majority of the demand comes from the domestic market, China’s solar photovoltaic (PV) sector has to rely on the absorbing capacity of the export markets. In 2012, with the euro crisis in full swing and the slow-down of demand for PV in the euro zone, China’s PV manufactures had to cut prices and suffered razor-thin margins. Some PV manufacturers in China are moving downstream into the project development space. With lower costs and lower upfront capital requirements, these manufacturers are poised to become a competitive force in the solar energy development space. However, since May 2012, the United States set punitive tariffs ranging from 24 percent to nearly 250 percent on most Chinese PV imports. Similarly, the European Union and India and other countries are carrying out anti-subsidy investigations into PV wafers, cells, and modules made in China. China’s central and provincial governments offer financial subsidies to clean energy projects. In the 11th FYP, the standard subsidy rate in the eastern region was around ¥200 per ton of standard coal (US$32.68 equivalent) saved. The standard rate in the western region was ¥250 per ton of standard coal saved.45 In the 12th FYP, the standard subsidy rate in the eastern regions has increased to ¥240
The World Bank – AusAID
11
Green Infrastructure Finance
per ton of standard coal saved, and the standard subsidy rate in the western regions has increased to ¥300 per ton. Table 5: Summary of Key Features of the Two Solar Subsidy Programs Applications
BIPV Program Grid connected rooftop BIPV systems
System Size Subsidy
≥ 50 kW ¥15/W for rooftop systems
Other Terms
¥20/W for BIPV systems Conversion efficiency minimum requirement: 16% for monocrystalline 14% for multicrystalline 6% for thin film
Golden Sun Program Grid connected rooftop, BIPV, and ground mounted systems. Off-grid systems in rural areas. ≥ 300 kW 50% of total cost for on-grid systems 70% of total cost for off-grid systems For grid connected systems, on-site consumption is encouraged. Excess electricity would be sold to the utility. Buy back rate is based on local benchmark coal-fired grid price.
Source: Climate Connect, 2010.44
A wide array of tax incentives are available, including a corporate income tax (CIT) and value added tax (VAT) reduction and/or exemption for RE projects, energy conservation initiatives and some types of Clean Development Mechanism (CDM) proceeds. Financial subsidies and tax incentives from both central and provincial governments are also made available to qualified energy service companies (ESCOs) holding energy performance contracts (EPCs) and consumers of energy efficient commodities, such as, air conditioners, cars and motors. In 2009, China rolled out two national solar subsidy programs: (i) the Building-integrated Photovoltaic (BIPV) subsidy program; and (ii) the Golden Sun Program. Both programs provide capital subsidies to solar power projects, for either on-grid or off-grid purposes, for various installed capacity. In 2013, the Golden Sun Program was replaced by the national PV feed-in tariff (FiT) scheme.
Tariff The Renewable Energy Law 2005 made provisions for surcharges to end-users to help finance the cost premium of distribution companies during the concession tendering period. Under the law, the power purchase agreements (PPAs) for all renewable projects have a valid period of one-year with automatic roll-over at the end of each year. In the case of PPAs on wind projects, the agreed tariff is locked in for at least 30,000 full load hours (about 12-15 years at partial load). At the end of the 30,000 hours the tariff will revert to the coal-fired tariff.37
12
The World Bank – AusAID
Green Investment Climate Country Profile - China
Feed-in Tariffs (FiTs) China started offering a FiT for biomass projects in 2006. It was twice revised upward because the initial FiT level was proven inadequate to sustain financial viability. The national FiT for wind was introduced in 2009 offering four levels at 0.51 (or 0.083 US$/kWh), 0.54, 0.58 and 0.61 ¥/kWh, corresponding to different wind resources in different regions.
Table 6: FiTs Levels in China Applications (starting year) Biomass (2006) Biomass (2009) Biomass update (2010) Wind (2009) On-grid solar (2011)
Level (¥/kWh) 0.25 0.35 0.75 0.51-0.61 1.00-1.15
Source: Renewable Energy Policy Network for the 21st Century, 2012.46
The different levels were set based on previously approved wind tariffs in each region between 2006 and 2008. In August 2011, China announced its first nationwide FiT for solar projects. The FiT laid down by the National Development and Reform Commission (NDRC) set an on-grid solar power price of 1.15 ¥/kWh (about 0.18 US$/kWh) for projects approved before July 1 and completed by year’s end and 1 ¥/kWh (about 0.16 US$/kWh) for projects approved after July 1, and projects not completed in 2011.
CDM Table 7: Number and Distribution of CDM Projects China is home to 60 percent of the issued CDM credits. The Government Number of China’s has successfully put in place a faciliCountry/Region registered projects contribution tating framework for CDM investors. China 2,363 Meanwhile, the Government has also Asia Pacific 3,871 61% used the CDM as a means to raise World 4,685 50% public funds, and to influence proj47 Source: United Nations Environment Program, 2012. ect selection through differential tax rates on various types of projects. CDM has five local designated operating entities to perform project assessments and issuing certification. CDM participation has improved the financial viability of RE projects in China. RE producers in China generally can count on two sources of revenues, one from electricity sales and the other from the generation and sales of Certified Emission Reductions (CERs) through the CDM. The latter can account for as much as 20 percent of a developer’s total revenue.37
Carbon Market In line with the emission reduction target of the 12th FYP, the NDRC has chosen seven regional pilots of emissions trading systems (ETS). The pilot markets include Beijing, Tianjin, Shanghai, Shenzhen, Chongqing, Hubei and Guangdong. The experience from the regional pilots is expected to be applied to the development of a national unified carbon market planned to be launched during the 13th FYP. Among the seven pilots, Shenzhen was the first one to pass a carbon trading law in November 2012. Eight hundred enterprises from 26 sectors are included in the Shenzhen scheme
The World Bank – AusAID
13
Green Infrastructure Finance
to ensure that at least 50 percent of the total emissions are covered. Shanghai has announced that its pilot carbon emissions trading platform will be launched in 2013.48 The Shanghai Environment and Energy Exchange will oversee the pilot trading platform made up of 200 firms covering 10 industry sectors, such as steel and power, and 6 non-industrial sectors, such as airlines, ports and hotels.49 Trading will be based on credits that can be bought or sold. The trial companies will be given initial quotas for free by Shanghai’s NDRC based on previous emissions data. Additional credits or shortages can be corrected through transactions in the carbon credit market Shanghai’s approach is also subject to approval from the Commission. In January 2013, Hubei Provincial government also published its Implementation Plan of Carbon Market Pilot with more than 150 energy intensive firms. Xinyu City in Jiangsu Province, also launched its own mandatory carbon trade platform in March 2013.
14
The World Bank – AusAID
Green Investment Climate Country Profile - China
4. Green Programs and Institutions
S
ince 2005, the Government made EE one of its highest priorities. The 11th FYP laid out ambitious targets to reduce energy intensity by 20 percent from 2005 to 2010. To achieve this target, the NDRC, the Ministry of Environmental Protection (MEP) and other central government agencies adopted drastic, top-down administrative measures. These measures included holding provincial leaders accountable to achieving assigned energy saving targets, and closing down thousands of outdated and inefficient plants in its power and heavy industry sectors. Small plants were also consolidated to improve efficiency and restrictions were introduced to discourage the production and export of energy intensive products, such as steel and cement. The key EE programs implemented during the 11th FYP period include:
■■
■■
The Ten Key Energy Conservation Projects (2005-2010), which focus on coal-fired industrial boiler (kiln) retrofits, district cogeneration projects, waste heat and pressure utilization projects, petroleum conservation and substitution projects, motors EE projects, energy system optimization projects, building energy conservation projects, green lighting projects, government agency energy conservation projects, and energy saving monitoring and testing and technology service system building projects. The Top-1,000 (Energy-consuming Enterprises) Program, which focuses on the reduction of energy intensities in key enterprises.
Figure 4: Energy Savings from 11th FYP Programs and Policies based on 2006-2008 Estimates 500
n Ten Key Projects n Buildings Energy Efficient
400
n Overlap Ten Key Projects and Top-1000 n Top-1000 Projects
300 Mtce
■■
200
n Small Plant Closures n Appliance Standards n Other Savings Including ProvincialLevel Programs
100
Small Plant Closures program which lowered on-grid tariff for the generation 0 from aged, small-sized coal-fired power Primary Energy plants, over a period of four years startSavings 2006-2008 ing in 2007. The most inefficient plants Source: Price at al., 2012.50 were prioritized, effectively reducing the outputs from the small-sized and aged plants, which were eventually taken out of services. The program has contributed to the proliferation of large-sized and more efficient generation units.51
The World Bank – AusAID
15
Green Infrastructure Finance
The next 12th FYP aims to reduce energy intensity by 16 percent from 2010 to 2015. The key EE programs being implemented during the 12th FYP period include: ■■
The Ten Key Energy Conservation and Emission Reduction Projects, which include: (i) energy-saving renovation projects; (ii) energy-saving projects that directly benefit the people; (iii) management and promotional projects relating to contracting energy; (iv) model projects of energy-saving technology industrialization; (v) projects relating to the construction of urban sewage treatment facilities; (vi) projects for the prevention and control of water pollution in key valleys; (vii) desulfurization and denitration projects; (viii) projects designed for the prevention and control of livestock and poultry breeding pollution; (ix) model projects promoting a circular economy; and (x) projects which involve building energy-saving and emission reduction capacity. The overall target is to save about 300 Mtce by the end of the 12th FYP.
■■
The Top-10,000 (Energy-consuming Enterprises) Program builds on The Top-1,000 (Energy-consuming Enterprises) Program in order to further reduce the energy intensity in key industries. The Top-10,000 Program aims to cover two thirds of China’s total energy consumption, or 15,000 industrial enterprises that use more than 10,000 tce per year, and around 160 large transportation enterprises (such as large shipping companies), and public buildings that use more than 5,000 tce per year.
■■
Small Plant Closures: China plans to further close 20 GW of small coal power plants, 48 Mt of iron-making capacity, 48 Mt of steel-making capacity, 370 Mt of cement-making capacity, 42 Mt of coking-making capacity and 15 Mt of paper-making capacity. Additionally, 12th FYP also raises environmental standards of the tombarthite industry and requires the elimination of inefficient capacity.
■■
Continuing various enabling policies for enterprise EE that build on policies and programs introduced during the 11th FYP, such as, adopting energy management system standards, training energy managers, building key energy consuming enterprise data monitoring systems, and expanding use of third parties for a wide range of EE services, including promoting energy performance contracting, energy auditing, monitoring, reporting and verification (MRV) systems, and facilitating access to commercial financing.
China’s efforts in RE and EE development are also supported by international institutions and organizations. In addition to the participation in CDM, programs such as the China Renewable Energy Scale-up Program (CRESP), the China Utility-based Energy Efficiency Program (CHUEE), the World Bank/Global Environmental Facility (GEF) China Energy Conservation Projects and the China Energy Efficiency Financing Project (CHEEF) have played a significant role in the country’s RE and EE development by promoting information sharing, offering policy recommendations, and providing financial incentives.
16
The World Bank – AusAID
Green Investment Climate Country Profile - China
5. Green Regulatory Framework
T
he NDRC is the primary policymaking and regulatory authority in the energy sector.30 Overall, the NDRC is the leading regulatory body which oversees investments in power projects and electricity tariff-setting. The NDRC and its local pricing offices approve PPAs of power projects.
Under the oversight of NDRC, the National Energy Administration (NEA) was established in June 2008. Its primary responsibility includes planning, coordinating and supervising activities in the energy sector. The NEA is responsible for: (i) energy development policies, regulations, and standards; (ii) the coordination of the entities engaged with the development of the national energy sector; and (iii) the supervision of China’s energy sector reform agenda.52 In 2013, the State Electricity Regulatory Commission (SERC) was merged into the NEA to strengthen its function of monitoring and regulating the operations of the country’s power sector. The National Energy Commission (NEC), a high-level decision-making body, was set up in January 2010 to further integrate energy-related institutions and functions currently administrated by the NDRC.53 The commission will review energy strategies and major policy issues, including development and conservation of energy resources, energy security and emergency responses as well as international cooperation.54 Other government agencies involved in the regulation of the national energy sector include: (i) the Ministry of Land and Resources (MOLAR), which is responsible for the approval of all land use and development of gas resources; (ii) the MEP, which is responsible for the approval of environmental protection measures for energy projects; (iii) the National Ocean Administration, which is engaged with offshore energy projects (e.g. offshore wind power); and (iv) the Ministry of Housing and Urban Construction, which is responsible for the concession of gas in urban areas.
The World Bank – AusAID
17
Green Infrastructure Finance
6. Investment Trends and Challenges
C
hina’s sovereign credit rating is one of the highest in the region and among developing economies. In December 2010, S&P affirmed its “AA-” long-term foreign current rating on China, citing the country’s “exceptional growth prospects” and its “modest government indebtedness” as the key factors supporting its creditworthiness and stable outlook.
Table 8: S&P’s Credit Rating Country China Indonesia Philippines Singapore Korea, Rep. of Vietnam
Rating AABB+ BB+ AAA A+ BB-
The rating agency had also noted that “the stable rating outSource: Standard & Poor’s, 2012.18 look reflects that China can absorb potential balance sheet losses with little damage to its credit standing, given its substantial foreign exchange reserves and strong fiscal position”.55 Since 2009, China has been continuously ranked among the top quintile of countries on the Global Competitive Index. It was ranked between 26th and 29th in the period 2009-2013.56 Two salient factors have contributed to the country’s strong competitiveness: (i) its market size (ranked 2nd in 2011); and (ii) its favorable macroeconomic environment (ranked 10th in 2011) characterized by high national savings rate (ranked 5th) and high sovereign credit rating (ranked 22nd).
Figure 5: Global Competitiveness Index Stage of development Transition 1-2
1 Factor driven
2 Efficiency driven
Transition 2-3
3 Innovation driven
Institutions 7 Innovation Business sophistication
6 5 4
Infrastructure Macroeconomic environments
3 2 Market size
1
Health and primary education
In terms of public-private investments (PPIs), Higher education Technological China led the region in absolute investment and training readiness that it attracted over the period 2003-2011. Goods market Financial market However, on a percentage of GDP basis, China’s efficiency development Low market efficiency result is less impressive with the lowest value among the countries in this study. This is likely China Efficiency-driven economies due to many implicit and explicit investment Source: World Economic Forum, 2012.56 restrictions that have been put in place relating to private, especially, foreign participation in the country’s public sectors. For example, the telecom sector had been a PPI “blind spot” due to its classification as “prohibited” (until December 2011) in the Government’s “Catalogue for the Guidance of Foreign Investment in Industries”.x Moreover, according to the “Guiding Opinions Concerning the Advancement of Adjustments of State Capital x The Catalogue delineates sectors of the economy where foreign investment is encouraged, restricted and prohibited. Sectors not listed in the Catalogue are considered permitted.
18
The World Bank – AusAID
Green Investment Climate Country Profile - China
and the Restructuring of State-owned Enterprises” (December 2006), investments in several “vital industries and key fields” should be restricted.58 These industries include: aviation, coal, electric power and state grid, oil and petrochemical, shipping, and telecommunications. Table 9: Investments in PPI - 2003 to 2011 (current US$ millions) Indonesia
Philippines
Vietnam
Malaysia
China
Energy
6,676
6,107
2,287
4,059
11,770
Telecom
7,562
7,328
1,894
4,449
0
Transport
1,519
969
1,120
3,878
23,550
28
531
92
2,521
6,328
15,785
14,935
5,392
14,906
41,648
0.38%
1.13%
0.79%
0.82%
0.12%
Water and sewerage Total Average PPI as % of GDP Source: World Bank, 2010.
57
US$ billion
Number of Projects
On the foreign direct investment Figure 6: FDI in China, 2001-2011 140 50,000 (FDI) front, China’s record is less ambiguous. Thanks to sustained 120 40,000 high economic growth, the 100 30,000 expansion of its domestic mar80 ket, and its relatively low, albeit 60 20,000 rising wage, China has been one 40 of the top FDI destinations in the 10,000 20 world. Over the past decade, FDI – 0 has more than doubled from the 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2001 level. In 2010, China was Utilized FDI (US$ billion) Number of Projects the world’s second largest FDI 59 Source: Ministry of Commerce, 2012. destination, second only to the United States. China’s success in attracting FDI is in part due to the fact that there are far fewer restrictions associated with foreign participation in the private sector than there are in the public sector. Notably, a structural shift has also happened in China’s FDI composition in the recent years, with the total number of FDI projects falling sharply from its 2005 level. This is primarily due to the “fundamental shift” from quantity to quality (i.e. a shift from large number of small investments to small number of large investments).
China is emerging as the global clean energy powerhouse. Since 2009, China has been leading the international RE race, accounting for about one third of the global total RE investments.60 The nation’s ascendance has been steady and steep. In 2004, China attracted less than US$2 billion worth of private investments in RE. By 2009, China led the world for the first time, with more than US$38 billion invested. By 2010, China’s investment reached a record US$ 49 billion.60 Today, China is home to the world’s largest installed capacity of RE. It is also the world’s leading clean energy manufacturer, producing nearly 50 percent of all wind turbines and solar panels.
The World Bank – AusAID
19
Green Infrastructure Finance
Figure 7: China RE Investment 35
50 US$ billion
25 40 30
15
20 5 10 0
2004
2005
2006
Utilized FDI (US$ billion)
2007
2008
2009
2010
% of Global Investment
60
-5
Number of Projects
Note: The investment figures do not include Government’s Government’s green stimulus funds fiscal incentives. Sources: Bloomberg and Frankfurt School of Finance and Management, 2012; and World Bank, 2012.60
Additionally, China is also rapidly increasing its investment in energy conservation. In 2006, China’s investments in energy conservation amounted to US$3.9 billion. Such spending increased to US$17.4 billion in 2007, US$22.8 billion in 2008, US$25.3 billion in 2009 and US$50.7 billion in 2010. Central and provincial governments contributed 12.7 and 6.4 percent of all the energy conservation investments in 11th FYP, respectively. As previously indicated, the investment demand of energy conservation is expected to increase to about US$193 billion over the 12th FYP implementation period.34
Renewable Energy Fund As part of the Renewable Energy Law 2005, a Renewable Energy Fund was established under the Ministry of Finance (MOF). Initially, the fund collected ¥0.004 (US$0.0006) per kWh nationwide (with some customer classes exempt). The proceeds from the surcharge were used to fund government-supported RE projects through FiTs. In December 2011, the NDRC announced the doubling of surcharges to ¥0.008 (US$0.0013) per kWh. According to industry analysts, the total tariff surcharges are expected to exceed ¥20 billion (US$3.2 billion) by the end of 2012. In April 2013, the MOF advanced US$2.4 billion to subsidize renewable power to the provincial grid companies and other independent electricity companies. Of the US$2.4 billion, US$1.5 billion was advanced to wind power, US$0.4 billion to solar power and US$0.5 billion to biogas.
Private Participation in Renewable Energy Although most investments have been made by state-owned enterprises to meet the government-mandated targets for RE capacity, the contributions by the private sector have also been significant. For example, small private investors and the grid operators have emerged as the key participants in biomass and small and medium hydropower projects that involve small investments.37 An upward adjustment of the FiT for biomass-based electricity in 2009 and again in 2010 unlocked private investment flows in biomass power generation and generated a total of US$1.3 billion of private investments in 422 MW of biomass power generation capacity.57 20
The World Bank – AusAID
Green Investment Climate Country Profile - China
Top 5 Growth in RE Capacity China 92% Turkey 85% Brazil 49% Italy 47% Argentina 46%
Top 5 Growth in Investment Italy 92% Indonesia 85% China 49% Australia 47% India 23%
Source: Pew Charitable Trust, 2012.43
Figure 8: Private Investment in New or Additional RE Capacity (US$ million)
US$ million
Table 10: Global G20 Clean Energy Investment, 2006-2011
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: World Bank, 2012.
61
During the 2001-2011 period, the private sector contribution to RE development amounted to US$8.6 billion, adding 6.9 GW in renewable installed capacity. Hydroelectric power was responsible for 3.6 GW of generation capacity. Privately developed wind farms added another 2.7 GW, at a total cost of US$3.8 billion. Private sponsors operating out of Hong Kong were responsible for 31 percent of the privately developed wind farms. Solar plants appear significantly less popular among private investors and represented a mere 214 MW, at a cost of US$545 million. As in the case with private sector participation in biomass power generation, all but one solar project was built after the implementation of the FiT in 2010.
Private Participation in Energy Efficiency During the 11th FYP, 79 percent of the investments in energy conservation came from the private sector, 19.1 percent from the public sector and 1.9 percent from the international community. Industrial firms, building owners, banks and the equity market were the main players in energy conservation investments. Investment of industrial firms Figure 9: Breakdown of RE Investments amounted to US$53.5 billion, representing 44.4 (US$ million) 172.7, 2.3% percent of the total private investments. Building owners invested US$1.9 billion, or 1.6 percent 2164.7, 28.9% 3246.2, 43.3% of the overall private investments. Investments from banks and the equity market were US$38 billion and US$1.6 billion, contributing 38 percent and 1.3 percent of the total private investments, respectively. 343.5, 4.6%
Unlike the “vital industries and key fields” where foreign and private sector access has been explicitly or implicitly restricted, the green sector has been repeatedly marked in the Government’s key policy documents as a fast-lane for foreign and private investments:
542.5, 7.2%
n Biomass n Hydro, Large (>50MW) n Hydro, Small (<50MW) n Solar, PV n Waste n Wind, Onshore
1026.6, 13.7%
Source: World Bank, 2012.61 The World Bank – AusAID
21
Green Infrastructure Finance
■■
The 11th FYP, which had promised greater scrutiny on foreign investment projects, had called for special attention on the environment and EE during evaluation of investments by the Government;
■■
The 12th FYP has established clean energy technology as one of the seven strategic industries that the Government aims to promote; and
■■
China’s newly-updated Foreign Investment Catalogue has also put clean technology under the “encouraged” category for foreign investment. Several lower technology and lower value-added sectors have been removed from the “encouraged” category in the revised catalogue.
22
The World Bank – AusAID
Green Investment Climate Country Profile - China
7. Concluding Remarks
O
ver the last three decades, China has experienced remarkable growth, transforming the country into the second largest economy in the world. The growth, largely driven by heavy industry and export oriented manufacturing, has also made China the largest energy consumer as well as the largest emitter of greenhouse gasses (GHGs) in the world. This has come at a steep price to its environment and as the economy continues to grow, the environmental challenges will inevitably escalate. Given the size of its economy and continued growth in energy consumption, China has a critical role in finding solutions to mitigate global climate change as well as address the related local environmental consequences. The Government has taken actions to address these issues. China’s action plans put forth the objectives of enhancing energy security and enhancing industrial competitiveness through more efficient use of energy resources.
Over the recent years, China has become a major player in the efforts to curb the effects of climate change through the introduction of many environmental policies and programs. One of China’s significant achievements has been in the area of energy intensity reduction. In the 11th FYP, China laid out ambitious targets of reducing energy intensity by 20 percent between 2005 and 2010. To achieve this target, China implemented top-down administrative measures and incentives schemes including shutting down many small, outdated and inefficient industrial and thermal plants, retrofitting facilities in energy-intensive industries, improving EE of buildings, implementing appliance standards, etc. China’s EE investments totaled around ¥2 trillion (over US$290 billion) during the 11th FYP. These efforts reduced the energy intensity by a reported 19.1 percent.62 Efforts to boost EE have continued with the 12th FYP (2011-2016). The plan called for a further 17 percent reduction in carbon intensity and a 16 percent reduction in the energy intensity of the economy. To this end, the 11th FYP’s Top-1,000 Energy-consuming Enterprises Program was scaled up to target more than 10,000 firms. Emphasis is being placed on the Ten Key Energy Conservation and Emission Reduction Projects, improving the quality of administrative measures, introducing more market-based tools to promote EE, and closing small-sized coal-fired power plants. In addition, the Government took steps towards launching cap-and-trade pilots and is considering other measures, such as a carbon tax. The NDRC has chosen seven pilots (in Beijing, Tianjin, Shanghai, Shenzhen, Chongqing, Hubei and Guangdong), which are expected to help create a knowledge base for building carbon markets at the regional level and ultimately to develop a national unified carbon market during the 13th FYP. China has also noticeably intensified its efforts in RE. During the 11th FYP implementation period, RE markets were established, renewable resource evaluations were completed, and many renewable projects were implemented. China achieved and even exceeded its RE targets during the 11th FYP period, with average annual growth rates in wind and solar installed capacity reaching 89.7
The World Bank – AusAID
23
Green Infrastructure Finance
and 62.8 percent, respectively. In a continuing effort to this end, China has set ambitious targets for 12th FYP and in 2012 alone invested a record US$68 billion in RE. According to the Plan, non-fossil fuel generation accounts for 11.4 percent of total primary energy mix by 2015 and 15 percent by 2020. Moreover, China had aggressively pursued CDM projects. It has emerged as a global leader in developing and exporting some clean energy technologies. In early 2013, NDRC issued a plan to accelerate the country’s geothermal development. In May 2013 the Chinese President Xi Jinping declared ‘ecological progress’ a priority.63 The MOF announced that it will introduce a set of new environment-related taxes, including consideration of a carbon tax. In an attempt to curb the number of old vehicles on the road and enforcing higher emission control levels for new vehicles in the city, Beijing announced to launch the long-awaited China V emission standard to replace the more lenient China IV standard which was introduced in 2008. According to Xinhua News Agency, since 2012 China has drawn up 54 national standards regarding EE, stipulating usage restrictions on sectors such as cement, coal, rare earth elements and chemicals, and has imposed basic standards in related management systems.64 Despite these accomplishments, China faces steep energy-related environmental challenges. Coal remains king in the country’s primary energy consumption and, with one fifth of the world’s population, China accounts for nearly half of the world’s coal consumption.65 During 2000-2011, despite concerted efforts in stemming energy intensity and scaling up RE, China’s consumption of coal more than doubled from 1.5 billion tons to 3.8 billion tons. In addition, China has to import more than half its oil.66 In the winter of 2012-2013 the widely reported heavy haze and smog descended over northern and eastern China was a stark reminder of the challenges ahead, including the health related consequences of insufficient actions. Along with coal-fired energy production, vehicle emission is another primary cause for the heavy smog. In an attempt to address this issue, China has recently imposed stringent fuel economy standards that would decrease fuel consumption to 6.9 and 5.0 liters per 100 kilometers by 2015 and 2020, respectively.67 China is planning to introduce ultra-low sulfur fuels (max of 10ppm) by the end of 2017. It also aims at improving fuel quality, scrapping high-emitting vehicles by the end of 12th FYP and limiting vehicle usage based on pollution levels.68 In pursuing green development, China enjoys a number of unique advantages. China has a large domestic market to scale up green sectors and an abundant natural endowment of resources for clean energy. It also has capital (including human capital) to invest in the green sectors. However, at the same time, China also faces unique challenges in the next decades. The incentives for environmental protection are weak and a competitive market environment for green industries is lacking. Monitoring and enforcement of standards remain weak, especially at the local level. Coordination between sectors, including between the Government and the private sector, as well between different levels of government, is also challenging in this large country with diverse local capacities. There is scope for improvement in coordinating vertically between the central state and provinces and horizontally, between different agencies and across jurisdictional boundaries. Finally, the
24
The World Bank – AusAID
Green Investment Climate Country Profile - China
Government could encourage different regions to provide greater environmental protection incentives for local governments. Many reports have for some time concluded that China is at an important crossroad, needing to rationalize the trade-off between the continued reliance on lowest cost energy to drive its industrial competitiveness and the consequences of environmental degradation. Chinaâ&#x20AC;&#x2122;s concerted efforts demonstrate how tough the challenge is to overcome. Deeper EE improvements and scaling of commercial RE are needed. Going forward, the Government will need to continue strengthening the quality of its administrative programs and balance them more with market-based tools. One measure could be to explore options to explicitly price both local and global externalities in order to level the playing field for new entrants in green technologies. Besides continuing its efforts to make further improvements on the EE front, the Government has to find the right policy mix to significantly alter its primary energy mix and reduce its dependence on fossil fuels, especially coal. Moving forward on a national cap-and-trade regime, and imposing carbon tax and other resource taxes are options under consideration. Whatever the mix, China should ensure that RE, EE and carbon emissions policies are consistent and coordinated.
The World Bank â&#x20AC;&#x201C; AusAID
25
Green Infrastructure Finance
8. Summary of Policy Instruments Below is a summary table of renewable energy, energy efficiency and market-based instruments for seven selected East Asia and Pacific countries. China
Korea, Rep. of
Indonesia
Philippines
Tax Incentives
●
●
●
Carbon Tax
●
Capital Subsidy/Grants - RE
●
●
Policy Distortions
●
Feed-in Tariff
●
●
Domestic
●
●
Foreign
●
●
●
●
Renewable Energy
Concessional Financing
Partial Risk Guarantee Renewable Portfolio Standard
Energy Efficiency & Green Tech
Market Based
Malaysia
●
●
●
●
●
●
●
●
●
●
●
●
●
●
● ●
●
●
● ●
●
●
●
●
●
●
●
●
Capital subsidy/Grants - EE
●
●
●
●
●
●
Domestic
●
●
●
●
●
●
Foreign
●
●
●
●
●
●
Concessional Financing
Partial Risk Guarantee
●
Green Labeling
●
Awareness Campaigns
●
●
●
●
CDM
●
●
●
Carbon market
●
●
●
Cap-and-trade scheme
●
●
● Full implementation ● Limited scale and/or early stage implementation ● Existing barriers
26
Vietnam
Tax Incentives
Singapore
The World Bank – AusAID
●
●
●
Green Investment Climate Country Profile - China
9. Annex Table of Contents 9.1 Policies, Objectives, and Targets...................................................................................................... 28 9.2 Financial and Economic Instruments............................................................................................... 36 9.3 Programs and Institutions................................................................................................................ 41 9.4 Regulatory Environment.................................................................................................................. 47 9.5 Supplementary Materials................................................................................................................. 49
The World Bank â&#x20AC;&#x201C; AusAID
27
Green Infrastructure Finance
9.1 Policies, Objectives and Targets Overarching Policies • Five-Year Plans (FYP) • National Climate Change Program and China’s Policies and Actions for Addressing Climate Change • Commitments to Reduce Emissions Within the Framework of the Copenhagen Accord • Green Industrial Strategy
Five-Year Plans (FYP) of People’s Republic of China are developed by the Communist Party of China through plenary sessions of the Central Committee and the NPC. The party plays a leading role in mapping strategies for economic development, setting growth targets, and launching reforms. In the last two FYPs an increasing emphasis has been placed on energy conservation, security, and sustainable development: Under the National 11th FYP, the Government introduced environmental targets, including a 20 percent energy intensity target (by 2010) and a 15 percent RE target (by 2020). Of the 18 specific targets included in the 11th FYP, seven were related to resources and the environment. Many of these targets were achieved, including: (i) the water use reduction target, which was exceeded; (ii) the energy consumption target, which was met; and (iii) the deforestation trend, which was reversed.50 The National 12th FYP included ten key chapters addressing sustainable development that are based on the following principles: ■■
Moving to “greener” economic growth;
■■
Reducing the energy intensity of the economy through energy conservation and energy intensity reduction policies;
■■
Reducing the GHG content of the energy used by increasing the share of RE in primary energy supply; and
■■
Expanding carbon sequestration.69
In addition to the National 12th FYP, specific policies were prepared for specific industries or sectors. These included: ■■
28
The 12th FYP for National Energy Science and Technology Development, which aims to provide technical support for the implementation of the 12th FYP for energy development and strategic development of new industries.
The World Bank – AusAID
Green Investment Climate Country Profile - China
■■
The 12th FYP for Coal Industry, which aims to make progress in coal industry layout adjustment and exploitation order regulation. It also plans to further centralize production.
■■
The 12th FYP for Coal-Bed Methane (CBM or Mine Gas) Development and Utilization, which sets a target of CBM output to reach 30 billion m3 and gas generator installed capacity to reach 2.85 GW by 2015. Under the plan, newly proved geological reserves should reach 1 trillion m3, and construction will be completed of two CBM industrial complexes at Qinshui Basin and at the east margin of Erdos Basin.
■■
The Development Plan for Shale Gas (2011-2015) includes an assessment of shale gas potential and the selection of 30-50 shale gas prospects and 50-80 favorable target areas nationwide. The government set a 6.5 billion m3 shale gas target by 2015.
■■
The 12th FYP for Renewable Energy Development mandates that, by 2015, the newly RE installed capacity reaches 160 GW. Of the 160 GW, 61 GW, 70 GW, 20 GW and 7.5 GW should come from the conventional hydroelectric power, wind power, solar power and biomass power, respectively. The proportion of RE generation to total gross generation should be at least 20 percent.
■■
The 12th FYP for Hydropower Development mandates that, by 2015, the total hydropower installed capacity reaches 290 GW with a pumped storage power capacity of 30 GW.
■■
The 12th FYP for Wind Power Technology Development estimates that the installed capacity of wind power will reach 100 GW, while the annual energy output will reach 190 billion KW. The proportion of wind power to gross generation will exceed three percent during the plan period. Offshore wind power capacity is expected to reach 5 GW.
■■
The 12th FYP for Biomass Energy Development states that, by 2015, the annual utilization of biomass energy will exceed 50 million tons of standard coal. Installed capacity for biomass energy power generation will total 13 GW, while the annual power electricity production will total approximately 78 billion kW. The annual gas supply of biomass energy will reach 22 billion m3. Biomass molding fuel will reach 10 million tons and bio-liquid fuel will reach 5 million tons. Large scale demonstration projects of new technology encompassing comprehensive utilization of biomass energy will be constructed.
■■
The 12th FYP for Solar Power Generation Development mandates, by 2015, the installed capacity of solar power generation to exceed 21 GW, with an annual power generation of 25 billion kWh. The focus is placed on the distributed PV power generation system.
■■
The 12th FYP for Energy Conservation and Environmental Protection Industry estimates that, by 2015, the total value of energy conservation and environmental protection will reach ¥4.5 trillion, or two percent of GDP.70 Meanwhile, the market share of high efficient energy conservation products will increase from 10 percent to 30 percent. By 2015, twenty professional energy contract management companies and 50 environmental protection companies with value over ¥1 billion in annual production will be formed.
The World Bank – AusAID
29
Green Infrastructure Finance
National Climate Change Program and China’s Policies and Actions for Addressing Climate Change set the emission intensity target relative to the level of economic activity. This implies that the emissions in absolute terms will depend on future GDP growth.xi This approach helps alleviate concerns about the effect of emission reduction commitments on economic development.
Commitments to Reduce Emissions Within the Framework of the Copenhagen Accord were made by China in 2009. The core target is a 40-45 percent reduction of the CO2 intensity from 2005 to 2020. In addition to the emission intensity target, China also made a commitment to increase its share of non-fossil fuels in primary energy consumption to approximately 15 percent by 2020. Until 2020 China plans to increase its forest coverage by 40 million ha. Moreover, China plans to increase forest stock volume by 1.3 billion m3 from the 2005 levels.
Green Industrial Strategy is a central component to the 12th FYP. The strategy prioritizes the development of seven new strategic industries. These include: (i) alternative energy; (ii) biotechnology; (iii) new generation information technology; (iv) high-end equipment manufacturing; (v) advanced materials; (vi) alternative fuel cars; and (vii) energy saving and environmental protection. The total value added output of the new industries is expected to account for eight percent of China’s GDP by 2015 and 15 percent by 2020. The Government will provide substantial amounts of public investment in these sectors over the next five years and this is expected to leverage hundreds of billions dollars of additional investments from both the private sector and local governments.xii
Renewable Energy Policies • Renewable Energy Law • Medium and Long-term Development Plan for Renewable Energy • Administrative Provisions for Renewable Energy Power Generation • Provisional Administrative Measure on Pricing and Cost Sharing for Renewable Energy Power Generation • Tentative Management Method for Renewable Energy Development Special Fund • Management Methods by Power Grid Enterprises Purchasing Renewable Energy Electricity
Renewable Energy Law was first promulgated by the NPC in February 2005. It became effective in January 2006, making China the first developing country to implement such a law. The Law explicitly states that the development and the usage of RE is a priority in energy development. The Law proposed a comprehensive RE policy framework, and institutionalized a number of policies and instruments for China’s RE development and utilization. The Renewable Energy Law acts as the umbrella legislation, while various ministerial regulations and measures support the implementation details. xi These engagements were further recognized by the United Nations at the Cancún Summit in December 2010. Nevertheless, they remained voluntary. China and other countries have resisted the idea of any international control over their domestic actions based on the concept of national sovereignty. GHG inventories can only be monitored and audited at the international level when mitigation actions benefit from international funding. xii For more details see China’s 12th FYP and Provisional/Indicative Sectoral Targets.
30
The World Bank – AusAID
Green Investment Climate Country Profile - China
A series of regulations have been established based on the Renewable Energy Law. The Law authorizes the regulatory department of the State Council to approve RE purchase prices (wholesale prices), or grid connection tariffs of RE power generation projects with consideration for promoting RE development and utilization. It also provides that the additional cost of purchasing RE-based electricity and the cost of grid connection for transmitting such electricity may be passed on to customers as retail electricity charges. An update to the original Renewable Energy Law 2005 was adopted by the NPC in December 2009 which took effect on April 1, 2010. The amendment contains two main provisions: ■■
More detailed planning and co-ordination is required, including co-ordination of renewables with overall power sector development and transmission planning, and co-ordination of local/provincial level development with national development plans.
■■
The Mandatory Connection Policy provisions were strengthened to guarantee the purchase of all renewable power generated by the electric utilities. Previously, utilities were only obligated to do so if the grid generated sufficient power demand. At present, utilities must buy the RE generated power under all circumstances.
Medium and Long-term Development Plan for Renewable Energy established specific targets for each type of RE. The plan set a mid-term target of raising the share of RE consumption. The plan also establishes: (i) number of national policies and measures for the establishment of a sustainable and stable market demand for RE; (ii) the improvement of the market environment; (iii) the construction and extension of grids; (iv) the development of renewable power tariff and cost sharing policies; (v) the creation of additional fiscal input and tax incentives; and (vi) the acceleration of technology improvement and industry development.
Administrative Provisions for Renewable Energy Power Generation were issued by the NDRC. The provisions specify the standards for administration of RE power generation and the roles of power generation and grid enterprises in the development and utilization of RE.
Provisional Administrative Measure on Pricing and Cost Sharing for Renewable Energy Power Generation were issued by NDRC shortly after the Renewable Energy Law was passed. This measure provides the general principles, pricing guidelines and cost sharing mechanisms of RE projects approved by the Government from January 2006.
Tentative Management Method for Renewable Energy Development Special Fund was formulated and put forth by the MOF in June 2006. This policy includes, among other things, assistance priorities, applications for assistance guidelines, their screening and approval and financial management. The special fund provides grants and subsidies covering interest on loans, and gives priority for the development and utilization of three major RE sources.
The World Bank – AusAID
31
Green Infrastructure Finance
Management Methods by Power Grid Enterprises Purchasing Renewable Energy Electricity was issued in July 2007 by the SERC. Previously, power grid enterprises were required to purchase all RE electricity without any relevant administrative system. This establishes an administrative system to monitor the purchase of RE based electricity by power grid enterprises.
Energy Efficiency Policies • Reduction Target for Energy Intensity • Energy Conservation Law • Monitoring and Evaluation Approaches for Energy Saving and Emission Reduction Implementation • Notice for Reduction of Export Taxation Return of Some Commodities • Guidelines on Promoting the Energy Performance Contract and the Development of the Energy Saving Service Industry • Temporary Measures for the Management of Fiscal Reward Fund • State Council Notice on Further Strengthening Elimination of Outdated Production Capacity • Notice on Clean-up Preferential Electricity Prices on High Energy-consuming Enterprises • Industrial Energy Efficiency and Green Development Special Actions
Reduction Target for Energy Intensity was adopted in 2005. The target indicated the importance of EE measures to the Government and made EE one of the highest national priorities. It was set at 20 percent from 2005 to 2010. The 12th FYP planned to further reduce energy intensity by 16 percent from 2010 to 2012. To achieve this goal, the Government has adopted drastic, top-down administrative measures including holding provincial leaders accountable for achieving assigned energy saving targets, and closing down thousands of outdated and inefficient power and heavy industry plants. Small plants were also consolidated to improve efficiency and restrictions were introduced to discourage the production and export of energy intensive products, such as steel and cement. The Government also provided strong financial incentives, including US$20 billion from the Central Government in 2006-2009, with additional funds from provinces.
Energy Conservation Law was initially introduced in November 1997. However, the law was not updated by NPC until 2007. The updated Energy Conservation Law became effective April 1, 2008. The updated Energy Conservation Law prioritizes energy saving as a basic national policy. It clarifies the energy conservation regulatory system and places energy conservation performance as one of the criteria for measuring the performance of local governments. The new Energy Conservation Law clarifies policies on industrial energy saving and adds new regulations for buildings, the transportation sector and public institutions. The new Energy Conservation Law provides a legislative foundation for energy conservation in China.
Monitoring and Evaluation Approaches for Energy Saving and Emission Reduction Implementation were issued by the State Council in 2007. They establish the requirements for a unified and scientific system to collect, monitor and evaluate data on energy conservation and
32
The World Bank – AusAID
Green Investment Climate Country Profile - China
emission reduction. They also emphasize that performance in energy conservation and emission reduction represent a crucial criterion for executive performance and that officials would be reviewed for non-compliance according to an accountability system.
Notice for Reduction of Export Taxation Refund of Some Commodities was approved by State Council in June 2007. The notice canceled the export taxation refund of energy intensive, pollution intensive and resource intensive commodities. It also indicates that the Government will charge an export tariff on energy commodities in the near future.
Guidelines on Promoting the Energy Performance Contract and the Development of the Energy Saving Service Industry were published in 2010 by General Office of the State Council on behalf of NDRC and other related institutions. The guidelines exempt: (i) sale tax of EPCs implemented by ESCOs; (ii) income tax for the first three years; and (iii) half of the income tax for the next three years for ESCOs. They also waive the value added tax of the assets that ESCOs transfer to consumers in EPCs. The guidelines also propose to include EPCs into the central budget investment and the central energy-saving and emission reduction fund.
Temporary Measures for the Management of Fiscal Reward Fund set the reward amount and funding sources given to the energy performance contract projects. Temporary measures were published by the State Council in 2010. They clarify that the fiscal reward fund will be allocated by the financial departments, both at central and provincial levels. For the Central Government the reward amount is ¥240/ton of standard coal and for provincial governments the reward amount is no less than ¥60/ton of standard coal. Provinces can raise their reward level.
State Council Notice on Further Strengthening Elimination of Outdated Production Capacity was issued in 2010. The notice makes detailed targets for eliminating outdated production capacity, including a 50 GW small power plant, small-sized boilers and furnaces used in coke, iron, metal, building and other industries. The notice will affect small production units that process 200 million tons of coal.
Notice on Clean-up Preferential Electricity Prices on High Energy-consuming Enterprises was issued in 2010. The policy requires canceling preferential electricity prices offered to high energy-consuming enterprises.
Industrial Energy Efficiency and Green Development Special Actions were published by the Ministry of Industry and Information Technology (MIIT) in 2013. The actions aim to establish 30 GW of efficient motors and outdate 40 GW of inefficient motors, as well as promote efficient motor manufacturing and demonstration projects in the industrial sector. Additionally, they also encourage the green development of lead related industries.
The World Bank – AusAID
33
Green Infrastructure Finance
Environmental Laws Liability Rules • Environmental Protection Law • Water Pollution Prevention and Treatment Law • Air Pollution Prevention and Treatment Law • Law on the Prevention and Control of Environmental Pollution by Solid Waste • Environmental Impact Assessment Law • Notice Addressing the Issue of Land Contamination • New Tort Liability Law
Environmental Protection Law is the foundation of all Chinese environmental laws and regulations. The law is enforced through other major environmental laws.71
Water Pollution Prevention and Treatment Law requires companies to obtain permits for sites that discharge wastewater to surface water and wastewater treatment plants. It requires compliance with state and local discharge standards and requires facilities that discharge pollutants directly or indirectly into water to register with the local Environmental Protection Bureau (EPB).
Air Pollution Prevention and Treatment Law requires companies that discharge pollutants into the air to register with the local EPB and to report on the categories, quantities and concentrations of pollutants discharged. In addition, the law obliges companies to provide technical information concerning the prevention and control of air pollution.
Law on the Prevention and Control of Environmental Pollution by Solid Waste requires the sites generating hazardous waste that are listed in the Hazardous Waste Catalogue to use licensed vendors to transport and dispose waste. It stipulates that polluters are responsible for the pollution they emit.
Environmental Impact Assessment Law requires new, expanded or modified projects to submit several documents. Those documents are: environmental impact report, environmental impact analysis or an environmental impact assessment registration. All documents are issued by the local or Central Government environmental authority for approval prior to commencing a construction project.
Notice Addressing the Issue of Land Contamination was issued by the former State Environmental Protection Administration (SEPA). The notice states that polluters will be held liable for the treatment of land pollution and the restoration of contaminated land. Entities that generate hazardous wastes must have their land tested and analyzed by environmental monitoring authorities before they terminate operations and change the land use purpose.72
34
The World Bank – AusAID
Green Investment Climate Country Profile - China
New Tort Liability Law was approved in December 2009 by the Standing Committee of the NPC. The law increased the liabilities for environmental pollution. The Tort Liability Law became effective on July 1, 2010. Chapters 8 and 9 of the Law specifically address liability for environmental pollution and clarify certain principles which have existed in various environmental laws, regulations, and policies issued earlier. The new law may heighten the exposure of companies to environmental tort claims notwithstanding full compliance with China’s environmental laws and regulations.73 Under the Tort Liability Law, a company that pollutes the environment will be strictly liable in tort for damage caused and will bear the burden of proof in respect of causation. Some of the main environmental-tort issues addressed in the Tort Liability Law include triggers of liability for pollution, evidentiary burdens, and the apportionment of liability.
Regulations • Green Credit Guidelines • Guidelines on Credit Underwriting for Energy Conservation and Emission Reduction • Local Environmental Regulations
Green Credit Guidelines were issued in 2012 by the CBRC. The guidelines were developed based on the Banking Industry Regulation and Administration Law and Commercial Banking Law, with the purpose of promoting green credit growth among financial institutions. The guidelines apply to policy banks, commercial banks, rural cooperative banks and rural credit unions. The guidelines require banks to reduce their lending to energy-intensive industries with high levels of pollution. The new guidelines also encourage banks to evaluate and classify the environmental and social risks of their client businesses and integrate the analyses and ratings into their overall credit risk management processes.xiii Guidelines on Credit Underwriting for Energy Conservation and Emission Reduction were put forth in 2007 and preceded the Green Credit Guidelines. The CBRC has long been active in raising awareness on financing issues within the banking sector.
Local Environmental Regulations are applicable jurisdictionally and in some cases may place additional requirements on companies.
xiii E&S risks as used in the Guidelines refer to potential impact and risks brought to the environment and communities by banks’ clients and their primary supply chains through construction, production and operational activities. This includes such E&S issues as energy consumption, pollution, land, health, safety, resettlement, eco-system protection, climate change, etc.
The World Bank – AusAID
35
Green Infrastructure Finance
9.2 Financial and Economic Instruments Fiscal Incentives and Direct Subsidies • Corporate Income Tax (CIT) • Refundable Value Added Tax (VAT) • Reform of the Resources Tax System • Carbon Tax • Two National Solar Subsidy Programs
Corporate Income Tax (CIT) incentives come in different forms and cover a broad array of activities: ■■
A reduced CIT rate of 15 percent is available to qualified advanced and new technology enterprises in fields of solar, wind, biomaterial, and geothermal energy;
■■
The CDM Fund is exempted from CIT on proceeds from CERs, donations, and interest income. CER income is CIT exempt for regular private enterprises;
■■
A full exemption of CIT for three years followed by another three years of 50 percent CIT reduction is provided to specific CDM projects (including HFC, PFC and N2O projects), qualified environmental protection and energy or water conservation projects; and
■■
CIT deductibles include: 10 percent of capital investments in qualified equipment, and 150 percent of qualified R&D expenses.
Refundable Value Added Tax (VAT) is offered on: (i) 50 percent on wind power sales; (ii) 100 percent on electricity generated from bio-diesel oil; (iii) goods produced from recycled materials or waste residuals; and (iv) sales from recycled resources. Sales from sewage treatment services are exempt from VAT.
Reform of the Resources Tax System will be conducted under the 12th FYP. In general, the tax reforms will shift from volume-based taxes, which were set several years ago and usually at a very low level, to value-based taxes that will fluctuate alongside several commodity prices. The new system was implemented for oil and gas in late 2011, and is expected to be extended to coal and other commodities. In November 2012, the MOF revealed that in the future water would also be charged the resource tax.
Carbon Tax has received much attention, since proposals for a new environmental taxation system, (drawn up by the MOF’s Financial Science Research Institute) have already been submitted for review and are expected to be implemented before the end of the 12th FYP period.74 The proposals include establishing an independent tax on GHG emissions that would focus on the major
36
The World Bank – AusAID
Green Investment Climate Country Profile - China
consumers of coal, crude oil and natural gas. The proposals also called for the tax to be levied as early as 2012.xiv
Two National Solar Subsidy Programs were introduced in 2009.xv Those are: ■■
The BIPV Subsidy Program was announced in April 2009. China’s Ministry of Housing and Urban-Rural Development introduced a stimulus plan for BIPV applications, offering ¥20 per watt for construction material and component-based BIPV projects, and ¥15 per watt for rooftop and wall-based projects. By July 2009, only three months after the announcement of the program, 111 rooftop-based or BIPV projects with a combined capacity of 91 MW had been allocated with subsidies totaling nearly ¥1.2 billion.
■■
The Golden Sun Demonstration Program was announced in July 2009. The MOF, Ministry of Science and Technology (MOST) and the NEA of NDRC, introduced the Golden Sun Demonstration Project. This aimed to facilitate the growth and expand the scale of the PV power generation industry through fiscal subsidies, scientific and technological support, and market incentives to accelerate the industrialization of PV technology and enable large-scale development of the PV industry. The Program provides upfront subsidies for utility-scale solar farms exceeding 300 kW, up to a total of 680 MW for qualified demonstrating PV projects from 2009-2011. By December 2010, 16 companies had won bids for suppliers of the Program. However, since 2013 the Golden Sun Program is not accepting new applications as a national PV FiT was being implemented.
Financial Measures • Feed-in Tariffs (FiTs) • Tariff Disincentives • Differential Electricity Price Policy • Renewable Energy Fund
Feed-in Tariffs (FiTs) for various low-emission technologies were introduced over the last several years. Those are: ■■
The Biomass FiT was adopted through the Renewable Energy Law and the subsequent Provisional Administrative Measure on Pricing and Cost Sharing for Renewable Energy Power Generation (implemented in January 2006). The biomass power generation project can either receive a subsidy of ¥0.25/kWhxvi or, when subject to competitive bidding, the bid winner’s price is capped by the local standard wholesale price;
xiv According to the National Solar Subsidy Programs, the carbon tax may begin at a rate of ¥10 (US$1.59) per ton of CO2, and gradually increase depending on a company’s emission levels. xv A reform of subsidy standards has been announced in 2013. xvi A price must be above the standard provincial wholesales price for desulphurization coal-fired generation in 2005.
The World Bank – AusAID
37
Green Infrastructure Finance
■■
In July 2009, China introduced a national FiT for wind with four levels at ¥0.51, 0.54, 0.58 and 0.61/kWh, corresponding to different wind resources in different regions;
■■
In August 2011, China announced its first nationwide FiT for solar projects. The FiT was established by NDRC and sets an on-grid solar power price of ¥1.15/kWh (about US$0.18/ kWh) for projects approved before July 1, 2012 and completed by year’s end; and ¥1.00/kWh (approximately US$0.16/kWh) for all others. According to NDRC, the solar power generation rates are expected to decrease to ¥0.75-1/kWh for centralized grid-connected PV projects and ¥0.35/kWh for decentralized grid-connected PV projects due to the rapid reduction of PV module and system prices.
Tariff Disincentives have been introduced to encourage power producers to phase-out small, inefficient, and high polluting coal-fired generation units. The policy, first introduced in 2007, lowered the on-grid electricity tariffs for small-sized coal-fired power plants over a period of two to four years. The policy was applied to all units less than 50 MW to 100 MW units that have been in service for more than 20 years, and to 200 MW units that have reached the end of their economic life. After on-grid tariffs for these aged and small-sized coal-fired power plants were lowered, the priority switched to more efficient plants for dispatching power generation. Outputs from the smallsized and aged plants were effectively reduced, and all were eventually taken out of service. This policy has significantly contributed to the structural upgrading of the generation sector to largesized and more efficient generation units.
Differential Electricity Price Policy was issued by State Council and NDRC in 2006. The policy requires placing a punitive electricity price on energy intensive industry, such as yellow phosphorus industry and zinc smelt industry, electrolytic aluminum, iron alloy, calcium carbide, caustic soda, cement and iron and steel. The electricity consumption of these eight industries will be 50 percent more, which means ¥0.2 per KW more than the general tariff. In 2010, NDRC further increased punitive electricity prices on energy intensive industrial enterprises. The electricity consumed by outdated enterprises will be charged a ¥0.1 per KW premium and the electricity consumed by restricted enterprises will be charged an additional ¥0.3 per KW.75
Renewable Energy Fund was established under the MOF as a part of the Renewable Energy Law 2005. Initially, the fund collected ¥0.004 (US$0.0006) per kWh nationally (with some customer classes exempt). The proceeds from the surcharge were used to fund government-supported RE projects and FiTs. However, the proceeds from the fund had not been able to keep pace with expenditure.76 The NDRC doubled the surcharges to ¥0.008 (US$0.0013) per kWh in December 2011. According to industry analysts, the total tariff surcharge is expected to exceed ¥20 billion (US$3.2 billion) by the end of 2012.
38
The World Bank – AusAID
Green Investment Climate Country Profile - China
Market-based Mechanisms • Clean Development Mechanism (CDM) • Carbon Markets • Capital Markets • Renewable Portfolio Standard (RPS)
Clean Development Mechanism (CDM) is governed by the United Nations Framework on Climate Change Convention (UNFCCC). CDM has been used to leverage public and private funding from developed countries for emissions reduction projects in China. The Government has successfully created a facilitating framework for CDM investors. China received 60 percent of the world’s issued CDM credits. It has also taken advantage of the CDM to raise public funds and to influence the development of projects which are consistent with its national policy goals through a tax differentiated by project type.77 However, under the new rules of the European Union, credits from CDM projects registered after 2012 will only be eligible for use in the bloc’s carbon market if they are located in countries defined as least developed countries or if the host country has signed a bilateral pact. The move was an attempt to divert clean energy investment to the world’s poorest countries and encourage advanced developing economies to start paying for their own emission reductions. Table 11: CDM Approved Projects by Scope Parameter Renewable Energy Energy saving and efficiency improvement Methane recovery and utilization Chemical pollutants reduction(HFC-23) N2O decomposition Fuels substitute Others Landfill burning power generation Afforestation and reforestation
Number of Projects 3,122
Average Annual Reductions (million ton CO2) 379.7
572 311 11 39 47 57 19 4
92.9 71.1 66.8 27.6 23.2 9.2 4.0 0.1
Source: Department of Climate Change, National Development and Reform Commission of China, 2012.78
Carbon Markets initiative was started in June 2008. The following years have seen the launch of several trading platforms.79 Nevertheless, only three of these have acquired significant importance: (i) the China Beijing Environment Exchange; (ii) the Tianjin Climate Exchange; and (iii) the Shanghai Environment and Energy Exchange. NDRC has chosen seven regional pilots including Beijing, Tianjin, Shanghai, Shenzhen, Chongqing, Hubei and Guangdong to establish local/regional level ETS. These pilots are expected to help create a knowledge base on building carbon markets at the regional level, and use that experience to build a national unified carbon market during the 13th FYP. All pilots are currently designing their
The World Bank – AusAID
39
Green Infrastructure Finance
regional ETS. While NDRC proposes a cap-and-trade scheme, each pilot may have leeway to adjust their trading scheme based on their own particular circumstances. The technical infrastructure at the basis of carbon markets is being built quite rapidly. Its most important element is the creation of a complete emissions statistical framework, which includes the ability to monitor the impact of energy conservation and emissions reductions policies. In parallel, China is also engaged in carbon-market capacity-building dialogues both bilaterally (e.g. with the European Union) and multilaterally (e.g. by applying to engage in the Partnership for Market Readiness a multilateral trust fund administered by the World Bank). Even if a unified Chinese carbon market remains distant, some experimental schemes can be implemented in the short term that can lead to innovative and interrelated measures to ensure China will meet its objectives.
Capital Markets (both domestic and international) are playing an increasingly important role in financing projects undertaken by Chinese firms. A significant portion of the Chinese firms that have issued IPOs on the NYSE and NASDAQ are in the green sectors, while the “new energy” sector has also attracted considerable attention among investors in the domestic stock exchange. Debt financing through bond issuance remains in its infancy. In 2011, ENN Energy Holdings Ltd. issued US$750 million equivalent of 10-year Eurobond at a coupon rate of six percent. In the same year, China Power New Energy Development Company Limited issued a ¥500 million denominated Eurobond with a coupon rate of 3.75 percent.
Renewable Portfolio Standard (RPS) was designed to ensure stable and sustainable market demand for RE. The Government plans to increase RE generation (non-hydropower) contribution to one percent and three percent of the total power generation by the end of 2010 and 2020. Additionally, generation companies, with installed capacity of more than 5 GW (i.e. Huaneng, Huadian, Guodian, China Power Investment and Datang are required to increase their contribution from non-hydropower renewable energies to eight percent of their total installed capacity by 2020). These companies have opted for wind power as it is the cheapest means to achieve scale and satisfy the targets.38
40
The World Bank – AusAID
Green Investment Climate Country Profile - China
9.3 Programs and Institutions Programs67 • Key Energy Conservation Projects • Top-1,000/Top-10,000 Energy-consuming Enterprises Program • Structural Optimization/ Small Plant Closures Program • Green Credit Policy Program • Pollution Prevention and Energy Efficiency Program (P2E2) • China Renewable Energy Scale-up Program (CRESP) • China Utility-based Energy Efficiency Program (CHUEE) • World Bank/Global Environmental Facility (GEF) China Energy Conservation Project Phase II • China Energy Efficiency Financing Project (CHEEF) • Financing and Equipment Leasing for Energy Service Companies
Key Energy Conservation Projects (2005-2010 and 2011-2020) were established in 2004 by NDRC as part of China’s Medium and Long-term Plan for Energy Conservation. These projects were aimed to increase EE through: (i) adjusting and optimizing the economic structure; (ii) promoting energy-efficient technologies; (iii)establishing a strict management system; and (iv) implementing effective incentive mechanisms. Later, this program became part of the 11th FYP to support the nation’s target to reduce energy intensity 20 percent by 2010. Ten Key Projects focused on: (i) coal-fired industrial boiler (kiln) retrofits; (ii) district cogeneration projects; (iii) waste heat and pressure utilization projects; (iv)petroleum conservation and substitution projects; (v) motor EE projects; (vi) energy system optimization projects; (vii) building energy conservation projects; (viii) green lighting projects; (ix) governmental agency energy conservation projects and energy saving monitoring and testing; and (x) technology service system building projects. The overall target was to save about 250 Mtce (excluding oil substitution) by the end of the 11th FYP. In addition, the energy intensities of major products in key industries are expected to be comparable to advanced international levels achieved at the beginning of the 21st century. In 2012, China’s State Council released the “Circular of the State Council on the Printing and Distribution of the 12th FYP for Energy Saving and Emission Reduction”, aiming to transform the mode of economic development, establish an energy-saving and environmentally-friendly society, and strengthen the capacity of sustainable development. The Circular updated the Ten Key Energy Conservation and Emission Reduction projects to include: (i) energy-saving renovation projects; (ii) energy-saving projects to directly benefit the people; (iii) management and promotional projects relating to contracting energy; (iv) model projects of energy-saving technology industrialization; (v) projects relating to the construction of urban sewage treatment facilities; (vi) projects for the prevention and control of
The World Bank – AusAID
41
Green Infrastructure Finance
water pollution in key valleys; (vii) desulfurization and denitration projects; (viii) projects designed for the prevention and control of livestock and poultry breeding pollution; (ix) model projects promoting a circular economy; and (x) projects which involve building energy-saving and emission reduction capacity. The overall target is to save about 300 Mtce by the end of the 12th FYP.
Top-1,000/Top-10,000 Energy-consuming Enterprises Program was launched by NDRC, National Bureau of Statistics and other governmental agencies in 2006. The program is one of the key initiatives aimed to help the country achieve the goal of 20 percent energy intensity reduction by 2010. As with the Ten Key Projects, the Top-1,000 Program set energy-saving targets for China’s 1,000 highest energy-consuming enterprises (defined as those enterprises from nine industrial sectors that consume 180,000 tce or more annually). The Top-1,000 Program includes large-scale enterprises in nine major energy-consuming industries.80 The goals of the Top-1,000 Program were to: (i) significantly improve the EE of these enterprises; (ii) reduce unit energy consumption to a national advanced level for all major products; (iii) have some enterprises attain either international advanced level or national leading level; and (iv) achieve energy savings of 100 Mtce in the 11th FYP period. In light of the big success of the Top-1,000 Program, NDRC, MIIT, and other 10 ministries have cooperated to expand the Top-1,000 Program to the Top-10,000 Program in the 12th FYP. The Top10,000 Program aims to cover two thirds of China’s total energy consumption, or 15,000 industrial enterprises that use more than 10,000 tce per year, and around 160 large transportation enterprises (such as large shipping companies), and public buildings that use more than 5,000 tce per year. The total number of enterprises covered by this program currently has reached to around 17,000. The target of the Top-10,000 Program is 250 Mtce of energy saving by 2015. To achieve the 16 percent energy intensity reduction relative to 2010, the total energy-saving target for China is 670 Mtce. This means the share of the energy-saving target of the Top-10,000 Program is 37 percent of the total energy-saving target. The key elements of the Top-10,000 Program include: (i) establishing energy conservation working groups in enterprises; (ii) implementing the target responsibility and accounting system; (iii) allocating targets to companies, plants and workshops; (iv) conducting energy audits and developing energy conservation plans, based on the Technical Principle of Energy Audits in Enterprises (GB/T 17166); (v) implementing energy audit systems; (vi) conducting EE benchmarking; (vii) establishing energy management systems following China’s energy management standard (GB/T 23331); (viii) expanding the energy managers training pilots; (ix) implementing energy utilization reporting systems; (x) continuing the phasing-out of backward technologies; (xi) accelerating energy conservation retrofits by allocating special funding for annual retrofits and cooperating with ESCOs; (xii) improving energy measurement and measuring instrument and encouraging companies to build energy management and control centers and to use automation and IT; and (xiii) establishing energy conservation incentive mechanisms.
42
The World Bank – AusAID
Green Investment Climate Country Profile - China
Structural Optimization/Small Plant Closures Program helped carry out the 11th FYP task by establishing a more rational structure of industries, products, and industrial organization as well as increasing the ratio of service sector value-added to total GDP of three percent. The program successfully closed 100 Mt of iron-making capacity, 55 Mt of steel-making capacity, and 250 Mt of cement-making capacity by 2010. Thousands of outdated and inefficient plants in the power and heavy industry sectors were closed under the program. The 12th FYP further plans to close 20 GW of small coal power plants, 48 Mt of iron-making capacity, 48 Mt of steel-making capacity, 370 Mt of cement-making capacity, 42 Mt of coking-making capacity, and 15 Mt of paper-making capacity. Additionally, 12th FYP also raises environment standards of tombarthite industry and requires outdating backward capacity.
Green Credit Policy Program was introduced in July 2007 by the CBRC, the MEP, and the People’s Bank of China (PBOC). International Finance Corporation (IFC) provides guidance to the CBRC on how to enhance monitoring and evaluation of the Green Credit Policy implementation.81 Moreover, the IFC supported the MEP with the “Green Credit Handbook”, “The International Experience in Promoting Green Credit: Equator Principles and IFC Performance Standards and Guidelines” and “The China Green Credit Policy Annual Report”.82 In 2008, MEP signed an information sharing agreement with CBRC, which indicated that information on environmental impact of firms would be recorded into the Credit System of the PBOC. Firms that disregard the environment law will be refused or will be required to return loans. The Green Credit Policy Program was able to reduce the growth of loans provided to energy intensive sectors by 3.3 percent by the end of 2011 vis-à-vis loans provided to other sectors. In early 2012, the CBRC issued the Green Credit Guidelines to promote green credit growth among Chinese banks and other financial institutions. The Guidelines require banks to carry out an evaluation of clients’ environmental risks when determining their access to credit, and to reduce funding to high energy consumption projects. While it’s still too early to assess the impact of the new guidelines, they do provide a clear policy direction for banks in terms of the approach to clean energy.
Pollution Prevention and Energy Efficiency Program (P2E2) uses Hong Kong’s legal and financial systems to mobilize international capital, the management and technology to provide solutions for China’s growing energy conservation and air, water and ground pollution problems. P2E2 uses the Asian Development Bank (ADB) or IFC loan guarantees (partial risk guarantees) and United States Export-Import Bank export credits and guarantees to enable commercial banks to make working capital loans, equipment leases and trade finance available to Hong Kong-based environment and energy service companies.
China Renewable Energy Scale-up Program (CRESP) launched by the Government, the World Bank and GEF in 2006 aims to fund policy research to scale up RE development. It also funds technology development and demonstration, mainly in wind power and biomass generation technologies. In the CRESP I project, GEF donated US$40 million, which induced ¥9 billion (about US$1.34 billion) investments in the country’s RE industry by 2011. The preparation of the CRESP II project is underway and, currently, the proposed project includes five components: (i) policy support; (ii) grid
The World Bank – AusAID
43
Green Infrastructure Finance
connection and technology design; (iii) technological progress; (iv) RE pilot demonstration; and (v) capacity building, investment support and project management.
China Utility-based Energy Efficiency Program (CHUEE) selects commercial banks to provide loans for EE equipment and projects.83 Bank lending is supported by an IFC risk sharing facility. By June 2009, the guarantee program had supported US$512 million in loans for US$936 million in projects, and a claimed GHG reduction of 14 million tons.
World Bank/Global Environmental Facility (GEF) China Energy Conservation Project Phase II is an international cooperation project in the field of energy conservation between the Government and the World Bank/GEF, to promote the EPCs mechanism and develop the ESCO industry in China.84, xvii The first phase of the project focused on three pilot ESCOs along with the establishment of the Energy Conservation Information Dissemination Center. Phase II has two main components: (i) the ESCO service component; and (ii) the ESCO Commercial Loan Guarantee Program. NDRCâ&#x20AC;&#x2122;s Project Management Office provides analyses of ESCO investment and energy savings. In addition to national support platforms (CHEEF), the Bank has continued supporting innovative financing business models at local levels by launching the Provincial Energy Efficiency Scale up Program in 2011. The program includes a GEF grant of US$13.4 million to Shandong, Jiangxi and Shanxi provinces to build capacities in energy conservation program implementation and policy development. It is complemented by a US$150 million Shandong Energy Efficiency Project that is piloting use of financial leases to promote EE projects.
China Energy Efficiency Financing Project (CHEEF) was approved by the World Bank in May 2008 and became effective in October 2008. The objective of CHEEF is to improve EE of medium and large-sized industrial enterprises in China, and thereby reduce their adverse environmental impacts. This is to be achieved through: (i) two International Bank for Reconstruction and Development (IBRD) loans of US $100 million each to EXIM Bank and Huaxia Bank; and (ii) GEF Grant of US$13.5 million for technical assistance to the Government and two participating banks. In June 2010, the World Bank approved an IBRD loan of US$100 million to Minsheng Bank to improve the EE of selected enterprises. In 2011, the CHEEF III provided an additional loan in the amount of US$100 million to scale-up the project. The CHEEF III has also expanded the targeted market segments from the industrial sector to the building sector and beyond. It has also broadened the sub-borrowers from large and medium-sized industrial enterprises to include all sizes of enterprises and ESCOs.
Financing and Equipment Leasing for Energy Service Companies enabled US$4 billion in EPCs in 2010. By the end of August 2011, there were 260 financing and equipment leasing enterprises in
xvii EMCO signs an energy service contract with a customer who is willing to implement an energy conservation renovation project. It provides a comprehensive array of services to that customer, including an EE audit, project design, procurement services, engineering, training, operating and maintenance, and energy saving measurement associated with the project, etc. EMCO makes a profit by taking a share of the energy savings of its customer. Terms ESCO and EMCO are used interchangeably in China to denote a company that engages in energy performance contracting for EE investment projects in other entities. 44
The World Bank â&#x20AC;&#x201C; AusAID
Green Investment Climate Country Profile - China
China. Equipment leasing allows clients to avoid mobilizing upfront equity and debt financing and collateral requirements because the equipment is owned by the leasing company. Leasing companies also can play roles in project bundling arrangements.
Institutions • State Council • National Leading Group Dealing With Climate Change, Energy Conservation and Emission Reduction • Department of Climate Change • Department of Resource Conservation and Environmental Protection • National Energy Administration (NEA)
State Council is the highest decision-making body of the Chinese economy and has control over the development and operation of the power sector.85 Although it is not directly involved in regulating the power sector, the State Council oversees the responsibilities of the central and provincial government authorities and the institutional structure of the regulatory body and assigns functions and tasks to relevant government authorities. Multiple ministerial agencies, at the central government level, are involved into China’s energy regulation, including: the NDRC, the NEA, the State Owned Assets Supervision and Administration Commission, the MEP, MOLAR, the Ministry of Water Resources and the more recently created NEC. The MIIT, the MOF, the MOST, the Ministry of Transport, the Ministry of Commerce, PBOC and the Ministry of State Security are also involved.86
National Leading Group Dealing With Climate Change, Energy Conservation and Emission Reduction was established in June 2007. The group is led by the Premier and is mainly responsible for: (i) researching and drafting national strategies and policies; (ii) implementing measures on climate change, energy conservation and emissions reduction; and (iii) coordinating their implementation among participating agencies. The group also studies China’s international cooperation on climate change and international negotiations. It holds plenary sessions each year, generally in June or July, to review progress and set goals for the upcoming year.87
Department of Climate Change (under NDRC) is responsible for: (i) analyzing the impact of climate change on social-economic development; (ii) coordinating the formulation of key strategies, and policies dealing with climate change; and (iii) leading the implementation of the UNFCCC. In collaboration with other relative parties in international climate change negotiations, it is also responsible for coordinating and carrying out international cooperation in response to climate change and related capacity building. It is also responsible for organizing and implementing the tasks related to CDM, and implementing policies created by the National Leading Group Dealing With Climate Change, Energy Conservation and Emission Reduction.88
The World Bank – AusAID
45
Green Infrastructure Finance
Department of Resource Conservation and Environmental Protection (under NDRC) supports the National Leading Group Dealing with Climate Change, Energy Conservation and Emission Reduction. It is responsible for analyzing strategic issues related with the coordinated development of the economy, society, environment and resources. It is also in charge of formulating and implementing of measures concerning the conservation and comprehensive utilization of energy and resources, and the development of the circular economy. In addition, it coordinates key pilot programs on energy conservation and emission reduction (e.g. Top-1,000 Enterprises and the Ten Key Energy Conservation Projects), and promotion of new products, technologies and equipment.89
National Energy Administration (NEA) is responsible for the following tasks:
46
■■
Formulating and implementing energy development plans and industrial policies;
■■
Promoting institutional reform in the energy sector;
■■
Administering energy sectors including coal, oil, natural gas, power sector (including nuclear power) and RE;
■■
Planning for energy conservation, comprehensive utilization of resources in the energy sector;
■■
Guiding scientific and technological advancement;
■■
Carrying out the R&D of equipment and guiding the assimilation of imported equipment;
■■
Organizing key energy-related demonstration projects and promoting the deployment of new products, new technologies and new equipment;
■■
Examining fixed asset investment projects of the energy sector within national plans and annual plans in accordance with the authority stipulated by the State Council;
■■
Conducting energy forecasting and emergency preparedness;
■■
Launching international energy cooperation;
■■
Participating in the formulation of policies related to energy, such as finance and taxation, environment protection, and climate change;
■■
Making recommendations on energy price adjustment and imports and exports aggregate; and
■■
Supporting the NEC.90
The World Bank – AusAID
Green Investment Climate Country Profile - China
9.4 Regulatory Environment Procedures and Mechanisms • China’s Vehicle And Engine Emission Standards • Air Quality Standards • System to Measure Carbon Emissions
China’s Vehicle and Engine Emission Standards are issued by the MEP. In addition to National Standards, which are mandatory nationwide, Environmental Standards apply to industries that have an impact on the quality of the environment. In addition, local governments may impose local standards. China’s first emission regulations for motor vehicles became effective in the 1990s. In May 1999, the SEPA in collaboration with the MOST and the State Administration of Machinery Industry issued the Automobile Emission Pollution Prevention Policy, which specified the objectives of pollution control and the requirements for new car model development. China’s first national emission standards (China I), equivalent to Euro I standards, were enacted in 2000. They were upgraded in July 2004 by the SEPA to the Euro II standard, with Beijing and Shanghai as pilots. China III, equivalent to Euro III standards went into effect on July 1, 2007 with Beijing, Shanghai and Guangzhou as pilots. China IV, equivalent to Euro IV, was introduced in 2010. On December 3, 2012, SEPA required all new gas fuel ignition engines or cars, which were produced, imported, sold or registered in China, would need to reach the China V standards. Implementation of the national standards has experienced repeated delays. For instance, the Phase III emission standards for gasoline and gasoil were originally scheduled to be implemented nationwide by January 1, 2010, but took six months longer. In January 2012, MEP officially announced that the implementation of the China IV emission standard for heavy-duty diesel vehicles had been delayed from January 2012 to July 2013. This has led to some large metropolitan areas, including Beijing and Shanghai, adopting more stringent regulations on an accelerated schedule, ahead of the rest of the country. Beijing implemented the Euro IV standards for light-duty vehicles in 2008 and plans to introduce Euro V-based standards from 2012. In April 2012, the Beijing Municipal EPB released a draft plan of new emission standard which is said to be equivalent to the Euro V standard. The Euro V-based standard emission went into effect on March 1, 2013 in Beijing.
Air Quality Standards (that include PM 2.5) were passed in 2012 by the State Council. The standard will be implemented in major cities in 2012 and 2013 before extending it nationally in 2016.
The World Bank – AusAID
47
Green Infrastructure Finance
System to Measure Carbon Emissions for major industrial companies is being established by the National Bureau of Statistics. This is a crucial move to support the country’s plans to establish pilot carbon markets and a carbon tax.77
Regulatory Agencies • National Development and Reform Commission (NDRC) • State Electricity Regulatory Commission (SERC) • China Banking Regulatory Commission (CBRC)
National Green Technology and Climate Change Council (MTHPI) chaired by the Premier, held its first meeting in January 2010. The main function of this council is to streamline and coordinate the effort to drive green technology amongst the various ministries. Under the Council, eight working committees have been established, namely: (i) Human Capital; (ii) Industrial; (iii) Research and Innovation; (iv) Promotion and Public Awareness; (v) Transportation; (vi) Green Neighborhood; (vii) Green Growth; and (viii) Climate Adaptation.
National Development and Reform Commission (NDRC) is the leading regulatory body which oversees investments in power projects and sets electricity tariffs. NDRC and its local pricing offices approve PPAs. As a macroeconomic management agency under the State Council, NDRC’s functions are to study and formulate policies for social and economic development, to reform and maintain a balanced economic development, and to guide the restructuring of China’s economic system. The pricing department of NDRC is the ultimate authority on issues related to electricity tariff settings and their adjustments. On-grid electricity tariffs of new power projects normally are proposed by the provincial governments, reviewed by SERC, and approved by NRDC.
State Electricity Regulatory Commission (SERC) has supervised the electricity sector since 2003. However, in 2013, SERC was merged into the NEA to strengthen its function for monitoring and regulating the operations of the country’s power sector. Before the merger, SERC was responsible for promoting reforms of the power sector such as breaking up monopolies, supervising market competition, monitoring and supervising policy implementations (including electricity-pricing policies) and issuing licenses to operators.
China Banking Regulatory Commission (CBRC) is responsible for supervising banks related to green finance and green credit.
48
The World Bank – AusAID
Green Investment Climate Country Profile - China
9.5 Supplementary Materials 0.6
1.2
0.5
1.0
0.4
0.8
0.3 0.6 0.2
Elasticity
Energy ontensity (tce/1,000Y)
Figure 10: Energy Intensity Evolution, 1980-2010
0.4
0.1
0.2
0.0 -0.1 1980
1985
1990
1995
Source: Authors, 2012.xviii
2000
2005
Energy Intensity
0.0 2010
Incremental Energy Intensity
Figure 11: Total Primary Energy Supply Evolution 100%
80%
n Combustible Renewables and Waste n Geothermal, Solar, etc.
60%
n Hydro n Nuclear 40%
n Natural Gas n Oil Products n Crude Oil
20%
0%
1999
2009
2011
Source: International Energy Agency, 2012.91 xviii Authors compilation based upon the data acquired from “China Statistical Yearbook 1980-2011”.
The World Bank – AusAID
49
Green Infrastructure Finance
Table 12: Resources and Environment Goals and Targets of Chinaâ&#x20AC;&#x2122;s 12th FYP Indicator Guaranteed arable area Forest cover Forest cover rate Forest stock Increase in water efficiency coefficient in agricultural irrigation Reduction in water consumption per unit of industrial value added Reduction in energy consumption per unit of GDP Share of non-fossil fuels in total primary energy consumption Rate of decrease in CO2 emission per unit of GDP Reduction in emissions of major pollutants: Chemical oxygen demand Sulphur dioxide Ammonia nitrogen Nitrogen oxides
Nature Unit of Target million ha
2010 121.2
2015 121.2
Growth (%) 0
% Binding million Binding m3 Predictive
20.36 13,700 0.50
21.66 14,300 0.53
1.3 6 0.03
%
Binding
30
% %
Binding Binding
16 3.1
% %
Binding Binding
Sources: Communist Party of China, 2011; KPMG, 2011; and Morgan Stanley, 2011.92
50
The World Bank â&#x20AC;&#x201C; AusAID
8.3
11.4
17 8 8 10 10
Green Investment Climate Country Profile - China
Table 13: China’s 12th FYP and Provisional Sectoral Targets Sector/Area
Specifics
New energy industry
¥5 trillion Government investment in new energy sector by 2020
Energy saving and environmental protection industry
¥3 trillion investment in environmental protection sector by 2015
Alternative vehicles industry
¥100 billion Government investment in alternative-energy vehicles industry by 2020. Annual sales of one million units of new energy vehicles by 2015
Carbon and energy intensity targets
17% reduction of carbon intensity target by 2015
Energy saving and environmental protection sector to be worth ¥4.5 trillion by 2015
16% reduction of energy intensity target by 2015 8-10% reduction of pollutants targets by 2015
Carbon tax
Introduction of carbon tax Tax rate to start from ¥10 and increase to ¥40 per ton by 2020
Carbon market
Voluntary carbon trading system under 12th FYP
Power sector decarbonization
New thermal power plants capped at 260-270 GW next five years
Sectoral performance standards
10% energy intensity and pollution reduction target for oil and chemical industries by 2015
Vehicles fuel efficiency
30% reduction of fuel consumption and CO2 emissions by 2015 compared to BAU
Non-fossil fuel in primary energy consumption
To reach 11.4% by 2015
Power generation capacity
Breakdown of power generation capacity by 2015
Coal production capped at 3.8 billion tons for the next five years
Non-fossil fuel power generation capacity to reach 474 GW by 2015 Annual saving of coal and CO2 emissions in the power sector by 2015 Investment in RE
¥2-3 trillion in RE over the next 10 years: ¥1.5 trillion for wind and ¥200-300 billion for solar.
Investment in power sector
Total investment in the power sector to reach ¥5.3 trillion by 2015: ¥2.75 trillion on power generation and ¥2.55 trillion on grids
Grids
¥500 billion investment on UHV lines by 2015 ¥4 trillion investment on “smart grids” by 2020
High speed rail
¥3-4 trillion investment in high speed rail by 2015.
Innovation
R&D spending to reach 2.2% of GDP by 2015 R&D spending to reach 2.5% of GDP by 2020 Intensified overseas M&A by Chinese companies to acquire technology
Sources: E3G, 2011; National Development and Reform Commission of China, 2011; and State Council, 2011.93
The World Bank – AusAID
51
Green Infrastructure Finance
Mineral Resources Compensation Fee and Resources Tax for Oil and Gas is managed by the MOLAR. In 2012, the MOLAR issued a Notice of Collection of Mineral Resources Compensation Fee on Petroleum Projects with foreign investment. The compensation fee is imposed on the mineral right holders of petroleum contracts, which by law are Chinese national oil companies. Petroleum contracts signed before November 1, 2011 will be exempt from its application, but will still be subject to the resource tax. Prior to the Notice of Collection of Compensation Fee, the State Council issued Decree No. 605 to launch a new resource tax scheme. It took effect on November 1, 2011. The resources tax for oil and gas moved from volume-based (between ¥8.00 and ¥30.00/US$1.30 and US$5.10 per ton for crude oil) to a value-based tax set at 5-10 percent (less than five percent in actual operation) of the value of the oil and gas produced. It is equivalent to a tax increase of 10-20 times for crude oil.94,xix Prior to Decree No. 605, petroleum projects were subject to a royalty scheme based on oil and gas output.
Coal Tax and Production Cap represents an important sustainable development mechanism. Since 2004, the Government allowed increases in resource taxes on coal in most provinces. The surcharge ranges from ¥5–15/ton for steam coal, ¥10–20/ton for anthracite, and ¥15–20/ton for coking coal. In 2008, revenue from the surcharge amounted to ¥14.6 billion.95
xix However, the net impact of the resources tax on China’s oil companies is minimal because the Government offset this increase with separate changes to the windfall profits tax that is backdated to November 1, the day when the resources tax is changed. The effects of both changes largely balance out.Terms ESCO and EMCO are used interchangeably in China to denote a company that engages in energy performance contracting for EE investment projects in other entities.
52
The World Bank – AusAID
Green Investment Climate Country Profile - China
10. References 1
World Bank Data Bank. “GDP (current US$).” Accessed July 21, 2013. http://data.worldbank.org/indicator/ NY.GDP.MKTP.CD.
2
World Bank Data Bank. “Population, total.” Accessed July 21, 2013. http://data.worldbank.org/indicator/ SP.POP.TOTL.
3
World Bank Data Bank. “Urban population (% of total).” Accessed July 21, 2013. http://data.worldbank. org/indicator/SP.URB.TOTL.IN.ZS.
4
International Monetary Fund. “World Economic Outlook Database 2011.” Accessed July 21, 2013. https:// www.imf.org/external/pubs/ft/weo/2011/01/weodata/weoselco.aspx?g=2001&sg=All+countries.
5
Economist Intelligence Unit. “EIU Country Data.” Accessed July 21, 2013. http://www.eiu.com/site_info. asp?info_name=EIUcountryData&=entr.
6
World Bank Data Bank. “Inflation, consumer prices (annual %).” Accessed July 21, 2013. http://data. worldbank.org/indicator/FP.CPI.TOTL.ZG.
7
Central Intelligence Agency. “GDP Composition by Sector.” Accessed July 21, 2013. https://www.cia.gov/ library/publications/the-world-factbook/fields/2012.html#rp.
8
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https://www.iea.org/ stats/.
9
Adapted from:
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https://www.iea.org/ stats/. U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www.eia.gov/ countries/data.cfm. World Bank. “Winds of Change: East Asia’s Sustainable Energy Future.” Accessed July 23, 2013. http://siteresources.worldbank.org/INTEASTASIAPACIFIC/Resources/226262-1271320774648/windsofchange_fullreport.pdf. World Bank Data Bank. “Energy imports, net (% of energy use).” Accessed July 23, 2013. http://data. worldbank.org/indicator/EG.IMP.CONS.ZS. Adapted from:
10
Indriyanto, Asclepias R., Nasrullah Salim, Fabby Tumiwa, Tri Mumpuni et al. “Electricity Governance in Indonesia: Assessment Report.” World Resources Institute, 2007. Accessed July 23, 2013. http://pdf.wri.org/ egi_report_indonesia.pdf. International Energy Agency. “Access to Electricity 2011.” Accessed July 21, 2013. http://www.worldenergyoutlook.org/resources/energydevelopment/accesstoelectricity/. World Bank Data Bank. “Access to electricity (% of population).” Accessed July 23, 2013. http://data. worldbank.org/indicator/EG.ELC.ACCS.ZS.
The World Bank – AusAID
53
Green Infrastructure Finance
World Bank Data Bank. “Electric power transmission and distribution losses (% of output).” Accessed July 21, 2013. http://data.worldbank.org/indicator/EG.ELC.LOSS.ZS.
11
Adapted from:
12
Asia-Pacific Economic Cooperation. “Energy Overview 2012.” Accessed July 23, 2013. http://publications. apec.org/publication-detail.php?pub_id=1432. Energdata. “Energy intensity of GDP at constant purchasing power parities.” Accessed July 21, 2013. http://yearbook.enerdata.net/energy-intensity-GDP-by-region.html. Adapted from:
13
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https://www.iea.org/stats/. Intergovernmental Panel on Climate Change. “Revised 1996 Intergovernmental Panel on Climate Change’s National Guidelines.” Accessed August 1, 2013. http://www.ipcc-nggip.iges.or.jp/public/gl/invs1. html. Adapted from:
14
Energy Market Authority of Singapore. “Singapore Energy Statistics, 2012.” Accessed July 21, 2013. http:// www.ema.gov.sg/media/files/publications/EMA_SES_2012_Final.pdf. Maurer, Luiz T., and Luiz A. Barroso. Electricity Auctions: An Overview of Efficient Practices. Washington D.C.: International Bank for Reconstruction and Development/ World Bank, 2011. Accessed July 23, 2013. http://www.ifc.org/wps/wcm/connect/8a92fa004aabaa73977bd79e0dc67fc6/Electricity+and+Demand+Side+Auctions.pdf?MOD=AJPERES. Perusahaan Listrik Negara. “Indonesian Electricity Tariff.” Accessed July 23, 2013. http://www.pln.co.id/eng/?p=534. Lee, Seung-Hoon. “Electricity in Korea.” Asia-Pacific Economic Cooperation, 2011. Accessed July 23, 2013. http://mddb.apec.org/Documents/2011/SOM/SYM/11_som_sym1_009.pdf. Wu, Yanrui, Xunpeng Shi, Fukunari Kimura et al. Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies. Jakarta: Economic Research Institute for ASEAN and Eastern Asia, 2012. Accessed July 23, 2013. http://www.eria.org/RPR-2011-17.pdf. Adapted from:
15
Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en. U.S. Energy Information Administration. “Countries Data.” Accessed July 21, 2013. http://www.eia.gov/ countries/data.cfm. Adapted from:
16
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https://www.iea.org/ stats/. Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en.
54
The World Bank – AusAID
Green Investment Climate Country Profile - China
Adapted from:
17
International Energy Agency. “Statistics and Balances 2009.” Accessed July 21, 2013. https://www.iea.org/stats/. Organization for Economic Co-operation and Development. “Energy Statistics of Non-OECD Countries (2012).” Accessed July 23, 2013. http://www.oecd-ilibrary.org/energy/energy-statistics-of-non-oecd-countries_19962851-en. Standard & Poor’s Rating Services. “Sovereigns Rating List.” Accessed July 21, 2013. http://www.standardandpoors.com/ratings/sovereigns/ratings-list/en/us.
18
World Bank. “Doing Business Economy Rankings.” Accessed July 21, 2013. http://www.doingbusiness.org/ rankings.
19
Transparency International. “Corruption Perceptions Index 2011.” Accessed July 21, 2013. http://www. transparency.org/cpi2011/results.
20
Adapted from:
21
World Bank Data Bank. “Foreign direct investment, net inflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS. World Bank Data Bank. “Foreign direct investment, net outflows (% of GDP).” Accessed July 23, 2013. http://data.worldbank.org/indicator/BM.KLT.DINV.GD.ZS. World Bank. “Private Participation in Infrastructure Database - Sector Data Snapshot.” Accessed July 21, 2013. http://ppi.worldbank.org/explore/ppi_exploreSector.aspx?sectorID=2.
22
World Bank Data Bank. “Lending interest rate (%).” Accessed July 23, 2013. http://data.worldbank.org/ indicator/FR.INR.LEND.
23
World Bank Data Bank. “Interest rate spread (lending rate minus deposit rate, %).” Accessed July 23, 2013. http://data.worldbank.org/indicator/FR.INR.LNDP.
24
World Bank Data Bank. “Liquid assets to deposits and short term funding (%).” Accessed July 23, 2013. http://data.worldbank.org/indicator/GFDD.SI.06.
25
International Energy Agency. “China overtakes the United States to become world’s largest energy consumer.” Accessed September 20, 2013. http://www.iea.org/newsroomandevents/news/2010/july/ name,19716,en.html.
26
Ma, Hengyun, and Les Oxley. China’s Energy Economy: Situation, Reforms, Behavior, and Energy Intensity. Berlin: Springer Verlag, 2012.
27
International Energy Agency. “Total Primary Energy Supply, People’s Republic of China (2009).” Accessed September 20, 2013. http://www.iea.org/stats/pdf_graphs/CNTPES.pdf.
28
Hornby, Lucy. “Record imports make China world’s top importer of crude oil.” Financial Times, 2013. Accessed November 5, 2013. http://www.ft.com/intl/cms/s/0/75d94744-332b-11e3-bf1b-00144feab7de.html.
29
U.S. Energy Information Administration. “Country Analysis: China.” Accessed September 20, 2013. http:// www.eia.gov/countries/analysisbriefs/China/china.pdf.
30
International Energy Agency. “Electricity generation by fuel (2009): People’s Republic of China.” Accessed September 20, 2013. http://www.iea.org/stats/pdf_graphs/CNELEC.pdf.
31
The World Bank – AusAID
55
Green Infrastructure Finance
U.S. Energy Information Administration. “International Energy Statistics.” Accessed December 9, 2013. http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=2&pid=2&aid=7.
32
Xinhua News Agency. “China announces targets on carbon emission cuts.” Accessed September 20, 2013. http://news.xinhuanet.com/english/2009-11/26/content_12544181.htm.
33
Ye, Qi. Annual Review of Low-Carbon Development in China (2013). Beijing: Social Sciences Academic Press, 2013. Accessed September 20, 2013. http://www.ssapchina.com/ssapzx/c_00000009000200010005/d_0736.htm.
34
United Nations Environment Programme and Frankfurt School of Finance & Management. “Global Trends in Renewable Energy Investment 2013.” Accessed September 20, 2013. http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2013.
35
Ng, Shin Wei, and Nick Mabey. “Chinese Challenge or Low Carbon Opportunity? – The implications of China’s 12th Five-Year -Plan for Europe.” E3G, 2011. Accessed September 20, 2013. http://www.e3g.org/docs/ E3G_Chinese_Challenge_or_Low_Carbon_Opportunity_updated.pdf.
36
Norton Rose Fulbright. “Renewable Energy in Asia (2010).” Accessed September 20, 2013. http://www. nortonrosefulbright.com/files/renewable-energy-in-asia-pacific-pdf-3mb-29339.pdf.
37
Martinot, Eric, and Li Junfeng. “Renewable Energy Policy Update for China.” Renewable Energy World, 2010. Accessed November 5, 2013. http://www.renewableenergyworld.com/rea/news/article/2010/07/renewable-energy-policy-update-for-china.
38
Adapted from:
39
Fan, J., W. Sun, and D.-M. Ren. “Renewables portfolio standard and regional energy structure.” Energy Policy 33 (2005): 279-87. Zhang, Zhong Xiang. Energy and Environmental Policy in China: Towards a Low-Carbon Economy. Cheltenham: Edward Elgar Publishing, 2011. 40
Moerenhout, Tom, Tilmann Liebert, and Christopher Beaton. “Assessing the Cost-Effectiveness of Renewable Energy Deployment Subsidies: wind power in Germany and China.” Swiss National Center of Competence in Research, 2012. Accessed September 27, 2013. http://www.longfinance.net/images/reports/pdf/ dbcca_chinalowcarbon_2011.pdf.
41
China Banking Regulatory Commission. “Notice of the CBRC on Issuing the Green Credit Guidelines.” Accessed September 27, 2013. http://www.cbrc.gov.cn/EngdocView.do?docID=3CE646AB629B46B9B533B1D8D9FF8C4A.
42
China Banking Regulatory Commission. “Guidelines on Credit Underwriting for Energy Conservation and Emission Reduction.” Accessed September 27, 2013. http://www.cbrc.gov.cn/chinese/home/ docView/200908050CE9DC53F577564BFF554AF1CDE5E600.html.
43
Pew Charitable Trust. “Who is Winning the Clean Energy Race?.” Accessed September 21, 2013. http:// www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Clean_Energy/Clean%20Energy%20 Race%20Report%202012.pdf.
44
Climate Connect. “Golden Sun Programme.” Accessed October 29, 2013. http://www.climate-connect. co.uk/Home/sites/default/files/Golden%20Sun%20Programme%20Overview%20Climate%20Connect.pdf.
45
KPMG. “Taxes and Incentives for Renewable Energy (2012).” Accessed September 20, 2013. http://www. kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/taxes-incentives-renewable-energy-2012.pdf.
56
The World Bank – AusAID
Green Investment Climate Country Profile - China
Adapted from:
46
Renewable Energy Policy Network for the 21st Century. “Interactive Map: China.” Accessed October 29, 2013. http://www.map.ren21.net/. United Nations Environment Program. “CDM projects by host region.” Accessed October 29, 2013. http:// www.cdmpipeline.org/cdm-projects-region.htm.
47
Carbon Market Watch. “China’s Pilot Emissions Trading Systems (Newsletter #3).” Accessed September 21, 2013. http://carbonmarketwatch.org/chinas-pilot-emissions-trading-systems/.
48
United Nations Development Programme China. “China and a Sustainable Future: Towards a Low Carbon Economy and Society.” Accessed September 27, 2013. http://content.undp.org/go/cms-service/stream/asset/?asset_id=2471266.
49
Price, Lynn, Mark D. Levine, Nan Zhou, David Fridley, Nathaniel Aden, et al. “Assessment of China’s Energy-Saving and Emission-Reduction Accomplishments and Opportunities During the 11th Five Year Plan.” Energy Policy 39, no. 4 (April 2011): 2165-2178. Accessed September 21, 2013. http://minotaur.lbl.gov/china.lbl.gov/sites/china.lbl.gov/files/Ace_Study.EP_.April_.2011.pdf.
50
Institute for Industrial Productivity. “CN-5: Small Plant Closures and Phasing Out of Outdated Capacity.” Accessed September 21, 2013. http://iepd.iipnetwork.org/policy/small-plant-closures-and-phasing-out-outdated-capacity.
51
State Council of People’s Republic of China. “Rules on National Energy Administration’s Main Responsibilities, Internal Institutions and Manning Quotas.” Accessed September 21, 2013. http://english.gov.cn/ business.htm.
52
People’s Daily. “China’s National Energy Commission is established.” Accessed September 27, 2013. http:// english.peopledaily.com.cn/90001/90778/90862/6880658.html.
53
People’s Daily. “NDRC’s 12 measures to accelerate energy saving.” Accessed September 21, 2013. http:// english.people.com.cn/90778/8381341.html.
54
Bloomberg. “S&P Affirms China Ratings on ‘Exceptional’ Outlook for Growth.” Accessed September 21, 2013. http://www.bloomberg.com/news/2012-11-29/s-p-affirms-china-ratings-on-exceptional-outlook-forgrowth.html.
55
Schwab, Klaus. “Global Competitiveness Index.” World Economic Forum, 2012. Accessed July 23, 2013. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf.
56
World Bank. “Private Participation in Infrastructure Project Database.” Accessed July 23, 2013. http://ppi. worldbank.org/explore/ppi_exploreRegion.aspx?regionID=2.
57
U.S. Bureau of Economic and Business Affairs. “2012 Investment Climate Statement - China.” Accessed September 21, 2013. http://www.state.gov/e/eb/rls/othr/ics/2012/191128.htm.
58
Ministry of Commerce of People Republic of China. “Foreign Investment.” Accessed September 29, 2013 http://english.mofcom.gov.cn/article/statistic/.
59
Adapted from:
60
Bloomberg and Frankfurt School of Finance & Management. “Global Trends in Renewable Energy Investment 2011.” Accessed September 21, 2013. http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2011.
The World Bank – AusAID
57
Green Infrastructure Finance
World Bank. “Private Participation in Renewable Energy Projects.” Accessed August 1, 2013. http://ppi-re. worldbank.org/. World Bank. “Private Participation in Renewable Energy Projects.” Accessed August 1, 2013. http://ppi-re. worldbank.org/.
61
Chandler, William, Holly Gwin, and Shipping Chen. “Financing Energy Efficiency in China.” Energy Transition Research Institute, 2011. Accessed September 21, 2013. http://www.etransition.org/images/2011.06.09.Financing_Energy_Efficiency_in_China.Final.03.pdf.
62
Ministry of Environmental Protection of People’s Republic of China. “Xi Jinping Stresses Adhering to the Basic State Policy of Resource Conservation and Environmental Protection.” Accessed September 21, 2013. http://english.mep.gov.cn/News_service/infocus/201305/t20130530_252988.htm.
63
Global Times. “Major efficiency standards formulated amid energy-saving drive.” 2012. Accessed October 18, 2013. http://www.globaltimes.cn/content/763504.shtml.
64
International Energy Agency. “World Energy Outlook 2012 Fact Sheet.” Accessed October 18, 2013. http:// www.worldenergyoutlook.org/media/weowebsite/2012/factsheets.pdf.
65
The Wall Street Journal. “IEA Trims China Oil-Import Forecast.” Accessed September 21, 2013. http://online.wsj.com/article/SB10001424127887323734304578540943684276944.html.
66
Reuters. “China imposes strict fuel economy standards on auto industry.” Accessed September 21, 2013. http://www.reuters.com/article/2013/03/20/china-auto-fuel-idUSL3N0CC2EK20130320.
67
Wagner, Vance, and Dan Rutherford. “Survey of Best Practices in Emission Control of In-Use Heavy-Duty Diesel Vehicles.” International Council on Clean Transportation and Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants, 2013. Accessed October 29, 2013. http://www.theicct.org/sites/default/files/publications/ICCT_HDV_in-use_20130802.pdf.
68
Hannon, Allison, Ying Liu, Jim Walker, and Changhua Wu. “Delivering low carbon growth – A guide to China’s 12th Five Year plan.” HSBC Climate Group, 2011. Accessed September 27, 2013. http://www.theclimategroup.org/_assets/files/FINAL_14Mar11_-TCG_DELIVERING-LOW-CARBON-GROWTH-V3.pdf.
69
Lan, X. Z. “China Drafts Plan for Development of Environmental Protection Industries over the Next Five Years.” Beijing Review, 2011. Accessed September 27, 2013. http://www.beijingreview.com.cn/2009news/ guonei/huanbao/2011-08/29/content_386752.htm.
70
Cai, Ron, and Ding Ning. “Increasing Environmental Liabilities.” United States Chamber of Commerce, 2010. Accessed October 29, 2013. http://www.amcham-shanghai.org/NR/rdonlyres/7A85138D-32A9-4DEDB47A-9FF9D33753D0/12206/apr10_legal_update.pdf.
71
Zhang, Dong Qing, Soon Keat Tan, and Richard M. Gersberg. “Municipal solid waste management in China: status, problems and challenges.” Journal of Environmental Management 91, no. 8 (2010): 1623-1633.
72
O’Melveny & Myers LLP. “News.” Accessed September 26, 2013. http://www.omm.com/shanghai/.
73
Reuters. “China to levy carbon tax before 2015 report.” Accessed September 26, 2013. http://www.reuters. com/article/2012/01/05/china-carbon-idUSL3E8C5D1220120105 .
74
Industry Efficiency Policy Database. “CN-8:Differential Electricity Pricing for Industry.” Accessed October 22, 2013. http://iepd.iipnetwork.org/policy/differential-electricity-pricing-industry.
75
58
The World Bank – AusAID
Green Investment Climate Country Profile - China
Martinot, Eric, and Li Junfeng. “China’s Latest Leap: An update on renewables policy.” Renewable Energy World, 2010. Accessed September 26, 2013. http://www.renewableenergyworld.com/rea/news/article/2010/07/renewable-energy-policy-update-for-china.
76
77
Delbosc, Anaïs. “China’s Green Credit Policy: Building Sustainability in the Financial Sector.” CDC Climate Research and Caisse des Dépôts et Consignations, 2011. Accessed September 27, 2013.
Department of Climate Change, National Development and Reform Commission of China. “Clean Development Mechanism in China.” Accessed September 26, 2013. http://cdm-en.ccchina.gov.cn/.
78
Fulton, Mark. “12th Five Year Plan: Chinese Leadership towards a Low Carbon Economy.” Deutsche Bank Group, 2011. Accessed September 27, 2013. http://www.longfinance.net/images/reports/pdf/dbcca_chinalowcarbon_2011.pdf.
79
Seligsohn, Deborah. “China’s 1000 Enterprise Energy Conservation Program Beats Target.” China FAQs, 2007. Accessed September 27, 2013. http://www.chinafaqs.org/blog-posts/chinas-1000-enterprise-energy-conservation-program-beats-target.
80
Aizawa, Motoko. “China’s Green Credit Policy: Building Sustainability in the Financial Sector.” International Finance Corporation, 2011. Accessed September 27, 2013. http://www.wilsoncenter.org/sites/default/ files/Motoko%20Aizawa.pdf.
81
Adapted from:
82
Aizawa, Motoko. “China’s Green Credit Policy: Building Sustainability in the Financial Sector.” International Finance Cooperation, 2011. Accessed October 22, 2013. http://www.wilsoncenter.org/sites/default/files/ Motoko%20Aizawa.pdf. Banktrack. “Sustainable Finance in China.” Accessed October 22, 2013. http://www.banktrack.org/manage/ems_files/download/china_sustainable_finance_newsletter_2_english_/090120_sustainable_finance_ in_china_feb.pdf. World Bank. “IEG Study Series Books: Climate Change and the World Bank Group.” Accessed September 26, 2013. http://lnweb90.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/FB326C17A264657D852577D60058F1E8/$file/cc2_full_eval.pdf.
83
ESCO Committee of China Energy Association Conservation. “About EMCA.” Accessed September 26, 2013. http://www.emca.cn/bg/en/news.aspx?cid=5.
84
Ma, Jinlong. “On-grid electricity tariffs in China: development, reform and prospects.” Energy Policy 39, no. 5 (2011): 2633-2645.
85
86
Adapted from:
Levine, M D., N Zhou, and L Price. “Overview of current energy-efficiency policies in China.” Energy Policy 38, no. 11 (2010): 6439-6452. Levine, M. D., N. Zhou, and L. Price. ”The Greening of the Middle Kingdom: The Story of Energy Efficiency in China.” National Academy of Engineering, 2009. http://www.nae.edu/Publications/Bridge/EnergyEfficiency14874/14951.aspx. 87
Hogan, Pat, Angela Falconer, Yuqing Yu, and Xiaolu Zhao. “Tracking Emissions and Mitigation Actions: Current Practice in China, Germany, Italy, and the United States.” Climate Policy Initiative, 2012. Accessed September 26, 2013. http://climatepolicyinitiative.org/wp-content/uploads/2012/05/Tracking-Emissions-and-Mitigation-Actions.pdf.
The World Bank – AusAID
59
Green Infrastructure Finance
National Development and Reform Commission of China. “Department of Climate Change.” Accessed September 26, 2013. http://en.ndrc.gov.cn/mfod/t20081218_252201.htm.
88
National Development and Reform Commission of China. “Department of Resource Conservation and Environmental Protection.” Accessed September 26, 2013. http://en.ndrc.gov.cn/mfod/t20081218_252198. htm.
89
National Development and Reform Commission of China. “National Energy Administration.” Accessed September 26, 2013. http://en.ndrc.gov.cn/mfod/t20081218_252224.htm.
90
Adapted from:
91
International Energy Agency. “Key Energy Statistics 2012.” Accessed September 26, 2013. http://www.iea. org/publications/freepublications/publication/kwes.pdf. International Energy Agency. “Total Primary Energy Supply, People’s Republic of China (2009).” Accessed September 20, 2013. http://www.iea.org/stats/pdf_graphs/CNTPES.pdf. Adapted from:
92
Communist Party of China. “Five-year plans of the People’s Republic of China.” Accessed September 26, 2013. http://www.english.cpc.people.com.cn/. KPMG. “China’s 12th Five-Year Plan Overview.” Accessed September 26, 2013. http://www.kpmg.com/cn/ en/IssuesAndInsights/ArticlesPublications/Documents/China-12th-Five-Year-Plan-Overview-201104.pdf. Morgan Stanley. “China’s 12th Five-Year Plan: Strategy vs. Tactics.” Accessed September 26, 2013. http:// www.law.yale.edu/documents/pdf/cbl/China_12th_Five_Year_Plan.pdf. Adapted from:
93
Jiabao, Wen. “Report on the Work of the Government, Fourth Session of the Eleventh national people’s Congress.” State Council of People’s Republic of China, 2011. Accessed September 27, 2013. http://online. wsj.com/public/resources/documents/2011NPCWorkReportEng.pdf. National Development and Reform Commission of China. “Report on the Implementation of 2010 Plan for National Economic and Social Development and on 2011 Draft Plan for National Economic and Social Development (Fourth Session of the Eleventh National People’s Congress).” Accessed September 27, 2013. http://www.iea.org/publications/freepublications/publication/China_2012.pdf. Ng, Shin Wei, and Nick Mabey. “Chinese Challenge or Low Carbon Opportunity? – The implications of China’s 12th Five-Year-Plan for Europe.” E3G, 2011. Accessed September 20, 2013. http://www.e3g.org/docs/ E3G_Chinese_Challenge_or_Low_Carbon_Opportunity_updated.pdf. Hook, Leslie. “China moves to reform energy taxes.” Financial Times, 2012. Accessed September 26, 2013. http://www.ft.com/cms/s/0/e17582d2-39e1-11e1-a8dc-00144feabdc0.html#axzz1veSj9l74.
94
Taylor, Robert P., Gailius J. Draugelis, Yabei Zhang, and Alberto U. Ang Co. “Accelerating Energy Conservation in China’s Provinces.” World Bank, 2010. Accessed September 26, 2013. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/09/01/000333038_20100901232632/Rendered/ PDF/564160ESW0whit1in0China1s0Provinces.pdf.
95
60
The World Bank – AusAID
I
n July 2012, the Green Infrastructure Finance Framework Report was published to address the constraints in financing green infrastructure and to develop a new PPP-based approach to accelerate investments in lowemission technologies. The approach calls for assessing the â&#x20AC;&#x153;Green Investment Climateâ&#x20AC;? of a given country in order to develop country-specific recommendations for policy and incentive programs as well as other measures which can be introduced in order to further promote green growth in an economy. This report includes one of the first Green Investment Country Profiles completed for the East Asia and Pacific Region as part of bringing the approach closer to operational status. The initial countries include China, Philippines, Vietnam, Malaysia, Indonesia, Singapore and South Korea. The assessment involves not only the green policy and incentives environment, but also the countryâ&#x20AC;&#x2122;s overall natural resource endowment of fossil and renewable energy, its industrial development strategy in addition to general business indicators and other considerations, such as electricity prices, the capacity of the financial sector to mobilize long-term domestic financing, as well as their overall regulatory and legal capacity to implement PPPs. The country profiles provide a general understanding of the attractiveness, prevailing trends, strengths, and other aspects affecting the ability of the country to leverage its green growth potential.
www.worldbank.org
www.ausaid.gov.au