Green Policy in East Asian and Pacific Region

Abstract     

The study analyses the process of green policy and program for investment development by some examples of experiences implemented by China to decrease the gas emission during the second half of first decade in 2000s during the 11^th Five-Year Plan (2006-2010) and 12^th Five-Year Plan (2011-2015). The green policy of China stimulated by indirect means of the Government of China and China CDM Fund established by several Chinese Ministries to decide taxes and to provide subsidies and public financing mechanism for private sector. The study overviews some results of this green policy in field of creating institutional structure, regulating the gas emission process relevant to Kyoto agreement and some initiatives for the ETS (Emission Trading Schemes). Majority of financing renewable energy were invested mostly developing countries, as China and South Korea. China could spent about US$10,8 billion including Three Gorges water dam.

The method for analysing is focusing on the Chinese rule and system by comparing with some international experiences in South Korea and Japan based on the data index. The problems are faced by the China, for example not every time successful monitoring system, collecting data, missing knowledge of governmental offices in environmental fields, not every time well organized harmonization for different levels of governmental and local making – decision, missing cooperation among the governmental offices and corporations and firms in different economic areas. In spite that the difficulties are followed by governmental forces in China, there were some main positive results for environment friendly technological development based on the green policy, China became the fourth largest wind power supplier in the world economy and favourable economic and financial background were created for the corporations to follow green policy in this country.

Introduction

The study focuses on some results coming from different indirect means of the governmental green policy in China to develop and finance advanced environment friendly technology based on the renewable energy resources. The main data for green policy comes from report and data base of China CDM Fund established by several Chinese Ministries (CDM = Clean Development Mechanism). Also the study extends to analyse some experiences of Japan and South Korea. The study uses international data bases from World Bank (Baietti, et al, 2012; World Bank, 2013) how the indirect means were used by Chinese government for its economic growth. Also the governments of these countries extent the carbon gas emission reduction through the Clean Development Mechanism to encourage participation in projects designed. (in detailed Gouvello, 2010).

At the international level the Climate Friendly Technology (CFT) became promoted in order to mitigate the gas emission for avoiding of the climate change and global warming. This extending process for the CFT has started in East Asia and Pacific region by stimulating the private sector based on the financing the production technology for creating advanced products and services in green policy since the beginning of 2000s. The Lower income and Upper income countries introduced their green environmental conservation investments in energy sector within international cooperation with developed countries, of which result they obtained US$26 billion for RE (Renewable Energy) asset finance in 2007.

Material and Method

The method for analysing is focusing on the Chinese rule and system by comparing with some international experiences in South Korea and Japan based on the data index concerning the comprehensive energy consumption in g/kilowatt hour and kg standard coal /ton. The problems are faced by the China, for example not every time successful monitoring system, collecting data, missing knowledge of governmental offices in environmental fields, not every time well organized harmonization for different levels of governmental and local making – decision, missing cooperation among the governmental offices and corporations and firms in different economic sectors.

Also the study tries to decide the difference of finance for the CDM programs in green policy during the 11^th Five Plan (2006-2010) in China and to determine the essence of these programs comparing with the international experiences. The China CDM Fund analyses the efficiency improvement by overviewing 31 projects with concessional loans from the CDM Fund by different types (China CDM Fund, 2011). Majority of financing renewable energy were invested mostly two developing countries, as China and South Korea and one developed country, as Japan. China could spent about US$10,8 billion including Three Gorges water dam in order to implement aims of green policy (World Bank, 2013).

Some main questions concerning the Climate Friendly Technology (CFT) emerge in case of China. First question is that has China any possibility to realize main aims of China CDM Fund, namely greenhouse gas emission reduction and low carbon technology based on the innovative environment friendly technology? Second question is that did China transfer its economic performance from fossil energy resource use to renewable energy resource use? Third question is that has China any serious development in field of renewable energy resource use in the international compare? After research the answers can somehow clear the main developing trend of China and its economic growth in direction to the use renewable resource use and extend CDM in the international compare.

Based on the sustainable development the natural resources should be managed, like water and sanitation, clean development mechanization (CDM) for sustainable human health. There is a lot of water resources in Egypt, as Neszmélyi (2014, p. 62) wrote about that Egypt has natural resources as energy and for agriculture and huge amount of human resources, for example renewable energy resources in MENA. This plan concerns some experiences implemented in Three Gorges water dam project in China.

Sustainability Innovative Low-Carbon investments which were analysed by principles for “Rubik’s Cube” solution. Instead of fossil energy resources including methane the firms should use renewable energy resources for reduction of methane and other gas emissions (Fogarassy, et al. 2014a; Fogarassy, et al. 2014b). Companies need for financial resources, even for investment relevant to the reducing gas emission, in any case the financial institutes should follow the financial conditions and risk management of the firms or small-medium enterprises, for example analyse all business cycles, evaluate the risks and determine risk sensitivity of company (see detailed in Zéman at al, 2014, p. 196 and Végh et al, 2014, p. 184.). But from other side of the risk, in contradiction, for example the FDI inflow into Africa preferred the investments in services, as less risk-sectors and this sector did not need much significant costly investments, but promised more profitable performance (UNCTAD FDI-TNC-GVC, 2009; Zéman et al, 2013). The economic growth of developing countries by ensuring financial supports from different developed countries and international organizations based on the FDI (foreign direct investment) system mobilizing foreign financial resources (World Bank, 2013).

Results and Discussion

The study analyses the process of green policy and program for investment development by some examples of experiences implemented by China to decrease the gas emission during the second half of first decade in 2000s during the 11^th Five-Year Plan (2006-2010) than in 12^th Five-Year Plan (20111-2015). The green policy of China stimulated by indirect means of the Government of China and therefor China CDM Fund established by several Chinese Ministries to decide taxes and to provide subsidies and public financing mechanism for private sector. The study overviews some results of the green policy in field of creating institutional structure, regulating the gas emission process relevant to Kyoto agreement and some initiatives for the ETS (Emission Trading Schemes).

Concerning the China CDM Fund and green policy, previously first the 11^th Five-Year Plan (2006-2010) declared to create the energy- conservation and environmentally-friendly society and reducing consumption per unit of GDP by 20% within this time length. In China the Ministry of Environmental Protection (MEP) is responsible for spending the majority of US$586 billion fiscal revenues for investments in fields of energy conservation, emission reduction and ecological engineering (Anbumozhi – Bauer, 2010). Additionally to the MEP, also Peoples’ Bank of China and China Banking Regulatory Commission (CBRC) were responsible for realising aims and investments for environment friendly technologies and mitigation. In spite that the governments had varying influences on the performance at national and firm levels, the main problem was lack of environmental knowledges about the natural and economic having impacts for decision makers (Zhang et al, 2011). But the program had positive influences by more practical experiences for some environment friendly investments concerning the using wind renewable energy resources.

According to the structure of China CDM Fund by the end of 2005, China CDM Fund was established by five Chinese Ministries, as Ministry of Finance (MOF), Ministry of Foreign Affairs (MFA), Ministry of Science and Technology (MOST), Ministry of Environmental Protection (MEP), Ministry of Agriculture (MOA), and also China Meteorological Administration. Representatives of different Ministries and governmental offices are members of CDM Fund Board and Management Centre. Since 2005 this China CDM Fund has extended its activities based on the governmental strategy in green policy. The main issues of the China CDM Fund by the government approval

• to integrate government and market functions,
• to support national programs for climate change to remain the sustainable social and economic development,
• specialization and international cooperation in climate change in China with developing countries,
• realizing innovative development in climate change,
• implement national sustainable development by connecting the CDM cooperation based on the Kyoto Protocol (China CDM Fund 2011).

Activities of the China CDM Fund strongly integrated into the strategy of the Eleventh Five-Year Plan (2006-2010) and Twelfth Five-Year Plan (2011-2015), which decided its program for climate change responsible, by which the CDM Fund provided supports for the provinces and local authorities, also for firms to follow strategy for greenhouse gas emission reduction and experiment of low carbon development. This means that the Five-Year Plans provide strategy and the China CDM Fund assist for its implementation. The industrial developments supported by plans and CDM Fund included grants, which covered solar power, wind power, market development, and needs of carbon trading market and formulation of carbon reduction standard-setting. The support of China CDM Fund means, that this Fund helps to create the favourable economic background for firms to follow the strategy of green policy, because the grants of the CDM Fund appeared as concessional load to ensure capital supply.

The main sources of the CDM Fund came from national revenue from the greenhouse gas emission reduction trading through CDM projects, which was around RMB (Renminbi, Chinese currency,     1 000.00 Juan Renminbi = US$ 156.93 and 1 Juan = US$ 6,37) 10 billion by December 31, 2011. The China CDM Fund support investments for improving industrial performance by concessional loans for clean development. In 2011 and 2012 the China CDM Fund disbursed concessional loans for 31 projects in fields of renewable energy, energy conservation, energy efficiency, new energy mechanization and value added product manufacturing in 14 provinces. Additionally to RMB 10 billion by the end of 2011, in 2012 China CDM Fund provided other RMB 517 million for projects included in 31 projects mentioned above. The concessional loans were entrusted by China CDM Fund to Chinese banks with controlling shares held by Chinese investors. Distribution of 31 projects with concessional loans from the Chine CDM Fund was 45,0% for covering energy saving and efficiency improvement, the 28,3% for renewable energy, also 26,7% for new energy equipment and materials manufacturing. (China CDM Fund, 2011)

The Chine CDM Fund uses a special measurement internationally accepted, which can be called as “carbon budget”, which shows the evaluated carbon emission reductions or potential emission reductions of the projects or the possible future investments. The “carbon budget” is very useful to decide the direct effect of emission reduction to calculate the carbon emission reduction, as this is called Carbon Emission Reduction Budget (CERB). The applicant based on the performance of its company calculates the CERB by method determined by Chine CDM Fund and CDM Executive Board of United Nations. For example the carbon emission reduction of such project or investment can be calculated exactly and monitored by fuel or energy consumption.

Also there were some international financing actions of the World Bank for creating economic growth in direction to less gas emission finally mitigation. There are some examples, which are follows:

The World Bank issued a report in 2009, its title as State and Trends of the Carbon Market, the CDM (Clean Development Mechanism) demonstrated the significance of carbon markets (Capoor-Ambrosi, 2009). At the international level the carbon markets in particular the JI (Joint Implementation) and CDM became considerable new sources to finance mitigation projects and investments. The financial resources given by the CDM between 2001, titled as first year of CDM projects, and 2012 were calculated US$18 billion to decrease the gas emission by about 1,5 billion tonnes of carbon dioxide equivalent (CO₂e). Each dollar of carbon revenue leverages on average US$4,6 in investment, bringing the total CFT (Climate Friendly Technology) investments facilitated by the CDM activities to over US$ 80 billion (World Bank, World Development Report, 2010).

The AGF aimed at using US$100 billion to be mobilized yearly for climate actions in Low income country-group, namely in developing economies by 2020, which funds could be coming from High income country-group. This financing system could be allocated to developing countries. Also concerning the AGE (UN High-Level Advisory Group on Climate Change Financing) Report that “a carbon price of US$20- US$25 could generate about US$100 billion – US$200 billion of gross private capital flows”. This means “such gross flows could lead to private net flows in the range of US$10 billion – US$20 billion. Moreover, US$30 billion-US$50 billion could be generated annually in increased carbon market flows” and authors expected “to around US$10 billion of net transfers.” (UNFCCC = UN Framework Convention on Climate Change, 2010). This action could be useful to incentive carbon market action as carbon gas emission allocation among countries in order to keep gas emission quota by selling quota to such countries, which have gas emission less than their quota. These projects of the different UN organization can cooperate with China to strengthen the environment friendly investment either in energy sector or different service sector, like transport.

In field of the electricity production the energy use is important to realise the economic growth with increasing standard of living. But electricity production can result damage for the natural environment, when electricity production is realised by burning coal by two times more than carbon dioxide contributing to increase effects for the global warming. Also in spite that the nuclear energy does not realise carbon dioxide emissions, but this one produces other waste products for the natural environment.

Results of the Five Year Plans

The Eleventh Five-Year Plan 362 million highly efficient light dissemination and 34,71 million energy saving air conditions were as over RMB 74 billion of domestic consumption by saving yearly energy consumption of 19,5 billion kilowatt hours. Also 4,26 million passenger cars below 1,6 litres have been sold since 2010 by worth of RMB 358 billion of consumption. The Plan supported development for using renewable energy, as of 50-million-kilowattwind power resources. Also the sun demonstration projects and solar power photovoltaic building demonstration projects were realised with RMB 10,2 billion of fiscal subsidy. The Plan realised that over 10.000 such vehicles within RMB 10 billion of different industrial investments for energy saving and increasing market competition.

The Table-1 shows the comparison of per unit energy consumption of energy –intensive products between China and other countries. These considerable results in energy consumption reduction also can contribute to the greenhouse gas emission reduction and more efficient energy use. In the line of coal consumption of power plant the coal consumption was highest in China comparably to Japan, Italy and South Korea. But China has reached the biggest reduction for coal consumption in case of power plant for period of 1990 and 2009. In case of the energy consumption of steel production China has drastically decreased energy use in kg standard coal per ton by almost one third and closed very much to the level of energy use of Japan for period of 1990-2009. China has decreased the energy consumption of steel production in kg standard coal /ton, by almost one-third, decreased comprehensive cement energy consumption in kg standard coal /ton by one-fourth, and decreased comprehensive paper and paperboard energy consumption in kg standard coal /ton, by one-third for period of 1990-2008.

In 2009 energy efficient products including air conditioner, computer and lighting with RMB 30,2 billion accounting for 70% of these same product categories (China CDM Fund, 2011). The data concerning the 11^th Five-Year Plan show how much considerable subsidies were provided by budget of China for the using renewable energy resource and developing technologies for its adaptation in practice. The supports given by this plan basically was higher than the concessional loans provided by China CDM Fund. Finally both of them can give wide-side possibility for low carbon technology adaptation. Based on financial supports of the 11^th Five-Year Plan and activity of China CDM Fund there were many considerable positive results in direction to use wider renewable energy resources and realise the greenhouse gas emission reduction at the beginning of second decade of XXI century in China.

Table-1: Comparison of per unit energy consumption of energy –intensive products between China and other countries

Source: China Energy Statistics Yearbook 2011

The international compare in the Table-1 the data show how the energy consumption has been considerably decreasing during the period of 1990-2009, which includes mostly the period of 11^th Five-Year Plan and partly the 12^th Five-Year Plan. In this case the gap between levels of energy use in several countries (Japan, Italy, and South Korea) and China decreased because of China developed its energy use efficiency proofed by Table-1.

The reduction of CO₂ emission per unit of GDP in % in 12^th Five-Year Plan (2011-2015) was between 11 and 19,5% in different provinces of China. This result was considerable opposite to the large greenhouse gas emission increase during the period of 2000-2008. In this period the industrial development was built on the strongly increasing fossil energy use. The reduction of CO₂ emission was implemented by the green policy strategy in China in order to realise the low carbon technological production and the renewable energy resource use. These aims were determined in 11^th and 12^th Five-Year Plans, also in programs of China CDM Fund.

SWOT ANALYSE for green policy of China

Strongness

Realise the main aims to reduction greenhouse gas emission and low carbon development based on the green policy. According to realise these economic aims, for the periods of the 11^th Five-Year Plan and 12^th Five Year Plan the central governmental supports have been considerable and the concessional loans provided by China CDM Fund provided considerable favourable financial bases for firms to decrease their greenhouse gas emission by using advanced environment friendly technology.

Weakness

In China there are some difficulties concerning the less time successful monitoring system, missing collecting data, missing knowledge of governmental offices in environmental fields, not every time well organized harmonization for different levels of governmental and local making – decision, missing cooperation among the governmental offices and corporations and firms in different economic areas.

Opportunity

The Kyoto agreements are for reduction greenhouse gas emission, which provide cooperation for realising targets of green policy. These international agreements can provide wider cooperation for advanced technological transfer from developed countries to developing countries. The technological transfer of transnational corporations within Foreign Direct Investment (FDI) inflow into the East Asian and Pacific and China can also decrease the lack of capital in this region.

Threaten

Weak international cooperation for the reduction greenhouse gas emission, low carbon development. Strong contradiction is among developing and developed countries, when the developed economies have less willingness to help developing economies in decreasing effects of climate change. Therefore the developing economies cannot use transfer technology from using technology based on the fossil energy use to renewable energy use. Therefore developing economies increased the greenhouse gas emission, while several developed economies like US does not want to reduce gas emission, but the decreased the growing rate of fossil energy use.

Concerning the above mentioned some main questions concerning the Climate Friendly Technology (CFT) emerge in case of China. For the first question it can be declared that has China could realise some main aims of China CDM Fund, namely greenhouse gas emission reduction and low carbon technology based on the innovative environment friendly technology, as it can be seen in the Table-2, because the reduction CO2 emission per unit of GDP reduced by 11 – 19,5% in 12^th Five Year Plan period. For the second question the reply is that China transferred its economic performance from fossil energy resource use to renewable energy resource use by widely applied solar, wind and water resources. China became the fifth largest wind energy using country in the world economy.

For the third question the reply is that China implemented serious development in field of renewable energy resource use in the international compare, which can be proofed by data in the Table-1, namely in coal consumption of power plant, energy consumption of steel production, comprehensive cement energy consumption and comprehensive paper and paperboard energy consumption. It can be seen that China could decide its economic growth in direction to the use renewable resource use, low carbon technological production and extend CDM in the international compare.

Conclusions

China has achieved many considerable hopeful results to decrease the greenhouse gas emissions in the country, and based on its important results China became the fourth largest wind power supplier in the world economy and favourable economic and financial background were created for the corporations in this country. Supports of China CDM Fund are equally with mostly providing concessional loans, which can ensure adequate capital supply for firms to develop performance of China to realise green policy strategy adequate for greenhouse gas emission reduction and low carbon development.

The electricity production can create many kinds of damages in the natural environment, when electricity production is realised by burning coal by two times more than carbon dioxide contributing to increase effects for the global warming. Therefore the renewable energy resources should be used mostly in order to avoid of the possible future damages for the nature either in china or in other parts of the world economy.

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