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Racing to a Competitive Economy: China Pursues High GDP, Low-Carbon Growth

Xueman Wang's picture
Also available in: 中文

 Yang Aijun/World Bank

December 2009 does not seem so long ago. The UN climate conference in Copenhagen had just come to a disappointing end, and I headed home feeling depressed.  I returned to China for holiday and was surprised to see the widespread awareness of climate change and the collective sense of urgency for action. The concept of "low carbon" was discussed in all major and local newspapers. To my amazement, I even found an advertisement for a "low carbon" wedding. I finished my holiday and went back to Washington with optimism and hope: Despite the failings of Copenhagen, China, the biggest emitter in the world and the largest developing country, was going through a real transformational change. China clearly saw action on climate change as serving its own interest and as an opportunity to pursue a green growth model that decouples economic development from carbon emissions and resource dependence.

In the past five years, the world has witnessed the emergence of China as a leader for tackling climate change.  A few weeks ago, colleagues at the World Bank Group heard an evidenced-based presentation by Vice Chairman Xie Zhenhua from the National Development Reform Commission (NDRC) of China, who showed what China had done in the past, is doing now, and plans to do in the future. He shared his candid assessment of the challenges, mistakes, and lessons learned from China's experience.

China’s progress is impressive. Between 2005 and 2013, average economic growth has been above 8 percent while the country’s emissions intensity has decreased by 28.5 percent compared with 2005 levels. This equates to emissions reductions of 23 million tons of CO2. These reductions were achieved through massive closures of inefficient coal fire plants, aggressive energy efficiency programs, expanding the renewable energy program, and large investments in clean technology.

While these numbers are impressive, sustaining them will be harder. Over the last 10 years, China has targeted its "low-hanging fruit" for mitigation options. The challenge today is how China will sustain annual GDP growth of more than 7 percent while continuing to reduce its economy’s emissions intensity.

Putting A Price on Carbon: Nations Opt For Market-Based Solutions

Xueman Wang's picture

 Curt Carnemark/World Bank

Climate change is a threat to global development and to poverty alleviation. And yet, reducing greenhouse gas emissions is proving difficult because all players in an economy contribute to the problem. To make a difference, we must reduce our emissions in a coordinated manner.

This is no easy task. So where do we go from here?

One approach involves pricing the “externalities” that are contributing to climate change. Pricing externalities into the costs of production is nothing new. A classic textbook example is the paper mill that sits upstream from a fishing village.

Discharge from the mill pollutes the river, diminishing the fishermen’s catch. The mill freely uses the water of the river in its production of paper, but does not pay for the damage of the negative externality that it causes. To remedy the situation, regulations can be put in place to stop waste from going into the river – or the mill can pay a fine equivalent to the loss of the fishermen’s revenue.

The latter is an example of an externality priced into the cost of production. The same can be done to combat climate change.

In this case, carbon emissions are the externality that must be priced. Doing so provides a cost-effective and efficient means to drive down greenhouse gas emissions as the cost of such pollution goes up.

With an Eye Toward the Future: Building Resilience in a Changing World

Habiba Gitay's picture

 Chatchai Somwat/Shutterstock

Typhoon Haiyan, the Category 5 super storm that devastated parts of the Philippines and killed thousands late last year, continues to remind us, tragically, of how vulnerable we are to weather-related disasters.

As the images of destruction and desperation continue to circle the globe, we’re also reminded that those most at risk when natural disaster strikes are the world’s poor – people who have little money to help them recover and who lack food security, access to clean water, sanitation and health services.

Over the last year, as one major extreme weather event after another wreaked havoc and claimed lives in the developing world, terms such as "resilience" and "loss and damage" have become part and parcel of our efforts here at the World Bank Group – and for good reason.

Developing countries have been facing mounting losses from floods, storms and droughts. Looking ahead, it’s been estimated that up to 325 million extremely poor people could be living in the 49 most hazard-prone countries in 2030, the majority in South Asia and Sub-Saharan Africa.

These scenarios are not compatible with the World Bank Group’s goal to reduce extreme poverty to less than 3 percent by 2030, or with our goal to promote shared prosperity.

Celebrating Success, Ongoing Challenges, and Opportunities that face the Montreal Protocol

Karin Shepardson's picture

New air conditioning units manufactured in a factory.

Today (September 16) is International Ozone Day. This day offers the international community the opportunity to laud the achievements of the Montreal Protocol on Substances that Deplete the Ozone Layer. Since 1987, the Protocol has worked to reduce the production and consumption of ozone-depleting substances (ODS), man-made industrial chemicals that damage the earth’s ozone layer.

Yet, as has become clear over the past few years, International Ozone Day is about more than just successful ozone layer protection. Given that many substances that deplete the ozone layer also have global warming potential (GWP), the transition to the use of substances with lower or no GWP has contributed important climate co-benefits over the years. As a result, the Protocol’s agenda has increasingly focused on cross-cutting themes linked with climate mitigation and energy efficiency. From both ozone and climate perspectives, the Protocol is widely recognized as a success.

The World Bank–China Montreal Protocol partnership is a testament to this success. Over the past two decades, it has phased-out more than 219,000 tons of ozone depleting substances from sectors as varied as refrigeration, air-conditioning, foam manufacturing, aerosol production, and fire extinguishing. Since these substances have GWP, the phase-out also avoided the equivalent of 885 million tons of carbon dioxide (CO2) or having the effect of taking 184 million cars off the roads.

Domestic Carbon Markets Draw Attention at the Carbon Expo

Neeraj Prasad's picture

Mary Barton-Dock, director of the Climate Policy and Finance unit of the World Bank, welcomes the participants to the 10th Carbon Expo in Barcelona
Some 2000 visitors from more than 100 countries are leaving Barcelona today at the end of Carbon Expo. The meeting, now in its 10th year, got off to a great start on Wednesday with the director of the World Bank´s Climate Policy and Finance unit, Mary Barton-Dock, welcoming the participants, followed by stimulating opening remarks from Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change (UNFCCC).

Figueres urged the audience to continue building carbon markets and not wait for policy perfections. She also encouraged participants to continue making the case for carbon markets to policy makers, who have committed to a global agreement on emissions by 2015. She emphasized the importance for the private sector to more loudly voice their willingness and ability to move to a low-carbon growth trajectory and compared the carbon market to a tree planted just a few years ago, not possibly imagining that today it would have sprouted 6,800 projects registered with the UNFCCC in 88 countries, representing 215 billion dollars of investment.

However, Figueres also acknowledged the importance of domestic initiatives that were putting a price on carbon, at a time when a global agreement continued to challenge policy makers.

China Phase-Out of Ozone Damaging Chemicals Brings Climate Benefits

Karin Shepardson's picture

A slew of air conditioning units in a building. - Photo: Shutterstock

Also available in Chinese

Last month, China was granted US$95 million to reduce its production of hydro-chlorofluorocarbons (HCFCs), substances that are used primarily for cooling, refrigeration, and the manufacture of foam products. The funding comes from the Multilateral Fund (MLF) of the Montreal Protocol, because HCFCs deplete the ozone layer and are controlled under the Protocol. With access to these funds, between now and 2015 China will reduce its production of HCFCs by 10%, or 47,000 metric tons from 2010 levels, allowing it to meet the first reduction targets set by the Protocol.

This alone is worth celebrating because China is the world's largest producer of HCFCs. Nearly 50% of its production is consumed by other developing countries, all of whom also face HCFC consumption reduction targets under the Protocol. Herein lies one secret to the Protocol’s success: its ability to regulate both production and consumption worldwide simultaneously, putting into practice an economist’s dream to tackle both supply and demand in tandem. By addressing the supply side of the problem through support to China’s production phase-out, the demand side - in China and in developing countries around the world - can build a sustainable HCFC consumption phase-out response. The ozone layer, and human and environmental health, will all be the better for it.

China Gets Ready for a New Carbon Era

Wang Shu's picture

 Rush hour traffic on a road in Beijing, China. - Photo: Shutterstock

Also available in Chinese

The 5th Assembly of the World Bank’s Partnership for Market Readiness (PMR) is coming to an end after rich and rewarding meetings in Washington DC this week. I had the opportunity to present China’s final Market Readiness Proposal (MRP) (pdf), or in more simple language, China’s proposal to build a national emission trading system (ETS). Together with China, the PMR also received proposals from Chile, Costa Rica and Mexico on their initiatives. (Also read: Can Carbon Taxes Be Effective?)

From the Chinese perspective, our MRP serves as a summary of the Government’s initial thoughts on how a domestic ETS would be established to cover the whole country. For this to happen, a lot of work needs to be done, and this proposal provides a framework and roadmap to guide us on our journey. We are expecting domestic and international institutions, experts and stakeholders from different levels to be involved in this design process. Above all, we hope to draw on the experience of existing carbon markets around the world as well as from the seven pilot ETSs - comprising five cities and two provinces - set to start this year in China. Facilitating continuous technical dialogues, PMR serves as a knowledge exchange platform for our team from China and all the participant countries. This is a unique and valuable experience. 

Shaping the Next Generation of Carbon Markets

Rachel Kyte's picture

 Smoke coming out of two smokestacks at a factory in Estonia. - Photo: World Bank/Flickr

Right now, the carbon markets of the future are under construction in all corners of the world.

China is determined to pursue low-carbon development and is embracing the market as the most efficient way to do so. Wang Shu, the deputy director of China's National Development and Reform Commission, told us this week that he sees the "magic of the market" as the most efficient way to drive China's green growth.

Five Chinese cities and two provinces are piloting emissions trading systems with the goal of building a national carbon market. Chile is exploring an emissions trading system and focusing on energy efficiency and renewable energy. Mexico is developing market-based mechanisms in energy efficiency that could cut its emissions by as much as 30 percent by 2020. Costa Rica is aiming for a carbon-neutral economy by 2021.

Each of the countries pioneering market-based mechanisms to reduce their domestic carbon emissions are leaders. Bring them together in one room, and you begin to see progress and the enormous potential for a powerful networking domestic system that could begin to produce a predictable carbon price -- a sina que non for the speed and scale of climate action we need.

That's happening this week at the World Bank.


Will China and the US be partners or rivals in the new energy economy?

Daniel Kammen's picture

When Chinese president Hu Jintao visited the US this month, many issues made headlines, but one that didn’t is nonetheless important: clean energy cooperation, competition, or both. This issue is a litmus test for the two superpowers’ ability to build a partnership based on mutual needs and opportunities. The outcome will affect our global economic, environmental and geopolitical future, and may influence the range of clean energy opportunities for emerging economies in fundamental ways.


Cooperation does exist between the US and China, with longstanding joint work on energy efficiency standards, and through a new but underfunded US-China Clean Energy Research Center. But the game has to be raised with higher-profile actions. Far more can be gained globally if a spirit of cooperation permeates the high-level political dialogue. These are not the only two nations to watch, but because they are the two largest emitters of greenhouse gases, and the two largest economies on the planet, signs of a shared vision of the future would mean a great deal.


The two countries need each other to build the clean energy economy. China needs energy to grow, and can drive the exponential growth needed to move renewable energy to the center of the global energy system. The US has a nimble and deep research and development system, and serial innovators and entrepreneurs whose Silicon Valley mentality has created wealth many times over. US capital market and enterprise management capacities are huge.

I want to ride my bicycle

Flore de Préneuf's picture

"Bicycle bicycle bicycle
I want to ride my bicycle bicycle bicycle
I want to ride my bicycle
I want to ride my bike
I want to ride my bicycle
I want to ride it where I like

Earlier today, I was stuck in a herd of slow-moving, smoke-belching traffic (also known as the Beltway in Washington D.C.), when I heard an uplifting feature about electric bikes on the radio. Electric bikes are apparently all the rage at this year’s ongoing bike show in Taipei.

The WDR 2010 described in its chapter on innovation how the electric bike market took off in China over the last 10 years as a result of “technological improvements, faster urbanization, higher gasoline prices, and increases in purchasing power.” Not surprising, in the Kingdom of the Bicycle. But will e-bikes sway car addicts elsewhere?

On today’s “Science Friday” radio show, callers shared their enthusiasm for Do-It-Yourself mitigation. There are now dozens of kits out there to help retrofit ordinary bicycles -- so you can chug up a hill without a sweat. A brother and sister team, 59 and 61, are setting off on Earth Day on an electric bike tour of the United States to show that older people are never too old to pedal.