China's 13th Five Year Plan: A green light for a green future
By Isabel Hilton, CEO China Dialogue Trust
China’s 13th Five Year Plan, approved at the March meeting of the country’s Nation People’s Congress (NPC), has reaffirmed China’s commitment to a low carbon future, both as a national environmental policy and as a strategic economic direction.
China’s old industrial economy is sputtering, dragged down by huge overcapacity and falling prices in steel, coal and cement. The 13th Plan maps out the next steps in China’s effort to move to a higher value, greener and more efficient economic future.
The plan’s details will emerge over the next several months but the outline is clear. Headline measures include a national energy cap; tighter targets for carbon and energy intensity; stricter controls on air, water and soil pollution; and plans to close down excess capacity in steel and coal. The layoffs would be compensated for by even greater investment in the renewables sector and in clean technologies, including electric mobility.
Leading on renewables
China plans to build on past efforts in renewable technologies that have resulted in the largest installed capacity in solar and wind and a rapid expansion of the export market in renewables. China is investing heavily in new power grids to support the continued development of renewables and already generates a quarter of its electricity from non-fossil sources.
The next phase would include growth in Chinese patents in more advanced technologies which, combined with its proven ability to manufacture efficiently and at scale, could position China as the dominant supplier of technology to an increasingly carbon constrained world.
The 13th Plan has set an overall growth target of 6.5% per year, despite some internal debate about whether target setting was appropriate at this stage of development. The bulk of this growth is intended to come from services, which planners hope will constitute 56% of the economy by 2020. This will, in turn, drive greater domestic consumption, which reached 44.5% of GDP in 2015, up from 36.8% ten years earlier.
This rebalancing of the economy should allow China to easily meet its new target of an 18% reduction in carbon intensity from current levels. This target builds upon existing carbon intensity targets of 40 to 45% reduction by 2020 and 60 to 65% reduction by 2030, both on 2005 levels.
The plan also includes:
- a target of 15% reduction in energy intensity over the life of the plan;
- reaffirmation of a 15% share of non-fossil fuels in electricity by 2020, which implies a total installed capacity of 250GW of wind power and 150GW of solar;
- a continuing expansion of hydropower to a total of 350GW by 2020;
- growth in nuclear by 38 to 49GW;
- an increase in biomass by 30GW.
An innovative and advanced economy
Speaking at the opening session, China’s prime minister Li Keqiang painted a picture of an innovative and advanced economy by 2020, with 2.5% of GDP devoted to science, technology and research and development.
He also repeated his determination to address some of the needed reforms in which little progress have been made so far. These include allowing a “decisive role” for market forces and “supply-side reforms”, code for a reduction in the role of inefficient state-owned enterprises.
Maintaining growth without expensive and wasteful investment may also prove challenging: the plan includes 50 new airports and further investment in high speed rail, both sectors that are close to saturation. The success of the plan may ultimately depend more on smaller, less glamorous initiatives in fields such as energy efficiency, that the Chinese system finds more difficult to implement.