Car­bon mar­ket for sus­tain­able growth

China Daily (Hong Kong) - - COMMENT - Chris Busch The au­thor is En­ergy In­no­va­tion’s re­search di­rec­tor.

With China set to launch an emis­sion trad­ing sys­tem (ETS) na­tion­wide to re­duce car­bon diox­ide emis­sions, its pol­i­cy­mak­ers could learn a thing or two from Cal­i­for­nia’s suc­cess­ful ETS. Cal­i­for­nia’s ex­pe­ri­ence sug­gests the ETS will help China achieve sus­tain­able growth. Many may ques­tion how an en­vi­ron­men­tal pol­icy can help gen­er­ate sus­tain­able eco­nomic growth. The an­swer is, it can do so in three ways.

First, im­pos­ing a price on car­bon emis­sions will help achieve President Xi Jin­ping’s goal of more ef­fi­cient eco­nomic al­lo­ca­tion through mar­ket sig­nals.

Sec­ond, re­duc­ing green­house gases such as car­bon diox­ide will im­prove the qual­ity of air, so the car­bon mar­ket will help cre­ate more blue-sky days in China, which means bet­ter per­for­mances from both blue-col­lar and white-col­lar work­ers.

And third, as the rest of the world in­creas­ingly em­braces clean tech­nolo­gies, China’s ef­forts will help do­mes­tic en­ter­prises to de­velop the ex­per­tise needed to be­come more com­pet­i­tive in the global mar­kets.

Car­bon re­duc­tions have proven to be eas­ier to ac­com­plish and more ben­e­fi­cial than ex­pected in eco­nomic and so­cial terms in the Euro­pean Union, the Scan­di­na­vian coun­tries, and Cal­i­for­nia.

Cal­i­for­nia has shown that car­bon pric­ing can co­ex­ist with strong eco­nomic growth. The US state has the high­est ETS price in the world — more than twice the EU price — along with the strong­est over­all eco­nomic growth in the West­ern hemi­sphere.

Also, Cal­i­for­nia’s ro­bust ETS price has un­leashed in­no­va­tion and at­tracted new in­vest­ment. It leads the other US states in clean tech­nol­ogy in­vest­ment and patents, and reg­u­larly at­tracts the most clean-tech ven­ture cap­i­tal in­vest­ment in the US. And last year, Cal­i­for­nia at­tracted $1.4 bil­lion in clean-tech ven­ture cap­i­tal, ac­count­ing for two-thirds of the to­tal ven­ture cap­i­tal in the United States.

Since its ETS went into ef­fect in 2012, Cal­i­for­nia’s job cre­ation rate has been 50 per­cent higher and eco­nomic growth twice as fast as the US na­tional rate. And among these jobs, more than 500,000 have been cre­ated in the clean en­ergy in­dus­try, in­clud­ing over 150,000 in the so­lar power sec­tor.

Be­sides, the ef­fects of the ETS have been al­most im­per­cep­ti­ble on en­ergy prices. Since gas prices are de­ter­mined more by global oil prices than the car­bon mar­ket, diesel costs less in Cal­i­for­nia to­day than what it did when the ETS went into ef­fect, be­cause of lower in­ter­na­tional prices.

A re­duc­tion in pol­lu­tion means an im­prove­ment in the air qual­ity, which is just one of the ben­e­fits of fight­ing cli­mate change. This was aptly ex­plained by Xie Zhen­hua, China’s spe­cial rep­re­sen­ta­tive on cli­mate change is­sues: “The cause of air pol­lu­tion and cli­mate change is the same — the burn­ing of fos­sil fu­els. Many of the poli­cies and mea­sures to solve the two is­sues are the same, such as re­duc­ing coal con­sump­tion and con­trol­ling the num­ber of mo­tor ve­hi­cles.”

More­over, sta­tis­tics help con­vey the op­por­tu­ni­ties of­fered by the surging global clean tech­nol­ogy mar­kets. Re­new­able elec­tric­ity gen­er­a­tion tech­nolo­gies have at­tracted more new in­vest­ment glob­ally than fos­sil fuel tech­nol­ogy since 2011.

Last year, re­new­able en­ergy tech­nolo­gies ac­counted for 70 per­cent of the new power plants that were set up, at­tract­ing more than $200 bil­lion in new cap­i­tal in­vest­ment. Bat­tery en­ergy stor­age and elec­tric ve­hi­cles ap­pear poised to make sim­i­lar spec­tac­u­lar gains.

Bloomberg New En­ergy Fi­nance pre­dicts that by 2030 half of the new sales will be bat­tery-driven elec­tric ve­hi­cles, and The Econ­o­mist has called the in­ter­nal com­bus­tion en­gine “roadkill” that sug­gests “the end is in sight for the ma­chine that changed the world”.

As the world’s leader — in in­stal­la­tion and man­u­fac­tur­ing of so­lar power, wind power, and elec­tric ve­hi­cles — China is well po­si­tioned to win in these rapidly grow­ing global mar­kets, but it can only do so with smart pub­lic pol­icy, in­clud­ing a well-de­signed ETS.

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