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Prof. Xu Jintao: Applying Economic Means to Achieve Dual Carbon

Feb 20-2024   



Achieving ‘peak carbon’ and ‘carbon neutrality’ is an intrinsic necessity for implementing new development ideas and constructing new development patterns. It will facilitate China’s high-quality economic development and showcase China’s responsibility towards to the world as a large nation. In a media interview, Prof. Xu Jintao of the NSD begins with an analysis of the major challenges to realize the Dual Carbon targets and elaborates on the choice between administrative methods and economic policy and the balance between environmental protection and economic development.

 

In 2020, President Xi Jinping set forth ‘peak carbon’ target by 2030 and ‘carbon neutrality’ by 2060. Prof. Xu believed that without China’s participation, the global climate actions could hardly be meaningful. The most daunting challenge for achieving the Dual Carbon targets lies in untangling the paradox between economic development and the necessity to reduce energy consumption and emissions, said Prof. Xu. This has enjoyed the consensus of society, but he pointed out that those who bear the costs related to energy saving and emission reduction are not exactly the ones who benefit from such efforts. Therefore, an appropriate mechanism is needed to motivate relevant parties. Prof. Xu said that such a mechanism should essentially be a policy system that makes good use of pricing methods and economic policy. This will render the transition low-cost, fair and rational, in stark contrast to previous administration-directed, movement-styled methods. Prof. Xu pointed out that the latter tends to shut down private firms and turn a blind eye to SOES, thus sacrificing the most dynamic part of economic development.

 

A rational policy framework can accommodate both environmental governance and economic development, said Prof. Xu. Through pricing methods, namely subsidy and taxation, China has succeeded in reducing the per-watt cost of renewable energy by 90% over the last decade and becoming the world’s largest manufacturer and exporter of photovoltaic and wind power equipment. Since 2021, subsidies for renewable energy have been scaled back across the board, showing that the policy has delivered desired effects. Another measure, a quantitative one, to reduce carbon emissions is carbon trading. Instead of specifying prices, the government uses emission volumes to accord emission rights and allows trading of the rights, which enables the market to discover prices. Prof. Xu said that the government might resort more to taxation in the future to solve environmental issues. Environmental taxes, low at the moment, need to become more flexible and higher, said Prof. Xu.

 

In addition to the market as the predominant method for allocating resources, the government has a role to play, said Prof. Xu. The European Union’s Carbon Border Adjustment Mechanism (CBAM) has already created significant impact, while the US is accelerating its climate actions and might roll out an act similar to but more stringent than CBAM. Being a big exporter, China will see its firms’ emission costs rise significantly. Such developments are likely to give rise to China’s own carbon tax mechanism, which might on its own or in combination with carbon trading become the country’s go-to tool for regulating carbon emissions in the next 10 to 15 years, said Prof. Xu.

 

Citing research which showed that enhancing energy efficiency might account for achieving 20-30% of carbon neutrality, Prof. Xu highlighted the crucial role of expanding forest acreage to capture and store carbon emissions that are bound to exist even as technology advances. It is estimated that by 2060 two to three billion tons of carbon dioxides will still have to be emitted.

Prof. Xu Jintao: Applying Economic Means to Achieve Dual Carbon

Feb 20-2024   



Achieving ‘peak carbon’ and ‘carbon neutrality’ is an intrinsic necessity for implementing new development ideas and constructing new development patterns. It will facilitate China’s high-quality economic development and showcase China’s responsibility towards to the world as a large nation. In a media interview, Prof. Xu Jintao of the NSD begins with an analysis of the major challenges to realize the Dual Carbon targets and elaborates on the choice between administrative methods and economic policy and the balance between environmental protection and economic development.

 

In 2020, President Xi Jinping set forth ‘peak carbon’ target by 2030 and ‘carbon neutrality’ by 2060. Prof. Xu believed that without China’s participation, the global climate actions could hardly be meaningful. The most daunting challenge for achieving the Dual Carbon targets lies in untangling the paradox between economic development and the necessity to reduce energy consumption and emissions, said Prof. Xu. This has enjoyed the consensus of society, but he pointed out that those who bear the costs related to energy saving and emission reduction are not exactly the ones who benefit from such efforts. Therefore, an appropriate mechanism is needed to motivate relevant parties. Prof. Xu said that such a mechanism should essentially be a policy system that makes good use of pricing methods and economic policy. This will render the transition low-cost, fair and rational, in stark contrast to previous administration-directed, movement-styled methods. Prof. Xu pointed out that the latter tends to shut down private firms and turn a blind eye to SOES, thus sacrificing the most dynamic part of economic development.

 

A rational policy framework can accommodate both environmental governance and economic development, said Prof. Xu. Through pricing methods, namely subsidy and taxation, China has succeeded in reducing the per-watt cost of renewable energy by 90% over the last decade and becoming the world’s largest manufacturer and exporter of photovoltaic and wind power equipment. Since 2021, subsidies for renewable energy have been scaled back across the board, showing that the policy has delivered desired effects. Another measure, a quantitative one, to reduce carbon emissions is carbon trading. Instead of specifying prices, the government uses emission volumes to accord emission rights and allows trading of the rights, which enables the market to discover prices. Prof. Xu said that the government might resort more to taxation in the future to solve environmental issues. Environmental taxes, low at the moment, need to become more flexible and higher, said Prof. Xu.

 

In addition to the market as the predominant method for allocating resources, the government has a role to play, said Prof. Xu. The European Union’s Carbon Border Adjustment Mechanism (CBAM) has already created significant impact, while the US is accelerating its climate actions and might roll out an act similar to but more stringent than CBAM. Being a big exporter, China will see its firms’ emission costs rise significantly. Such developments are likely to give rise to China’s own carbon tax mechanism, which might on its own or in combination with carbon trading become the country’s go-to tool for regulating carbon emissions in the next 10 to 15 years, said Prof. Xu.

 

Citing research which showed that enhancing energy efficiency might account for achieving 20-30% of carbon neutrality, Prof. Xu highlighted the crucial role of expanding forest acreage to capture and store carbon emissions that are bound to exist even as technology advances. It is estimated that by 2060 two to three billion tons of carbon dioxides will still have to be emitted.