China's top legislature has just approved a new law designed to put production in what is now one of the world's four biggest economies on a more sustainable foundation. When the law comes into force in January, it will add weight to government efforts to get industry to use energy and other resources less wastefully and curb emissions that harm health and the environment.
Dubbed the ''circular'' economy by officials, this is China's latest effort to go green by raising efficiency and harnessing alternative energy to reduce reliance on coal, oil and gas all of which when burned release carbon dioxide, the main greenhouse gas blamed for global warming and climate change.
China pays a heavy price for waste and inefficiency in its economy, and the internal debate among policymakers, industry and non-government groups concerned about the consequences of runaway economic expansion echoes concerns in Australia and elsewhere. The head of the National Development and Reform Commission, Ma Kai, said last year that in 2006 China used 15 per cent of the world's energy to produce just 5.5 per cent of global GDP.
''The overall growth of the Chinese economy is inspiring, but one of the worries is that we have paid too dear an environmental and resources price for such growth,'' he said. Enacting the new law intended to improve this situation is the easy part. Enforcing it at all levels of the Chinese bureaucracy will be much more difficult as provincial and local governments across the vast country compete to attract and retain industries (and the employment and wages they bring), even if they are dirty or only semi-clean.
China, like the Bush Admini-stration in the United States, is wary of committing to a binding national cap on its greenhouse gas emissions because it knows that doing so could undermine its competitive advantage. This was the position taken by the Howard government. But it was reversed when the Rudd Government signed the Kyoto protocol in December. Now, Australia and other advanced economies risk losing their competitive edge unless there are agreed global rules, universally and equitably applied to all sectors of all major economies. Otherwise, energy-intensive industries and sectors in some countries will be hit harder than others elsewhere by emission controls and taxes.
To see the buffeting facing governments and economies in the brave new world of environmental correctness, China need look no further than Australia, one of its leading resource suppliers. Australia is the fourth-largest greenhouse gas emitter in the world on a per capita basis, mainly because it relies heavily on coal to generate electricity. China has a similar dependence. However, Australia emits five times more per person than China.
The Rudd Government plans to launch a national cap-and-trade scheme by 2010 that would set emissions levels for 75 per cent of the economy, including 1000 of Australia's biggest companies. The scheme will put a price on emissions and then oblige companies exceeding their allocated caps to buy permits to cover them. The latest report to the Government by its top climate change adviser, Ross Garnaut recommended an initial carbon price of $A20 a tonne. Business groups say this is too high, while environmenta-lists say it is too low and risks catastrophic climate change.
The emissions trading plan, which is still under negotiation with industry, has triggered a raging debate over how costs are to be apportioned among companies, consumers and government. Rudd said recently the scheme would ''help drive our long-term transformation to a low-carbon economy.'' But industry has warned it could drive large emitters offshore or out of business while deterring new investment in critical infrastructure like power supply, and sharply raising prices of electricity and other products for consumers.
The Government has promised compensation for consumers and help for businesses facing higher energy costs. But in doing so, it has distorted the ''polluter pays'' principle in an attempt to ease the burden on firms most likely to loose their competitive edge at home or abroad. Energy-intensive industries with more than 2000 metric tonnes of emissions per $1000 in revenue would pay for only 10 per cent of their emissions, while cleaner companies producing 1500-2000 tons would pay for 40 per cent of their emissions.
Wherever emissions trading schemes have been mooted, they are proving controversial. As part of its drive to lead the world in fighting climate change, the European Union has promised to cut emissions by 20 per cent by 2020, compared with 1990 levels. It has said it would deepen the cut to 30 per cent if big economies like China and the US joined the global reduction effort. Some members of the European Parliament are now having second thoughts in the face of industry protests. They are calling for a full impact assessment before cutting beyond 20 per cent. No wonder, then, that China is cautious. It does not want to cut its emissions to spite its economy.
The writer, a former Asia editor of the International Herald Tribune, is an energy and security specialist at the Institute of South-East Asian Studies in Singapore.
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