Paving the Way for Policy

Feb 02, 2016
Paving the Way for Policy

Mark Dwortzan | MIT Joint Program on the Science and Policy of Global Change

In the global effort to mitigate climate change, China has taken center stage. The world’s leading carbon dioxide emitter (the U.S. is second), China emits 30 percent of global CO2 emissions and is home to some of the planet’s worst air pollution, both largely due to its reliance on coal for energy. More than a year before the Paris climate talks in December 2015, many watched closely to see what China and the U.S. would put on the table. In November 2014 at the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing, Presidents Obama and Xi jointly unveiled landmark pledges for post-2030 action that represented a new level of ambition for both nations.

Specifically, China pledged to achieve two energy-related goals by 2030: to increase the share of non-fossil fuels (nuclear power and renewables) in its energy mix to about 20 percent, and to reach its peak in CO2 emissions. In support of those goals, it announced a national cap-and-trade system that will put a price on carbon emissions starting in 2017.

China did not arrive at these major policy decisions overnight; they represent a three-year effort to develop a comprehensive plan to balance environmental, public health and economic concerns on the home front with growing international pressure to mitigate its rising greenhouse gas emissions. To formulate that plan, Chinese government officials consulted with leading experts in climate science, energy and economics, including those at the Tsinghua-MIT China Energy & Climate Project (CECP), an initiative of the MIT Joint Program on the Science of Global Change that provides analyses of the impact of existing and proposed energy and climate policies in China on its technology, energy mix, environment and economy.   

In its signature study—released in October 2014 as a Joint Program Report and presented over the course of a year to nearly 100 policymakers, academics and industry representatives in Beijing—CECP researchers showed that by combining carbon taxes with ongoing investment in increasingly cost-competitive renewable energy technologies, China could achieve peak CO2 emissions by 2030 without undermining long-term economic growth. Known as the China Climate and Energy Outlook, the CECP study now appears in the journal Energy Economics.

Influencing U.S.-China Cooperation on Climate Change

Since its initial release in 2014, the study has made a substantial contribution to U.S.-China cooperation on climate change and global efforts at the recent Paris climate talks.

“Both the U.S. and Chinese governments relied significantly on a number of studies of China's future energy and emissions trajectories that were conducted over the past two years to inform them on the details behind China's proposed climate goals which were announced in November 2014 in the U.S.-China Joint Announcement on Climate Change, submitted as part of China's Intended Nationally Determined Contributions, and ultimately included in the Paris Agreement in December 2015,” says Lynn Price, senior staff scientist and leader of the China Energy Group of the Energy Analysis and Environmental Impacts Division at Lawrence Berkeley National Laboratory. “The China Climate and Energy Outlook was a key study that helped positively shape the U.S.-China climate cooperation that has been credited with providing the momentum for the successful outcome in Paris."

Paul Joffe, senior foreign policy counsel at the World Resources Institute in Washington, DC, concurs.

“CECP’s research has helped inform both the U.S. and China about China’s climate change mitigation potential and what targets and policies China could adopt,” says Joffe. “This was important as the U.S. and China reached a breakthrough understanding on their climate action goals, embodied in their climate action plans for the Paris climate conference. Understanding of China’s climate action helped build momentum among other countries, resulting in the successful conclusion at Paris.”

Projecting Economically Viable Climate Solutions

The Outlook used an analytical framework developed by CECP—the China-in-Global Energy Model (C-GEM)—to test what might happen under three policy scenarios between 2010 and 2050: a No Policy (baseline) scenario in which no energy or climate policies are implemented from 2010 onwards, resulting in steady CO2 emissions growth through 2050, endangering prospects for global climate stabilization; a Continued Effort scenario that assumes that China remains on its pre-COP21 path of reducing carbon intensity by around 40% every 15 years; and an Accelerated Effort scenario that assumes increases in both the resource tax applied to coal, crude oil and natural gas, and in tax incentives to promote renewable energy.

Enabled by a carbon price that rises to $26/ton CO2 in 2030 and $58/ton CO2 in 2050, the Continued Effort scenario would lead to carbon emissions peaking around 2040 and the non-fossil energy share rising to 15% in 2020 and around 26% in 2050. In the Accelerated Effort scenario, which approximates China’s COP21 pledge, CO2 emissions peak around 2030 (with coal consumption peaking around 2020) and the non-fossil energy share rises to 26% in 2030. In this scenario, the carbon tax rises from $38/ton CO2 in 2030 to $115/ton CO2 in 2050. Meeting the 2030 targets would exact an added cost to the economy that rises to 2.6% of the value of China’s domestic consumption in 2050.  

The CECP team’s analysis indicates that a commitment to a significant energy system transition—one that includes broad market reforms and a price on carbon emissions—can reduce environmental impact while maintaining economic growth over the longer term. While the study does not explicitly calculate avoided air pollution and health damages, the researchers note that reductions in coal under both policy scenarios will reduce adverse impacts on these fronts as well.

“The CECP China Climate and Energy Outlook demonstrated the value of co-creating policy-relevant analysis through international academic collaboration,” says study co-author Valerie Karplus, an Assistant Professor of Global Economics and Management at the MIT Sloan School of Management and Director of CECP in the MIT Joint Program from 2011 to 2015. “When it comes to the impact of our work, the mutual understanding and trust built in the course of model development has proven to be as important to its impact as the numbers themselves."

At MIT the CECP is supported by founding sponsors AFD, Eni, ICF International, and Shell, and receives sustaining sponsorship from the Energy Information Administration at the U.S. Department of Energy. At Tsinghua University, the program is supported by the Ministry of Science and Technology, National Development and Reform Commission, and the National Energy Administration as well as Rio Tinto. Both groups also received support from the U.S. Energy Foundation.

Photo: On Dec. 4, MIT Sloan School of Management professors Henry Jacoby (right) and Valerie Karplus (center) and their collaborator, Professor Xiliang Zhang (left) of Tsinghua University and the MIT-Tsinghua China Energy and Climate Project, gave presentations at the MIT Club of France in the historic France-Amériques building. Addressing an audience of COP21 attendees, MIT alumni, current students and others, they discussed how China’s actions coming out of COP21 could help shape the future global energy system. (Photo by Emily Dahl, MIT Energy Intitative)