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International Consultants LtdAndrew Leung

Climate Change Adaptation –Policy, Strategies, Methods and Challenges - the Case of China

Professor Andrew K P Leung, SBS, FRSA International and Independent China Strategist

BIT’s 6th Low Carbon Earth Summit 2016 Qingdao, China

November 10-12, 2016

Disclaimer

All materials contained in this presentation, including any analysis, comments, remarks, opinions and pointers are for information, debate and discussions ONLY. No warranty of their accuracy, completeness, timeliness or reliability is implied.

Any reliance on these materials in any way assumes total exemption of any liability whatsoever of Andrew Leung International Consultants Limited and Andrew K P Leung including all their current and future Affiliates, Associates or Assigns.

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National ecological survival focuses the mind

China’s Future, David Shambaugh, Polity, 2016

• Average water availability < ¼ world average

• Glacial melt from Qinghai-Tibetan Plateaushrunk by 21% and 7% a year

• Desertification affecting 1/3 of land mass• Extreme weather events increasing • 300 million rural residents non-potable

water• Half of groundwater contaminated • 16 of world’s most polluted cities• World Bank – costs 5.8% of GDP

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Looming Water Crisis

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• 20% of world population; only 7% of world’s freshwater

• 1/4 of world average in per capita freshwater availability

• Very unevenly distributed : Yellow River - 2%, Yangtze River – 52%

• 67% of freshwater used in agriculture (of which 90% for rice), much inefficiency (< 50%)

• North China 65% of China’s agricultural land, relying on irrigation and underground aquifers

• Groundwater provides potable water for 70% population and irrigation for 40% of agriculture (60% up North)

• 70% rivers and lakes polluted to various degrees

• 90% groundwater in cities non-potable; 2/3 of 600 largest cities water-stressed

• Irrigated agriculture unsustainable – food security

• Industrialization 22% of water demand • Impending water crisis - increasing demand,

inefficiencies, pollution, and climate change.

Sustainability mandates greener economy

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Energy security necessitates self-reliant green energies China’s Malacca Dilemma

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Advantages of “Ecological Civilization” beckon

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Historical perspectives – Japan’s experienceFrank Gibney, Japan: The Fragile Superpower, W.W. Norton, 1975Most of the beautiful scenic (lake) was hopelessly polluted by … polluted waters from the factories on its shores. Smogwarning became regular and asthma sufferers began trekking to the hospitals. …. hundreds of people fell ill from eating the local fish. Many died. … mercury-filled drainage from one factory and where a painful bone disease was caused by cadmium

Susan L. Shirk, China: Fragile Superpower, Oxford University Press, 2007For ... decades, the government treated environmental protection as a distraction from economic growth……. acid rain is falling on one-third of the country, half of the water its seven largest rivers is ‘completely useless’……one-third of the urban population is breathing polluted air. More than 70% of the rivers and lakes are polluted., and ground water in 90% of the cities is tainted.

Osaka, 1955 - 2016

Kitakyushu- City (1960s ⇒ 2010)

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Milestones and Roadmaps

• Roadmap of Chinese Academy of Sciences - fossil energy’s share to decline from 92.7% in 2007 to 45% by 2050; renewable energy to rise from 6.5% to 45%; nuclear energy from 0.8% to 10%.

• 2010-2014. solar capacity increased by 3,161.6% to 28.05 gigawatts, wind by 225.8% to 96.37 gigawatts, nuclear by 83.7% to 19.88 gigawatts, biomass by 72.4% to 9.48 gigawatts, hydro by 39.7% to 301.83 gigawatts, and geothermal by 7.1% to 0.03 gigawatts. Overall increase 73.3% to 455.64 gigawatts in 4 years.

• Steel and cement production possibly peaked in 2014. ½ energy use subject to mandatory efficiency standards. = 85% less energy-intensity for economic growth compared to the past 25 years.

• Intended Nationally Determined Contribution (INDC) at COP21 -by 2030 over 2005 (a) CO2 emission to peak (b) lower CO2 intensity by 60-65% (c) increase non-fossil energy to 15% overall by 2020 and 20% by 2030 - 2X wind capacity to 200 gigawatts and >3X solar capacity to 100 gigawatts by 2020 over 2014 (d) reduce emissions by 40-45% by 2020 (e) increase forest stock by 4.5 billion cubic m (f) 20 billion yuan South-South Climate Cooperation Fund

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Environmental policies and laws

• September 2013, 6 ministries jointly launched Air Pollution Prevention and Control Action Plan in Beijing-Tianjin-Hebei Region. PM2.5, or “fine particle,” concentration, to reduce by 25% from 2012. Region’s total coal consumption to reduce by 83 million tons by 2017

• Environmental Protection Law 1 January 2015 - accumulative fines with no ceiling, NGO law suits enabled, local officials accountability tightened. Environmental Impact Assessment system to be embedded.

• Air Pollution Prevention and Control Law 1st January, 2016. Laggard cities to publish plans to achieve emission reduction targets with public input and regular updates. Party secretaries green credentials in judging promotion.

• 2013-2014: Shenzhen, Shanghai, Beijing, Guangdong, Tianjin, Hubei, and Chongqing pilot emission trading schemes combined to become world’ second largest (after Europe) = 650 to 700 m tons of CO2 in 2014 v 2.1 billion in Europe, 382 m in Australia and 165 m in California. National ETS expected for 2017.

• Carbon tax mooted.• Green dispatch system to promote renewable sources in electricity

distribution, especially solar and wind.• Clean coal measures, coal caps and coal-free zones. • Vehicle fuel quality standards to be enhanced.

Circular Economy Promotion Law, January 2009

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“Water 10”

"Water Ten Plan" (Directives), State Council, 16 April, 2015 –• Significant water improvement across the board by 2030• Over 70% of water in 7 key rivers to reach Grade III or above• Over 93% of urban drinking water sources to reach Grade III or above• To reduce groundwater over-extraction and control groundwater pollution –

groundwater falling under “very bad” category shall decrease to around 15% • Environmental quality of coastal areas – up to 70% to reach Grade I or II;• Improve urban water environment in key regions – the amount of Grade V+

water in Beijing-Tianjin-Hebei to fall by 15%, and in Yangtze River Delta and Pearl River Delta to be eliminated.

• To stay within 2020 cap of 670 b m3 water use• Pollution control, water efficiency, improvement in agriculture, municipal

water use, coastal water management and overall ecological protection.• 7 key rivers: Yangtze, Yellow, Pearl, Songhua, Huai, Hai & Liao River; 9 key

coastal bays; 3 key regions: Beijing-Tianjin-Hebei, Yangtze River Delta & Pearl River Delta; and 36 key cities including Beijing, Tianjin, Shanghai, Chongqing, 27 provincial capitals & 5 special cities including Dalian, Ningbo, Qingdao, Shenzhen & Xiamen.

• RMB1.9 trillion new investment in environmental-protection industries (of which RMB1.4 trillion for products & services) to create 3.9 million new non-agriculture jobs

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“Soil 10”• Action plan for Soil Pollution Prevention and

Control, State Council, May 31 2016, to be enacted 2017

• Some 19.4% farmland, 10.4% of grassland, and 10% woodland contaminated.

• Excessive levels of cadmium in rice and rice products• Nationwide survey to focus on tainted farmland and

impact on public health. • To decontaminate 90% of polluted farmland and

industrial sites by 2020; 95% of all polluted land to become safe by 2030.

• To build polluted land database and mechanism for controlling land developers

• Remediation costs to be paid by polluters, expected to cost $90 billion next 5 yrs; at least 6 trillion yuan to replenish tainted farmland; Beijing allocated only 9 b yuan for soil remediation in 2016, though 146% > 2015

• Costs, enforcement, and lack of reliable data main obstacles 12

Strategies and vision CHINA 2050 HIGH RENEWABLE ENERGY PENETRATION SCENARIO AND ROADMAP STUDY, Energy Research Institute, NDRC, China, April 2015

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Methods

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CHINA 2050 HIGH RENEWABLE ENERGY PENETRATION SCENARIO AND ROADMAP STUDY, Energy Research Institute, NDRC, China, April 2015

Modelling

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CHINA 2050 HIGH RENEWABLE ENERGY PENETRATION SCENARIO AND ROADMAP STUDY, Energy Research Institute, NDRC, China, April 2015

Action Plan

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CHINA 2050 HIGH RENEWABLE ENERGY PENETRATION SCENARIO AND ROADMAP STUDY, Energy Research Institute, NDRC, China, April 2015

Local challenges and responses

• Beijing – Economic restructuring + ecological re-construction • 19.6 million people; 5 m vehicles• Water@=1/10 of world average• Dry lakes, degraded pastures, dust from Inner Mongolia,

Ningxia• Green production, green living and green ecology • Service industry = 75% GDP• Energy intensity dropped 62.6% 2000-10• Water consumption@ dropped 40% • Coal consumption dropped 11% • Energy-efficient buildings = 51.9% of total• Public transportation in central urban areas 36.8%• Stage IV vehicle emission standards phased out older vehicles • Garbage recycling rate 35%; sewage treatment 90-95% in

central urban and new areas. • Water-recycling 57%• Urban forest coverage increased to 53%• Beijing-Tianjin-Hebei ecosystem – ecological barriers, water

conservation, home garden, green agriculture for desertification control, water conservation, air-water purification, regional afforestation, agricultural product safety

• Air quality registered 14% improvement over 2005 17

China: Innovative Green Development, Hu Angang, China Renmin University Press, Beijing, 2015 Chongqing - Leader in Afforestation • 1.55 billion trees planted since 2008 with highest number of

varieties acting as ecological barrier • To transform the city from a “stove” to a green lung – forest

coverage to jump from 21% in 1996 to 45% by 2017• River Forest projects – cleaning of Wujiang, Jialing, Wentang,

and Yulin Rivers with Boyang River Park and ChangshouLakeshore forest garden

• Green Yangtze-Chongqing Action Program • Nursery projects with seedling output up 14.6% since 2007• Soil erosion drastically reduced – sediments to Three Gorges

Reservoir to drop from 500 m tons 1997 to 110 m tons 2017 Ecological Qinghai • Very fragile ecology –poor biological endowment – average

temperature -5 to 8%; 1.12 % arable land• Water Tower of China - Source of The Three Rivers – Yellow

(90%), Yangtze (25%) and Lanchang (10%) • Ecological and economic poverty relief• 2004-9, vegetation + grassland coverage + 23.2% and 90%• 2010 – Declared “prairie meadow and wetland ecological

function zone”. • 2015 – experimental ecological protection zone

Supply-Side Reform

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12th FYP tools

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China successfully reduced carbon intensity by 20% during 12th FYP (2010-15), surpassing original target of 17%.

2011-15 trajectory

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2020 targets

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Wind and solar power

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PV electricity generation

Made in China 2025

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Green bonds

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• Emerging economies’ green bond market ($10 b) matching developed world ($21 b), already > 2X last year.

• Led by Chinese banks - Shanghai PudongDevelopment Bank ( $5bn) in two deals. Industrial Bank ($1.5bn), and Bank of Qingdao -$600m in March.

• Dutch bank ABN Amro became the latest issuer selling $560m six-year bond with a 0.65% yield.

• Geely Auto, buyer of Volvo and maker of London’s iconic black taxis - $400m to fund development of electric taxi for London; Hyundai Motor - $500m in March to fund development of hybrid models.

• Outside Asia biggest issuers this year - European Investment Bank and International Bank of Reconstruction and Development + large companies e.g. Apple and the Spanish energy company Iberdrola

Offshoring through ownership

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Vision of a Green energy network in the South China Sea

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The global urban challenge

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Massive energy and resource implications

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4th Industrial Revolution

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The holy grail of green and smart cities

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Bloomberg (19 February, 2014), China spent more on smart grids than the U.S. for the first time in 2013, with $4.3 billion invested, accounting foralmost a third of the world’s total.

Internet of Things

Common Adaptation themes and dynamics

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Asian Adaptation technologies

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Agriculture: Crop breeding, fungal symbionts (for more resilient varieties), laser land levelling (to minimize water run-offs), pressurized irrigation (for precision); floating agriculture (using hydroponics), improved livestock feed (greater resilience), livestock temperature regulation (against high temperatures)

Coastal areas: structural barriers, geo-synthetic barriers, artificial wetlands and reefs, beach nourishment and dune construction, elevation, land reclamation, flood resilience and flood proofing.

Human Health: long-lasting insecticidal bed nets, rapid diagnostic tests, disease surveillance systems, e-health, flood-proof drinking wells and latrines.

Transportation: warm-mix durable asphalt, engineered cementitious composite (recycled waste), active motion-dampening systems (to fortify ports), intelligent traffic information, signalling and sensor systems

Water: rain water harvesting, surface water storage, inter-basin water transfer, aquiver re-charge, water loss and demand reduction, desalination, point-of-use water treatment, wastewater treatment, stormwater management and bioswales(to absorb excess runoffs), flood barriers including wetlands and flood plains, structures to accommodate flooding

Disaster risk management: light detection and ranging (aerial mapping of flooded areas), artificial lowering of glacial lakes, monitoring systems, emergency shelters, early warning systems, social media disaster response

China’s unique Adaptation challenges• Huge landmass and population with diverse climate, ecological,

socio-economic conditions • North becomes warmer for farming but faces worsening water

crisis• Looming Water Crisis • Massive “North-South Water Diversion Project” raises

ecological and equity issues. • 300 million farmers suffer from extreme weather conditions

including rising droughts and floods, soil degradation, water scarcity, desertification, and pollution

• 128 million in dire need of poverty relief• Virtually all are small-holders with weak capacities to respond.• Rapid urbanization encroaches on arable land and eco-systems • Lack of reliable data in certain fields e.g. soil degradation • Lack of institutional and inter-disciplinary coordination • Lack of dedicated financial resources• Powerful local vested interests against reforms • Inadequate enforcement and accountability • Weak awareness and civic responsibility for common ecology• Lack of robust civil society and rule of law

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Coordination for a holistic approach • Adaptation to Climate Change in China (ACCC) in

collaboration with UK and Switzerland aims to show results 2020 , working with provincial, national and international organizations. Pilot projects in Quangdong, Ningxia, and Inner Mongolia

• Issues and disciplines (International Institute for Environment and Development (IIED) (supported by Japan International Cooperation Agency (JICA) : agriculture, water resources, forestry, coastal zones, human health, ecosystems, bio-diversity, major projects, energy, urban development, environmental protection, agro-metrological disasters, grassland degradation, afforestation, forage resourcing and planting, infrastructure, social-wellbeing, state and non-state actors, both local, national and international, monitoring, early-warning and sharing

• ACCC working on the following inadequacies - (a) regional climate models (b) access to climate data (c) knowledge gaps (d) coherent framework to address vulnerability, risks and adaptive planning (e) inter-disciplinary approaches and collaboration (f) research and policy development (g) international sharing of knowledge and experience (h) evidence-based approach for more comprehensive policy formulation

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Andrew Leung International Consultants Ltd

Thank you

Andrew K P Leung, SBS, FRSAwww.andrewleunginternationalconsultants.com

International and independent China Specialist with over 40 years professional experience covering Hong Kong and Mainland China. Chairman of Andrew Leung International Consultants, founded in London now relocated to Hong Kong. Provides strategic advice on China-related finance, investment, politics and economics globally, including both business and governments. China Futures Fellow selected worldwide by Berkshire Publishing Group, Massachusetts. On the Brain Trust of Evian Group, a Lausanne-based think-tank. Founding Chairman of China Group of Institute of Directors City Branch, London. Advisory Board Member of China Policy Institute, Nottingham University, 2005-10. Governing Council, King’s College London, 2004-10. Visiting Professor with Metropolitan University Business School. Helped set up Standard Chartered Bank’s first merchant-banking subsidiary in Hong Kong (1983); oversaw the trans-migration of industries into China as Deputy Director-General of Industry; US-government sponsored month-long visit to brief Fortune 50 CEOs on China beyond Tiananmen Square (1990); Editor-at-Large of a London-based international consultancy on China’s energies (2007). Sponsored Speaker on China at international conferences, including Forum Istanbul, Turkey, Annual African Banking and Financial Institutions Conference in Accra, Ghana, and Low Carbon Earth Summit in Dalian, China. Regular interviewee on live television with CNBC, Aljazeera English, Times Now of India, BBC and other international channels. Awarded Hong Kong’s Silver Bauhinia Star (SBS) and included in UK's Who's Who since 2002.