Notes from the Field

To Meet Low-Carbon Growth Targets, China Engages Small Businesses

October 24, 2012

Last week, China launched the fourth census of its environmental protection industry. This census will gather detailed demographic information on businesses that manufacture environmentally-friendly products, such as energy-saving technologies, or that operate in the field of environmental protection by offering services such as recycling, environmental education, or environmental consulting. The census data will be important for policymakers who are in the process of guiding the country’s low-carbon development and helping reach environmental targets set in China’s 12th Five-Year Plan of National Economic and Social Development (released in March 2011).

As the world’s largest emitter of greenhouse gases, China is facing both domestic and international pressure to reduce its emissions levels. At the same time, China seeks to maintain annual national GDP growth of around 7 percent despite a global financial crisis, rising property prices, and increased risks of social instability. In order for the Chinese government to realize the twin goals of reducing carbon emission levels and achieving sustainable economic development, policymakers need a better understanding of how the environmental protection industry is currently contributing to the attainment of low-carbon growth targets.

The government’s latest plan is ambitious. China committed itself to reducing its energy intensity (energy consumption per unit of GDP) by 16 percent and carbon intensity (CO2 emissions per unit of GDP) by 17 percent below 2010 levels by 2015. The plan also sets a target for China’s energy saving and environmental protection industries of 15 percent annual growth rate and US$720 billion worth of total output by 2015 (approximately 2 percent of GDP).

China is currently implementing three strategies to reach these goals: (1) restructuring the country’s industrial structure by reducing the percentage of heavy industry and other carbon-intensive industries and increasing the percentage of service industries; (2) replacing carbon-intensive energy sources (such as coal) with cleaner energy sources such as hydroelectric, nuclear, solar, and wind energy; and (3) encouraging technical innovation to transform carbon-intensive technologies and behaviors into  highly energy efficient ones.

Progress is already evident in some towns and cities across China. As RenewEconomy recently wrote, “a clean energy revolution is occurring, with more wind farms, hydropower plants, and biomass facilities being built [in China] than anywhere else on earth.” This development is the result of implementing provincial or municipal action plans that seek to meet their individual low-carbon targets set by the national government. For example, Guangdong province in southern China is the country’s largest manufacturing region. The national government has directed the province to reduce its carbon intensity by nearly 20 percent below its 2010 level by 2015. Due to their economic success over the past 30 years, the number of small and medium-sized enterprises (SMEs) has grown in Guangdong province and they account for 80 percent of the province’s industrial revenue and job opportunities. At the end of 2009, about 99 percent of industrial enterprises in Jiangmen (located in southern Guangdong province) were SMEs, and those SMEs provided about 86 percent of Jiangmen’s industrial revenue. However, as is the case nationwide, most of these SMEs are still using traditional production methods that are labor- and resource-intensive, and so they face difficulty in meeting the energy-saving targets set by the government.

The Asia Foundation recently worked with the Center for Environmental Economics and Policy Research (CEEPR) of the Guangdong Academy of Social Sciences on a project aimed at engaging SMEs in the low-carbon economy planning process. As a first step, CEEPR and the Foundation surveyed SMEs about their participation in the low-carbon transition process in Jiangmen. A new Asia Foundation occasional paper titled “Engaging SMEs in the Low-Carbon Transition in China: A Case Study of Jiangmen City” examines the results of the survey in greater detail, and provides insight into the situation of SME participation in China’s low-carbon development in other Chinese cities. We hope this will help inform national low-carbon economic growth policies.

CEEPR and the Foundation discovered that most SMEs in Jiangmen are aware of the low-carbon transition in their city, and they generally have a positive attitude toward the transition. Some SMEs have even taken actions to join in the transition, transferring to energy-saving technologies or adopting other cleaner production measures. However, several factors limit full SME participation in low-carbon growth strategies, such as a lack of professional guidance, technology, capital, competent personnel, or sufficient financial incentives. As such, the paper recommends that policymakers review and revise current action plans with an increased focus on the needs of SMEs, and that efforts to raise awareness and interest for more environmentally-friendly products among consumers could be effective at incentivizing more universal adoption of less carbon-intensive production processes.

China’s low-carbon growth policies are ambitious – and vital for curbing climate change and global warming. Effective engagement of SMEs will play a huge role in meeting critical targets, and civil society groups can play an important role in monitoring SME environmental practices.

The Asia Foundation in China recently launched a multi-year project to promote more effective environmental information disclosure and citizen participation in environmental decision-making. Watch a video for more about The Asia Foundation in China.

Huang Zhen is The Asia Foundation’s environment program officer in Beijing. She can be reached at huangzhen@asiafound.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

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