By Kevin Rudd
As one of the first countries to emerge from what may still just be the first wave of this coronavirus crisis, China also has an opportunity to lead the world in demonstrating what a green economic revival can look like.
Already, China’s emissions – like those across the rest of the world – have dropped sharply as a result of this crisis. In the four weeks after Lunar New Year, it is estimated that domestic emissions dropped by as much as 25 per cent, equivalent to around 200 million tonnes of carbon dioxide.
This is roughly a third of what a country like Australia emits in an entire year. And while China’s emissions have since steadily increased and are likely to spike with pent-up demand, the real risk now is that they will return to an even steeper trajectory than they were on before the crisis struck.
So far, Beijing’s economic toolkit has been focused largely on simply getting factories back to work, helping small businesses keep their doors open, and supporting the poorest parts of its population to get through the crisis.
However, as the party leadership’s eyes turn to a larger stimulus package focused on forging a path towards a medium- and long-term recovery, whether the country is able to use this to usher in a green economic revival or lock itself into a carbon-intensive recovery is the key question. Much of this will rest on the decisions taken in the coming weeks, including in the lead-up to the National People’s Congress annual session.
Thankfully, there are some reasons to be optimistic. In March, the Politburo Standing Committee signalled that China’s economic recovery pathway must involve accelerated “new infrastructure construction”, adding a new term to the political lexicon.
Under that umbrella falls everything from 5G base stations, installing ultra-high-voltage (UHV) power lines to allow for greater renewable energy uptake, accelerating the extension of more than 4,000km of railway including for high-speed trains, increasing support for electric vehicles including through the roll-out of more charging stations, as well as big data centres, artificial intelligence and so-called “industrial internet”.
But to go down this path – which probably requires around a 10 trillion yuan (US$1.4 trillion) investment over the next six years – will require some circles in Beijing to avoid the temptation to simply revert to the old economic playbook.
That means throwing out of the window the idea that the best way to create jobs and boost gross domestic product is to invest only in traditional infrastructure projects such as roads, bridges, airports and coal power plants.
Whether the party can bring itself to rationally pause President Xi’s ‘Chinese dream’ targets for economic growth will, therefore, be a key measure of their wider resolve, but to double down on it now risks simply locking China into a high-carbon pathway and putting aside what would be a more economically and environmentally sustainable route.
Official statements in April that China is casting its mind to traditional investments in transport, energy and hydraulic projects must, therefore, give reason for pause. As does the approval in early March of 7.9 gigawatts of coal-fired power, more than was approved in all of 2019.
What the party must realise is that these developments do not go unnoticed overseas, nor would any rollbacks on environmental regulations to clear the way for short-term economic growth. At the same time, any measures also need to be carefully calibrated: for instance, there is no point investing in UHV transmission lines to simply pump more coal-fired power through the grid or installing 5G bases and electric vehicle charging stations that are dependent on coal-fired power.
Nobody doubts that large-scale public interventions are needed to allow the Chinese economy to rebound quickly from this crisis on the back of the worst growth since the Cultural Revolution. But, as Beijing knows from its experience during the last financial crisis in 2008, getting the balance right in terms of its investment in green measures vs traditional infrastructure is absolutely key.
In 2008, China’s 4 trillion yuan stimulus package was world-leading on the face of it. Around a third of its economic measures were geared towards low-carbon transformations – twice as much as Britain and almost three times as much as the United States; only dwarfed by the packages developed by South Korea and the European Union.
In Australia, my own government bolstered the insulation in more than 1.2 million homes – or 20 per cent of our national housing stock – and provided a rebate for the installation of 73,000 solar hot water systems: two simple steps which have avoided roughly 19.5 million tonnes of emissions through to today.
But in China’s case, the proportion of its own package dedicated to traditional infrastructure drove an enormous thirst for cement and steel, outstripping the environmental gains elsewhere.
Admittedly, not all of this rests on the shoulders of those in Beijing whose economic coffers are not as strong as they were a decade ago. This time, the investments of provisional governments will be key, including Guangdong which accounts for more than 10 per cent of China’s GDP and has in its own right identified more than 50 billion yuan of opportunities for investment in “new infrastructure” in 2020 alone. But Beijing will clearly set the tone and the framework for the approach.
Put simply, China has an opportunity before it. One is to help restore the balance between humanity and nature through forging the way towards a green economic revival that is consistent with its own modernisation trajectory, the world’s Sustainable Development Goals and the Paris Agreement on climate change, and would provide it with a breakthrough moment in its green and low-carbon transition towards a stronger and more resilient economy.
And the other is to lock in an even higher pathway of emissions in the years to come, choking up the air in many of its cities again, and ceding the role it has carved out for itself in recent years as one of the stewards of the global environment. Beijing must choose carefully the path it wants to take.
First published by the South China Morning Post on 18 May 2020