Retrofit this: central Chongqing (Oliver Ren/Wikimedia Commons)

China “must spend $1 trillion” on low carbon infrastructure over next five years

15 June 2016 | By David Rogers 0 Comments

China will have to spend $1 trillion over the next five years to alleviate the environmental stress brought by the country’s rapid industrialisation and meet its target of reducing greenhouse gas emissions after 2030, according to a report by Chinese and American groups published last week. 

Released to coincide with the second China-US Low Carbon Cities Summit in Beijing, the report was written by Energy Foundation China, the Chinese Renewable Energy Industries Association, and a Chicago-based think tank called the Paulson Institute. Bloomberg Philanthropies was among the research partners.

It argues that about a quarter of $1 trillion should be spent on promoting the design and construction of low carbon buildings, and retrofitting the existing stock. The money would be spent on “green financing” for low energy buildings, backed up by a reform of building codes and a third-party rating system.

“Besides distributed solar, we also encourage cities to explore ways to purchase green electricity from other cities, to expand the market demand for clean energy and to help cities achieve their low-carbon goals”– Peng Peng, China's Renewable Energy Industries Association

The remaining cash would be aimed at energy generation and transport.

As with buildings, the aim would be to spur greener policies with the aid of financial carrots and regulatory sticks. Wang Zhigao is the city programme director at Energy Foundation China, and the author of the transport section of the report. He said: “One challenge for financing urban transportation is the reliance on local government debt for capital investments and operational expenditure, which exposes cities to high credit risks.”

He added that “financing models such as public–private-partnership (PPPs) can help diversify sources of funding and secure more investments for low-carbon transportation projects”.

Peng Peng, the policy research director at the Chinese Renewable Energy Industries Association, commented that $77bn should be spent on renewable electricity generation by 2020. He said: “Besides distributed solar, we also encourage cities to explore ways to purchase green electricity from other cities, to expand the market demand for clean energy and to help cities achieve their low-carbon goals.”

The report’s focus was on the role of the financial sector in providing the required investment. Ma Jun, the chief economist of the People’s Bank of China, commented during the conference that the Chinese government had approved about $15bn of green bonds between January and May.

Three years ago the Chinese government introduced a system of four colour alerts to deal with air pollution. In December 2015, the government issued its first ever “red alerts” in Beijing after the amount of particles in the air passed the threshold of 172 micrograms per cubic metre. This forced 2,100 factories to suspend or reduce production, shut down schools, and restricted the number of vehicles on the road.

An executive summary of the report, in English, can be found here.

Photograph: Retrofit this: central Chongqing, in western China (Oliver Ren/Wikimedia Commons)