LOW CARBON ECONOMY: THE NEW HOLY GRAIL

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The creation of a “low carbon” economy that will provide jobs and clean up industry is now a crucial policy objective for countries trying to spend their way out of the world economic downturn. A recent report by HSBC calculates that the United States is allocating 12 per cent of its fiscal stimulus to the green economy and China, 34 per cent.

There is a compelling scientific, economic and strategic case for low carbon development and the first movers have a lot to gain with worldwide investment in renewable energy having grown by 65 per cent a year since 2004, and projected to reach $600 billion a year by 2020.

China’s 11th Five-Year Plan (2006-10) includes a target to reduce energy intensity by 20 per cent during that period. This would translate to a saving of emissions around four times greater than the European Union’s current commitment under the Kyoto Protocol.

But despite these ambitious objectives China’s total greenhouse gas (GHG) emissions are already on par with those of the US and rising fast. This is clearly driven by the imperative of economic growth for China’s 1.3 billion people. China thus faces a qualitatively different challenge to the one that faced by industrializing nations in the past: of combining rapid industrialization, urbanization and poverty reduction with the transition to a low carbon economy.

No country has ever done this before, but the Chinese appreciate that carrying out the work of energy conservation and emission reduction and coping with climate change is a requirement of the Scientific Development Concept.

In response to the challenge of achieving a low carbon economy in China, a number of research institutes working with Chatham House in London have developed the concept of low carbon zones (LCZs). These will aim to stimulate transformational regional political leadership in a similar fashion to the special economic zones (SEZs) in the early 1980s, which gave certain regions the power to introduce more liberal economic regulations than the rest of the country, with some spectacular results.

Under the LCZ scheme, designated regions could be granted similar powers to experiment with a low carbon policy. To qualify for the LCZ status, regional leaders would have to commit to low carbon standards beyond the existing benchmarks at the national level.

These LCZs could then attract hi-tech foreign direct investment through measures such as strong patent protection, tax incentives and targeted recruitment of skilled workers. They could attract new types of carbon finance, too, by building the institutional capacity required to support local emissions trading schemes, drawing on international experience and underpinned by strong monitoring and reporting systems.

Furthermore, allowing them to pilot harmonization of standards with Europe in key low carbon sectors such as vehicle emissions, energy using products and construction would help facilitate Chinese exports and enhance trade and investment flows in the LCZs.

A second variant of the LCZ can be found in the UK, where there are similar proposals but on a smaller scale and mainly in the context of local rather than regional government. Cities are massive producers of carbon dioxide not just from traffic, but also from more energy use in buildings. So it is not surprising to hear calls to introduce a rolling program of LCZs aimed at dramatically improving the energy efficiency of all buildings — public and commercial premises and especially houses.

Here a precedent exists in the smokeless zones of the 1950s, which reduced pollution arising from the use of coal after the smog of 1952 killed 4,000 people in London. These LCZs could be rolled out across the country incrementally, with local authorities declaring an area to be an LCZ. Private sector partners would then be invited to deliver the actual service.

These partners would assess each building or house for energy efficiency and design and implement individual energy saving regimes. Within a specified time, it would become mandatory for all properties in the zone to reach the minimum ratings of energy efficiency.

A range of technologies and measures is available to ensure that energy efficiency addresses the whole property, and many of the measures will pay for themselves through lower bills. Focusing the zones on neighborhoods has great advantages because there are economies to be made from concentrating on defined areas and scope — for example, by introducing combined heat and power plants. This second form of LCZ was proposed by the last administration at London’s City Hall by the then deputy mayor.

Designing and implementing effective policies to drive the transition to a low carbon economy and share the costs equitably is a major political challenge for governments across the world. As we pursue the low carbon route to future economic development, LCZs both in their Chinese and UK variants offer an important means of dealing with the challenges ahead.

Published in China Daily, 5 May 2009