China’s 13th Five Year Plan and the Environment

Kimi Li – University of Toronto, Stephen Zhao – Oxford University

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In March 2016, the Chinese National People’s Congress (NPC) will be meeting to approve the 13th Five Year Plan (13th FYP), a set of economic targets and goals that will guide the development of the Chinese economy from 2016 to 2020. The content of China’s Five Year Plan illustrates government priorities and will set the direction of Chinese economic policy. It will direct vast numbers of programs and massive amounts of budgetary resources. As such, the 13th FYP holds significant implications as well for China’s environmental policy and can tell us what to expect from China on issues such as energy sector reform and climate change for the next five years.

Building a Moderately Prosperous Society and Improving Development Concepts

At the end of October 2015, the Central Committee of the Chinese Communist Party released the Draft Proposal of the 13th FYP (Draft Proposal), which rarely differs in substance from the final approved plan. It states that the overarching goal of the 13th FYP is to create a “moderately prosperous society” by the 100th year from the founding of Chinese Communist Party (CPC).

The five major goals of the “moderately prosperous society” are outlined as:

1. Maintaining moderate to high speed economic growth, with priority in balance, inclusion and sustainability;
2. Improving the people’s overall welfare, with a key focus on public services, employment rates, income disparities and the literacy rate;
3. Improving people’s mannerisms and cultural understanding;
4. Increasing efforts in environmental preservation and sustainability; and
5. Reforming the policies to be more stable and mature.

Beyond the goal of creating a “moderately prosperous society”, the plan emphasized that development in China needs to reflect five major concepts:

1. innovation,
2. coordinated and balanced growth,
3. green development,
4. open development and international cooperation, and
5. shared development and the people’s welfare.

Policies outlined in the plan were framed in terms of the aforementioned five concepts, along with a concluding statement regarding the need to strengthen the leadership of the Party.

The Quest for a Green China

The issue of the environment looms large in the 13th FYP. Environmental preservation and sustainability is one of the five major goals of the “moderately prosperous society” and sustainability is a stated priority in maintaining moderate to high speed economic growth. Green development is one of the five major development concepts in the Draft Proposal; it is a key aspect of innovation in the 13th FYP, and has a presence in both balanced development and open development concepts.

The Draft Proposal emphasizes efficiency and conservation, whether it in land use, energy use, or water use. Changing methods of production and consumption that generates a more ecological ways of life is also identified as a priority. The six main environmental goals listed under green development are:

1. Harmony between man and nature;
2. The construction of “principle function districts”;
3. Low carbon development;
4. Conservation and efficient use of resources;
5. Intensify environmental control; and
6. Construction of strong ecological barriers.

Select Key Policies

Energy: The Draft Proposal contains a number of interesting policy directions for China’s energy market. One important policy direction is the push for liberalization of the oil, gas, and electricity markets. Currently, government monopolies generate an environment where Chinese fossil fuels and energy generated from fossil fuels are subsidized. This is counterproductive to efforts to reduce emissions in China and is a significant obstacle to beneficial policies like the imposition of Carbon Pricing Mechanisms. Opening these markets to competition will not only promote firm efficiency, but also help remove protections on these industries that are harming the environment.

In addition, the Draft Proposal advocates for a reduction in the use of fossil fuels, increased innovation in alternative energy, and an acceleration of the development of renewables, hydropower, nuclear power, and cleaner fossil fuels, i.e. natural gas. The Draft Proposal also encourages the development of energy storage and smart grid construction and implementation of low carbon energy distribution and distributive energy resources.

Emissions Permit and National Online Monitoring System: An emissions permit system will be implemented for all stationary polluters. The Draft Proposal states that there will be an effort to establish or improve permits for energy use, water use, carbon and other pollutant emission rights and nurture and develop exchange markets. China has been operating pilot projects for carbon emissions trading schemes since 2013 and a national scheme had been previously announced for implementation over the 13th FYP plan period (2016-2020). It would follow under this initiative.

Moreover, there is also plans to institute a national online environmental monitoring system as well as the establishment of vertically integrated sub-provincial monitoring officers and system. Monitoring in China has traditionally been a weak-point in any environmental efforts and it is positive to see more action proposed in this area. However, the Draft Proposal is a very general document and it is difficult to judge the prospects for success without further program detail.

Carbon Emissions Reduction: The Draft Proposal also calls for support to optimized development zones to reach peak emissions and to establish a near-zero carbon pilot project. China has previously attempted to build a zero-carbon city, though the project fell by the wayside.

Transport: China will push for expansion of alternate energy vehicles and improve the production of electric cars in the 13th FYP period. There will be a priority placed on public transportation and efforts to strengthen rail travel. Bicycling and other green forms of transportation will be encouraged.

Principle function districts: The 13th FYP is placing greater emphasis on the principle function districts, a means of organizing China’s internal geography based on an area’s environmental carrying capacity and resources, as well as its development potential. Under the principle function districts framework, officials will be audited for their environmental performance. This is a positive development and incentivizes officials to pursue sustainable growth to advance their careers instead of purely aiming to increase GDP figures of the economy they govern.

Green Finance: The Draft Proposal also pushes for greater levels of Green finance and proposes a green development fund.

Meeting Expectations

The 13th FYP proposes/promises a greener, more sustainable China and, considering the current environmental challenges China faces and the recent tone of its environmental policy, it comes as expected. There are some much needed reforms being undertaken such as efforts to end the government monopoly over oil, gas, and electricity; improvements in monitoring and official incentive structures; and pilot efforts to peak emissions and aim for zero-carbon economies. Nonetheless, there is little ‘shock and awe’ in the Draft Proposal. It remains to be seen how the additional detail of the complete and final version of the 13th Five Year Plan will affect government policies outlined in the Draft Proposal.