The rising challenge of sustainability
China is home to one-fifth of the world's population. In 2007, the country consumed about 2.7 billion tons of standard coal equivalent and emitted about 7.5 gigatons of greenhouse gases. Indeed, it has overtaken the United States as the world's top emitter. China's demand for energy--and the emissions and pollution associated with its use in industry, power generation, transport, and waste landfills--also contributes to other environmental ills. In northern China, desertification threatens arable land and grasslands. Water shortages are a growing problem across the country.
China emits a greater proportion of greenhouse gases from its industrial sector than most other nations, developed or developing. These high levels reflect the massive industrialization China is now undergoing. Emissions from the provision of electric power and heat to commercial and residential buildings are a consequence of China's rapid urban growth and rising living standards. The country's moderate level of transport-related emissions reflects the current low penetration of motor vehicles--about 4 vehicles per 100 people in 2008, compared with almost 60 vehicles in Japan and 80 in the United States.
As China's GDP grows in tandem with urbanization, the country's emission profile will change. Long-term projections based on a consensus of leading Chinese economists suggest a 7 to 8 percent annual GDP growth rate.
Opportunity and Challenge
By 2030, two-thirds of China's roughly 1.5 billion people will live in urban areas. To cope with that increase, China plans to build 50,000 new high-rise residential buildings and 170 new mass-transit rail and subway systems.
We estimate that China's current efforts and recently enacted policies could reduce the country's energy intensity by 17 percent during every five-year interval from 2005 to 2030. Under what we call the policy scenario, China would emit 14.5 gigatons of carbon emissions annually by 2030.
The gains in energy efficiency would come largely in the industrial sector (through lower energy intensity and better waste recovery) and in the generation of power (through increased use of nuclear and renewable energy and improvements in coal-power efficiency).
More energy-efficient new buildings and better fuel efficiency in car fleets would help as well.
These improvements would also reduce the need for imported energy--by 30 percent for oil and 85 percent for coal.
To achieve these gains, the government will have to make a significant effort, rigorously enforcing policies and providing incentives for investments in energy efficiency across sectors.
Mckinsey identified five major categories of energy efficiency and greenhouse gas-abatement opportunities that China could implement between now and 2030. If China pursued them successfully, it could reduce its dependence on imported oil by up to 30% more than the 30% reduction it currently hopes to achieve.
Green power
As manufacturers ramp up the production of equipment for solar and wind power, the cost of implementing these technologies will decline. By 2030, China could generate
- 8% of its energy through solar
- 12% though wind
- 16% with nuclear power
- 19% hydropower
- 8% by natural gas
Green transport
Cars and trucks are a relatively minor source of greenhouse gas emissions in China, but that's about to change. By 2030, it could replace the United States as the nation with the most vehicles--over 330 million of them.
Green industry The steel, chemical, cement, coal mining, and waste-management sectors play a crucial role in China's economic development. All of them also use significant amounts of energy: they accounted for about one-third of total consumption and 44 percent of carbon emissions in 2005 and are also a major source of air and water pollution.
Green buildings
China's rapid urbanization will continue for several decades. Apartment houses, office buildings, and commercial centers are proliferating to accommodate this massive migration and economic development. Total floor space (including residential and commercial) will more than double in China, from 42 billion square meters in 2005 to 91 billion in 2030.
Green ecosystem
Farms and forests are carbon sinks. Although China has halted most activities that led to deforestation, virgin forests now cover only 11 percent of the country's total land area. By our estimates, government forestation and reforestation programs will raise forest coverage to 20 percent of China's total land area by 2010. China is also trying to limit grazing on grasslands (90 percent of its 400 million hectares of grassland is degraded or at risk), to introduce sustainable agriculture, and to promote the use of methane from animal manure for heating and cooking in rural areas.
Some 23 million rural families heat their homes and cook with methane. By 2030, these policies will reduce emissions by 0.29 gigatons annually.
To realize the full potential of the additional opportunities, China would need to start now; even waiting a few years would reduce the possibilities for raising energy efficiency and abating emissions.
READ MORE AT THE SOURCE: McKinseyQuartrly.com