Decarbonization may boost economic growth

A wind-power plant in Zhoushan, Zhejiang province. YAO FENG/FOR CHINA DAILY

Efforts to reduce carbon levels may become a new growth engine for China's economy in the coming decade, bringing investment opportunities in a variety of industries that will likely outweigh losses in other areas, economists and business leaders said.

Their comments came amid heated discussions over how the world's transition to low-carbon usage will reshape major economies, including concerns that the process could damage China's growth, given its energy-intensive economic structure.

However, a study by Swiss firm Pictet Wealth Management, found that the measures to alleviate climate change are forecast to drive up China's annual economic growth by 0.1 percentage point to 4.8 percent from 2025 to 2030.

"The vast amount of investment required for new infrastructure and technology upgrades can boost growth directly. In addition, given China's leading position in some renewable energy solutions, like wind and solar, it can benefit from rising global demand for such technologies and equipment," said Chen Dong, senior Asia economist at Pictet Wealth Management.

The low-carbon transition will also likely encourage more research and development activities in China, which may lead to higher productivity through innovations, Chen said.

By contrast, decarbonization could soften growth of the United States economy in the next 10 years, given its large oil and gas industries, according to the firm's study. The European economy may get a net boost in the same period as investments in green technologies help shore up aggregate demand.

Olivier Blum, chief strategy and sustainability officer of French multinational Schneider Electric SA, said China's ongoing transition to a low-carbon economy has brought new business opportunities for a variety of industries and his company will beef up investments in this area.

"We are keen to support Chinese clients to cut carbon emissions with our technologies and solutions of digital transformation in energy management and automation," Blum said.

However, experts said the low-carbon transition is not without costs, which can come in the form of output losses of polluting industries and higher costs for downstream companies. Coordinated steps are needed to ensure a smooth transition that minimizes possible economic damage.

"If the phaseout of traditional industries goes at such a fast pace that the eco-friendly new industries cannot catch up with, economic growth could face downward pressure," said Lan Zongmin, a researcher at the Development Research Center of the State Council.

Lan said China will likely ramp up efforts to accelerate the development of eco-friendly sectors over the remainder of the year, including energy-saving solutions like efficient use of coal, new energy industries and the trading of carbon emission quotas.

At a recent meeting, the Political Bureau of the Communist Party of China Central Committee called for efforts to put an end to "whirlwind campaigns" for carbon reduction, support of quicker development of new energy vehicles, and the introduction as soon as possible of an action plan to achieve a carbon emissions peak before 2030.

Wang Qian, Asia-Pacific chief economist at the US-based Vanguard Investment Strategy Group, said it is important for China to ensure that production curbs in high carbon-emitting sectors, like mining and utilities, will not be so aggressive that they cause supply disruptions and rising commodity prices.

"Aggressive decarbonization could destabilize the economy in the near term, given China's dependence on fossil fuel, especially coal. The clean energy technological transformation takes time," she said.

The country produced 2.26 billion metric tons of raw coal in the first seven months of this year, up 4.9 percent year-on-year. Factory-gate prices of the coal mining and washing industry rose 21.4 percent during the same period, according to the National Bureau of Statistics.