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A "Green Lining" in China's Economic Stimulus Plan

It may be counter-intuitive, but a global economic slowdown could help the United States and China work together on climate change.

After years of very rapid growth, China's energy consumption and greenhouse gas emissions now look to be slowing sharply. One major factor: China's energy efficiency and renewable energy policies---now in their third year---have begun to make a real impact at the provincial and local levels. We are already seen slowing growth in the cement industry and a decline in annual steel output. Electricity demand in October was down 4% over the same month a year ago, the first such decline in almost seven years. The global economic slowdown will accelerate these trends.

For several years, the Chinese government has been sponsoring a shift from energy-intensive to knowledge-intensive jobs and economic activity. China's recently-announced $586 billion stimulus package (Rmb4,000 billion) will transform its economy even faster, by promoting economic restructuring and essential green infrastructure. The slowdown makes this transition all the more urgent, because GDP growth in China's service sector produces more jobs than does the industrial sector. With recent GDP growth rates above 10 percent, China's heavy industry generated enough new jobs. But with slower growth forecasts, continuing large cohorts of high school and college graduates, and its rural population moving to non-agricultural employment, China needs to generate even more jobs from its economic investments.

Many details on China's stimulus package have yet to be released, but what we know so far is promising. (Note: the Chinese central government has released new details since this article was first posted.) It includes 12 percent $50 billion for direct energy efficiency and environmental improvements. In addition, the programs doubles—to $85 billion—investment in rail transport (a lower-carbon alternative to road and air transport), and adds $70 billion for new electricity grid infrastructure. New, more flexible and sophisticated grid infrastructure is vital to increasing the efficient use of both traditional fuels and renewable energy sources. Furthermore, the stimulus package promises considerable investment in health, education and rural services. These sectors are both less energy intensive and strong on promoting jobs and welfare.

It is still very unclear how large the stimulus package will actually be, or how much will be financed by the Central government versus provincial and local governments. Central and provincial officials are still negotiating actual spending plans. The provinces have already proposed $1.4 trillion in new projects, but funding from the Central government may reportedly be only one quarter of the initial announcement. Still, even a more modest stimulus package would represent a hefty portion of China's $3.2 trillion annual GDP.

From the perspective of climate change and other environmental issues, it is encouraging to see that a cleaner, more efficient development approach continues to be a priority within China's overall industrial and employment goals---even in the face of an economic slowdown. China's resolute commitment to its energy and pollution abatement goals should be reassuring to the international community, especially to negotiators at December's COP-14 conference in Poland. With both the U.S. and China looking to use clean energy investments to reinvigorate their economies---and with China's slower emissions growth---we have a unique opportunity to make progress on our shared interests in resolving climate change and creating healthier, more sustainable economies.

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