Solving Air Pollution in China
Severity of the problem
China produces over a quarter of global greenhouse gases in some of the most densely populated locations on the planet. The result: infamous levels of air pollution causing increasing concerns among the people, and now, in the government as well.
Main contributors to air pollution in China are: 1) coal burning, which in 2016 generated 62% of all electricity in China 2) heavy industries, particularly steelmaking and chemicals, and 3) vehicle exhaust.
While the problem is spread across the country, the worst affected are the capital Beijing and Hebei province that surrounds it. This region has high concentrations of heavy industries and people, along with cold winters requiring plenty of residential heating.
In 2016, Beijing experienced 129 polluted days, when PM2.5 particulate concentration rose above 75 μg/m^3, and another 39 "severely polluted" days when PM2.5 levels rose to more than twice that. To compare, the EU's maximum allowed daily average for PM2.5 is 25 μg/m^3. A European study in 2013 found that for every 10 μg/m^3 increase in PM2.5 level, lung cancer rates increased by 36%.
Chinese citizens are not happy about this. Pollution, along with education, is the top reason why they emigrate. In an act of protest, performance artist Wang Renzhen famously vacuumed the capital's air in 2015 and made bricks from the collected dust particles. Later, Dutch artist Daan Roosegaarde started making jewellery from the stuff. The air pollution in China is so terrible it inspires modern art.
Government's Plan for Tackling Air Pollution
During the last five-year plan conference in 2016, Premier Li Keqiang promised "heavy blows" against pollution. The government made concrete commitments to reducing air pollution: get good air quality readings on 80% of the days, and reduce factory emissions of PM2.5 particulates by 25%. Below are the ways in which the government is working to achieve these goals.
1) Scale back on coal and steel
In the wake of the 2016 five-year plan, state-owned companies were ordered to reduce coal production by about 20% (or by 800 million tonnes) and steel production by about 15% (100 to 150 million tonnes) over the five years. It was partially successful, being offset by illegal expansions of coal and steel firms looking to keep jobs and revenues.
It helps that in order to reach the next stage of development, China anyways needs to transition from the polluting heavy industries towards services. What's more, overcapacity and inefficiencies in these vast, state-owned industries are contributing the country's rising toxic debt problem.
2) Use natural gas instead of coal
Chinese consumption of natural gas, a cleaner alternative to coal, has increased 19% in 2017. The plan is to increase natural gas from 6% of primary energy mix in 2015 to 10% in 2020. In 2016, 64% of natural gas used in China was produced domestically, 17% was imported as liquified natural gas, and 19% was imported via pipelines from Turkmenistan, Uzbekistan, Kazakhstan, and Myanmar. Pipelines from Russia are in the works.
3) Expand renewable energy
China is dominating the renewable energy sector. It is the world's biggest manufacturer and consumer of solar and wind power, producing 63% of the world's photovoltaic cells in 2014, and having installed over one half of the world's wind turbine capacity in 2015. The country intends to continue growing the renewable energy sector. In the early 2017, the government pledged about $370 billion for clean energy, which is to provide 20% of all energy needs by 2030 (it provided 12% at the end of 2015).
4) Promote new-energy vehicles
At the end of 2016, China had the largest stock of new-energy vehicles (NEV), close to one million. Three quarters of those were pure electric vehicles, and 96% were produced in China. Government incentives for NEVs include purchase subsidies, building a network of charging stations, and preferential treatment in urban driving restrictions. Furthermore, the government will require vehicle makers or importers to have electric vehicles make up 12% of their fleet by 2020. There is a plan a to phase out fossil fuel vehicles altogether by 2030.
5) Institute carbon credits
China just launched the biggest carbon-trading scheme in the world, involving around 1,700 power plants that generate one third of carbon emissions in the country. The scheme will later be extended to other sectors, including iron and steel. As elsewhere, the scheme involves credits granted to a company allowing it to emit a certain amount of carbon dioxide. Companies that produce less than they were granted can sell their spare credits on a secondary market, and companies that exceed their carbon cap can purchase them.
In conclusion, China is taking air pollution seriously, and given the government's track record of fast and effective implementation, it can be expected that the air will improve significantly over the coming years. The need for innovative solutions means that great opportunities lay ahead in China for creative clean tech companies.
Sretko Becarevic is Project Manager for Market Intelligence at SXMHI Group in Shanghai. SXMHI offers the full range of services for companies expanding in the Chinese market. In addition to market intelligence, SXMHI services include supply chain, sales & marketing, and back office support.