Blue Skies & 13FYP Green Development

By Hongqiao Liu 16 March, 2017

While 'blue skies' were the focus at China's Two Sessions, water & soil are no less important. See our review

The environment is a frequent topic of Chinese leaders these days. This year on March 5th, Premier Li Keqiang advanced the “war on pollution” he declared in 2014 by declaring a new “battle” to “make the skies blue again”. Luckily for the delegates of the “Two Sessions”(两会, lianghui) – the National Peoples’ Commission (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) –  they enjoyed bright sunshine and blue skies during the two-week of conferences.

Environmental protection again placed as a top priority of the Two Sessions

In this year’s annual government work report, environmental protection is again placed as a top priority of the central government along with issues like employment, financial security and people’s livelihood. “Deepen institutional reform to build a sound ecological environment” is highlighted as one of the top priorities of 2017. Moreover, Premier Li Keqiang urged to “save the bottom line of environmental protection”.

China to deliver “Qualified answers” in 13FYP

Premier Li Keqiang spoke to delivering “qualified results”, inferring satisfactory results, to the people, and according to his Work Report this will include ecological environment information, as well as other aspects of life.

       
If 2016 is an example for qualified answers on the ecological environment we can expect answers on energy intensity per unit of GDP emissions reductions, key pollutant emission reductions, etc.  In fact, 2016 was quite a “green” year; the energy intensity per unit of GDP dropped 5%, sulfur dioxide and nitrogen oxide emissions dropped 5.6% & 4% respectively, the annual average concentration of PM2.5 in 74 key cities dropped 9.1%, coal consumption percentage dropped 2%, and the renewable energy percentage increased 1.7%.
As for 2017 (the second year of the 13^th Five Year Plan), further targets have been set:

• To further reduce steel production capacity by around 50 million tonnes and coal by 150 million tonnes. Also, to phase out, stop or freeze the construction of coal power generation capacity of more 50 million kilowatts;
• To reduce pollutant discharge of chemical oxygen demand (COD) and ammonia by 2%, and to control and prevent water pollution in key river basins;
• To complete the compensation mechanism of key ecological functional zones, establish a monitoring and early warning system on resources and the environment, as well as improve pilot projects of the national natural resource capital management system;
• To cultivate and strengthen the energy-saving and the environmental protection industry for the achievement of a win-win situation on environmental improvement and economic development;
• To implement strict environmental enforcement and supervision accountability; and
• To promote the comprehensive reform of agricultural water price, improve the “guarantee rate” of rural drinking water supply and quality, and control & prevent rural pollution of non-point sources.

While looking ahead make sure you are also up to date on of China’s key water policies over the last year with our review and check out our notice on its 2017 No.1 Document.

Winning the battle of “blue skies”

Premier Li’s promise to make the skies blue again was the major environmental note at the Two Sessions. In order to achieve this China needs to continue to adjust domestic coal use, which as the targets above show it is doing.

Premier Li: the energy sector is essential to winning the battle of safeguarding blue skies

However, China also needs to adjust its renewable energy development. According to a Greenpeace report, China wasted enough wind energy in 2014-2016 to power Beijing for a year and came with an environmental & health bill of more than RMB8.4 billion.

Indeed, Premier Li said the energy sector is essential to the winning the battle of safeguarding blue skies. The political will is real and strong.

While “making our skies blue again” is the focus of much attention, water and soil are no less important  

If you look at Premier Li’s remarks during this year’s Two Meetings, by far he spoke most on air pollution/prevention compared to water and soil. In his Work Report the words on water and soil combined accounted for just around a third of those on air pollution.

This focus on air pollution isn’t that surprising as after all, the Chinese people see it, breathe it and smell it. Moreover, there has been growing information about the health consequences of polluted air. However, while water and soil pollution may not be as visible as air pollution their severity and the associated health consequences are no less important. Moreover, our economies run on water and we all depend on soil for food production.

More general &  soft targets were set for water & soil
The real focus this year is on key regional water basin poln control & agri non-point source poln control…

Unlike the ambitious target of winning the battle in safeguarding blue skies, this year the government set more general and soft targets on water and soil pollution control and prevention. Besides two pollutant discharge reduction targets, the real focus this year is on key regional water basin pollution control and agricultural non-point source pollution control. “Drinking water safety” is no longer a priority but rural drinking water continued to receive high political attention.

According to the 13FYP on Water Conservation Reform and Development, the target is to increase tap water access rate in rural area to 80% by 2020. Yet, no specific target was set on the ratio of water quality meeting national drinking water standard, not in the 13FYP or Li Keqiang’s annual work report.

The Yangtze River Economic Belt highlighted as a key project…
…Up to RMB22 bn of investment in the belt failed to pass environ approval in 2016

Ecological environment restoration of the Yangtze River Economic Belt was highlighted as one of the key projects of “building a sustainable green wall”. In a press conference during the Two Sessions, Minister Chen Jining from the Ministry of Environmental Protection (MEP) said an ecological redline had been draw to protect key ecological functional zones in the belt. After Xi Jinping’s guidance on “placing ecological environment as a priority”, new projects in the belt will have to face much stringent environmental entry threshold. According to Chen, in 2016 alone, up to RMB 22 billion of investment in the belt failed to pass environmental approval. Already the MEP is setting up a market access negative list of which environmental criteria are key  – as we said in 2016, China is no longer tolerant for any “monkey business”.

On the soil front, China will launch a new detailed survey on soil pollution this year. Much has changed since the last national soil quality survey in 2006. Will the new results show that more than 16.1% of soil polluted? How will China secure its red line on arable land with 19.4% agricultural land being contaminated from heavy metal and POPs? Hopefully the new survey will provide some honest answers on whether China is on the right track in tackling soil pollution. For more on China’s action on soil, see our Soil Ten article.

China to implement stronger control on raw materials in transition to manufacturing power

‘Made in China 2025 Action Plan‘ was one another of the most popular topics during the two-week conferences, according to the Renmin Public Opinion Monitoring and Research Institution. China’s transition into a world manufacturing power (as guided by the Action Plan) and its push to a circular economy is creating a new development path for China, one that does not prioritise growth over pollution.

‘Made in China 2025’ was another popular topic…
…but questions remain about the supply of the critical raw materials crucial for the Plan

China’s transition to a manufacturing power is heavily reliant on raw materials, including strategic and critical minerals such as rare earths, tungsten and graphite. This could become an issue as we showed in our Rare Earth Report, where China may struggle to feed its domestic need for these materials by as soon as 2020. Rare earths and other critical raw materials are crucial to many of the higher-value manufacturing industries that ‘Made In China 20025’ pushes. In other words, the transition can’t be achieved without a sustainable supply of rare earths and other critical minerals. See which other critical materials are dug-up in China here.

The Chinese government is aware of the situation and has implemented a series of policies and regulations since the 13FYP to secure its domestic supply. In a recent national storage bid in January 2017, the State Reserve Bureau purchased over 2,000 tonnes of rare earth oxides from the major Chinese rare earth groups. This plus the newly established ‘Resource Exploitation Red Line’, ‘The National Strategic Mineral Resources Category,’ ‘National Planned Mining Area’, ‘Key Mining Areas of Important Value to National Economics’ and a new wave of crackdowns on the black market and illegal mining, signal China’s increasing control over the situation. The global market would do well to take note.

We are happy to see that environmental issues are key topics of the central government and hope that by the time the 13FYP targets are being assessed in 2018, China is winning the battle on blue skies and smoothly transitioning to world manufacturing power.

Further Reading

• Key Water Policies 2016 – 2017 – Missed out on the key water and water-related policies in China over the last year? Get up to speed with China Water Risk Dawn McGregor’s review, including the latest on the water law
• China’s Water Stress Is On The Rise – Water stress across 54% of China worsened in 2001-2010. The World Resources Institute’s Dr Jiao Wang, Dr Lijin Zhong & Charles Iceland deliver the good and the bad news of China’s latest water stress data
• China Leads The G20 On Climate Change – In 2015, the world economy decarbonised at a record 2.8%. China led with the biggest reduction of 6.4%. PricewaterhouseCoopers’ Robert Milnes on how this is tracked in their Low Carbon Economy Index
• Cost-Effective Carbon Reduction In Wastewater Treatment – The wastewater industry consumes a lot of energy. Xylem’s Lu Shuping shows how its rapid expansion makes it ripe for attractive energy savings opportunities, especially in China
• MyH2O – Test Your Water – To improve transparency, Charlene Ren set-up MyH2O, one of China’s first online crowdsourcing networks on drinking water quality. We sat down with Ren to learn more about their testing, interactive mapping platform and what’s next

• 5 Trends For The Year Of The Rooster – The Rooster crows a new pecking order as China leads the global climate fight & drives structural changes at home. Stay on top with our 5 trends and make sure you are not walking on eggshells but laying golden eggs
• Beautiful China 2020: Water & The 13 FYP – China wants to exert tireless efforts to build a Beautiful China where the sky is blue, the land is green and the water runs clear. Find out what this means for water, the environment and the economy in the next five years in the upcoming 13th Five Year Plan
• The War on Water Pollution – Premier Li Keqiang has just declared war on pollution. Tan expands on the government’s stratagems & offensives and fundamental changes required to shore up the MEP’s arsenal in order to wage a successful war
• 5 Regulatory Trends: From Enforcement To Finance – Since 2016, China’s environmental policy landscape has undergone a series of important changes. CWR’s Xu summarises key regulations & 5 trends you need to know, from greater enforcement to green finance
• Dug-Up In China: The World’s Critical Raw Materials – China is the largest global supplier of many critical raw materials but growing domestic demand could mean it becomes a net importer. How will other countries secure these materials that are key to a low carbon future? China Water Risk’s Hongqiao Liu explores China’s direction in the 13FYP