According to plan

On October 18, the fifth plenum of the 17th Communist Party of China Central Committee came to a close. One of the main results of the meeting was the approval of a draft of the country’s 12th Five Year Plan. The draft has not yet been made public, but the communiqué trumpets the same old themes: Happier, healthier, wealthier people and more economically and environmentally sustainable growth.
 
The last goal is tantalizingly close, and yet still so far away. The 11th Five-Year Plan managed to deliver stellar growth and weather an unprecedented global economic crisis, but it failed to meet environmental targets. Not only does it look like China will miss its goal of a 20% reduction in energy intensity by five percentage points, it has failed on other fronts. The government claims that chemical oxygen demand in China’s water supply was reduced by 9.66% between 2005 and 2009 – just shy of the 10% target – but there are reasons to doubt this statistic. Regardless, the country’s inability to conserve what water it does have is forcing it to spend US$62 billion (so far) rerouting water from southern provinces to the north, where irreplaceable ancient aquifers are being rapidly drawn down.
 
Like most governments, China’s has solved the easy problems first, using established methods. Incubating green manufacturing industries through a combination of government investment, procurement and policy preference is something Beijing has done before in other sectors. But it has been much less successful in persuading Chinese property developers to spend more money – without any guaranteed financial returns – on putting better insulation and energy-efficient light bulbs into their buildings. The same goes for convincing local governments not to idle water filtration facilities to save on operating costs.
 
The next phase is therefore the difficult one. China’s solar and wind industries are already at overcapacity and are starting to descend into a price war. Other policy distortions – such as subsidies for efficient lighting wasted on LED decorations that adorn government buildings and highway interchanges – are becoming increasingly unsustainable. Water remains too cheap, making the new goal – to reduce water usage per RMB1,000 of GDP by 30% – far out of reach at present.
 
Political efforts must now turn to changing the way factories and buildings – China’s biggest and least efficient consumers of energy and water – are built and operated. This requires increased enforcement of existing standards, supported by fiscal reforms like a carbon emissions tax and higher water prices.
 
When enforced, such policies necessitate changes in behavior and, because they entail at least a short-term cost for the powerful real estate and manufacturing sectors, come with both an economic and a political price. Many a promising green initiative has been wrecked at the intersection of these three factors, and not just in China. Some question whether the country’s current political incentive structure is capable of making this adjustment.
 
While skepticism is warranted, cynicism is not. Beijing has set the stage as well as it can for the transformation. Pouring billions into domestic nuclear, wind and solar power development has created a substantial industrial cluster that can only benefit from policies that encourage the use of cleaner energy. It is the source of some 700,000 "green" jobs in renewable energy. This cluster is now a substantial lobbying force that did not exist five years ago, which the government can now turn against opponents internal and external.
 
If China actually does pull off this painful transformation in the next five years, the pain should be widely distributed. For all their complaints, Western companies and consumers have saved a lot of money at the expense of China’s environment. It is in everyone’s interest that the country produce less pollution, and while green protectionism may be dubious economic policy, it is politically necessary for Beijing to cram unpopular policies like carbon taxes down the throats of reluctant factory managers.
 
But one thing is certain: It will take more than publishing ambitious targets and hoping for the best.