Way forward must be lean, clean and green
China could reap the advantages of embarking on a rapid but thoughtful transition toward a low-emission economy
After more than 10,000 years of relative stability, the scientific evidence presented is clear that the climate equilibrium of the Earth is out of balance. The short-term effects likely include more hurricanes, floods and heat waves.
The possible long-term effects include the destruction of glaciers, forests and ocean ecosystems, imperiling the human habitat and livelihoods. When the McKinsey Global Institute looked at five possible ways in which climate could impact the world－livability and workability, food systems, physical assets, infrastructure services and natural capital－it found that every one of the 105 countries studied looked to be more vulnerable in at least one of these realms by 2030.
Decision-makers in every country have an important role to play in limiting climate change, including China, not least for their own self-interest.
Sea levels off eastern China rose 93 millimeters between 1980 and 2012, while glaciers shrank 10 percent between the 1970s and early 2000s. If greenhouse-gas emissions continue to rise at the current rate, the threats of extreme heat and heat waves could affect 10 to 45 million people by 2030, and one out of 11 working hours could be lost to extreme heat by 2050. That could put at least $1 trillion of China's GDP at risk in any given year.
Between 2005 and 2018, China reduced its carbon intensity by more than 45 percent, and it has developed important green technologies. If China were to embark on a rapid and thoughtful transition toward a low-emission economy, it could not only reduce the global risks of climate change, but also find new sources of economic growth. There are three elements to this strategy.
First, mitigating carbon emissions. Right now, China is the world's largest single emitter, accounting for 20 percent of the total. Moreover, it continues to rely on coal, the most emissions-intensive fossil fuel, for most of its power generation. Decarbonizing would require action across the economy. For a start, China's power and fuel mix need to change, away from coal and toward cleaner fuels (power and transportation account for about one-third of China's greenhouse gas emissions). That would mean retiring inefficient coal plants and replacing them with cleaner alternatives; ramping up electrification (cars, buildings and industrial processes); and growing a green hydrogen market. Because coal remains so significant, China could also invest even more in developing carbon capture, utilization and storage (CCUS) technology. It must also look at the other side of the mitigation coin－at how to reduce demand in the first place. This could be done through greater efficiency, in both energy use and processes. Doing so would likely make operations both cheaper and more resilient. Finally, it could look at methane and nitrous oxide, which are other powerful greenhouse gases, for example by improving fertilization practices, as well as eliminating fugitive methane emissions.
Second, adapting to physical climate risks. To prevent costly crises caused by climate change and safeguard vulnerable populations, protection is critical. This includes such measures as building seawalls and ensuring backup power. Adaptation could also go deeper by embedding climate resiliency in every aspect of the economy and society. For example, China's city planners could factor in climate risks－and thus build in resilience－into all their work, including housing, water, sewage and transportation. The national government could help by creating a resilience playbook to help cities assess their vulnerability and to identify priorities. Infrastructure developers, too, could plan for potential risks over the lifetime of their assets, evaluating both acute hazards such as flooding and chronic ones, such as rising temperatures, and then acting on that information. Doing so requires expertise. Studies show that every dollar invested in building resilient infrastructure saves an estimated $6 in future costs. Finally, developing more sophisticated climate risk insurance, including traditional loss-based insurance but also catastrophe bonds or weather derivatives, could be helpful. It creates cash flow for people when they need it, while protecting government finances. It can also help governments plan for unexpected hazards and might encourage the construction of more resilient projects: better-protected assets require a lower insurance premium.
Third, supporting global sustainable growth. China's domestic progress on climate change could also be economic assets. Specifically, countries that decide to develop economic low-emission technologies, such as electrolyzes, sustainable aviation fuels, alternative proteins and CCUS technologies, these could be scaled up and exported. China could mobilize capital flows for green projects globally. China could provide technical assistance to other countries considering the climate impacts of their own infrastructure and in doing so play a bigger role in promoting international climate collaborations. This might also include new standards on carbon pricing and collaborating with global financial institutions and multilaterals to make "lean, clean, and green" development a global reality.
Scientist argue that climate risk is locked in because of what has already been emitted. The question, then, is how to stop things getting worse. No one should underestimate the difficulties, but it is also important not to underestimate the possibilities. As the world's leading emitter, and given its economic clout and its innovative capabilities, China has an important role to play. It could seize the day, for the benefit of its own people, its own future－and that of the planet.
The author is a senior partner in McKinsey's Shanghai office and the director of McKinsey Global Institute. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
