The financial crisis has spread from the United States to the world. China, as a part of the world economy, has seen a major impact on its economic growth – and its energy-saving and emissions-reduction measures.
Historically, such crises have had a large negative impact on economic development and resulted in reduced energy consumption and pollution. China has set lofty goals for economic development, energy-saving and emissions-reduction; the measures in the eleventh Five-Year Plan have been strictly implemented, though the actual results over the past three years have been unsatisfactory. Although the economy has slowed since August 2008 and energy use has fallen rapidly, with energy-saving and emissions-reduction no longer such a problem, the effect is only temporary. As the economy recovers, both energy use and emissions will rebound. In the long term, economic growth is inevitable and China faces energy-saving and emissions-reduction challenges. China cannot lower its guard.
Since the Industrial Revolution, economic expansion and the burning of fossil fuels have caused massive increases in pollution. But economic cycles and crises cause fluctuations in that economic growth, and hence in energy use and pollution.
The changes in per capita greenhouse-gas emissions for certain nations since the mid-nineteenth century can be seen in Figure 1. Due to the quality of data from the nineteenth century means some historical details are lost, but from the early twentieth century records improve and the data becomes more accurate. Therefore, the data can teach us several lessons.
First, a recession leads to a large fall in energy demand and thus greenhouse-gas emissions. Energy consumption plummeted in Germany and Japan at the end of the Second World War, with emissions dropping by around 80%. The end of the Soviet Union and collapse of the Russian economy caused energy consumption to drop 40% in 1990. In the “Three Years of Natural Disasters” after the Great Leap Forward in China, energy consumption decreased and emissions fell significantly. Energy crises in 1973 and 1986 also reduced energy demand and emissions in major economies. The Great Depression also saw energy use and emissions fall by one third.
Second, the more globalised a nation is, the greater the impact of a global crisis. Developing nations, which are less integrated into the global economy, suffer less than the early industrialisers, such as the United States and countries in Europe.
Third, although per capita emissions fluctuate with the economy, the overall trend is upwards. When a crisis has passed, emissions quickly rebound and hit new highs.
Fourth, per capita emissions are almost in direct correlation with development. As the level of development increases, so do emissions per head. Europe and the United States have higher per capita emissions than developing nations, such as China and India.
Fifth, when development reaches a certain level, growth in per capita emissions slows, stabilises and even falls. Per capita emissions in Japan and the United Kingdom have been stable for almost two decades, while Germany has seen 30 years of negative growth.
So, why does an economic crisis lead to energy-saving and emissions-reduction? Table 1 illustrates the changes in China’s energy consumption during the Asian Financial Crisis of 1997. Figure 1 shows how China’s per capita emissions peaked in 1997, falling until 2001, when there was a quick recovery. Analysing the data in Table 1 explains why: first, the financial crisis caused a fall in demand for energy. Growth in energy demand fell from 8.3% in 1995, to 4.1% in 1996 and 0.2% in 1997. At its lowest point, total energy demand had fallen by 9.3%, which led to a drop in pollution. Second, looking at energy structures shows that coal, the most polluting source of energy, was hit hardest. Negative growth started in 1997, with a fall of 15.7% by 1999. Cleaner sources of energy – oil, natural gas and hydropower, for instance – were virtually unaffected. Thus energy became cleaner overall, and pollution fell. Third, when market conditions worsened, low-technology, small, inefficient and uncompetitive enterprises failed first; larger, more advanced and more efficient firms were better placed to weather the storm. This lead to an overall increase in energy-efficiency and a reduction in pollution.
Table 1 Growth in energy consumption during the Asian Financial Crisis (1997-2000)
Source: China Energy Data Report 2004, LBNL, ERI/NDRC, 2006.
During a crisis, economic activity shrinks, demand falls and total energy demand follows suit. Thus a cleaner energy structure ensues. However, the demand for energy across different sectors changes in different ways: household consumption may change slightly, but not much, and the service industry is not affected badly. The largest impact is in the manufacturing industry, particularly raw materials and heavy industry. And while household and service sector energy comes largely from oil, natural gas and electricity, industry – particularly heavy industry – tends to rely on cheaper, polluting sources of energy, such as coal. Therefore, during a crisis the total energy demand falls and energy overall becomes cleaner.
NEXT: Can China meet its energy-saving targets?
Pan Jiahua is executive director of the Centre for Urban Development and Environment at the Chinese Academy of Social Sciences
Homepage photo by Bert van Dijk