An Impact Assessment of China’s Renewable Portfolio Standard using MRIO Analysis

Event: 21st Conference of International Input-Output Association
Conference Paper

As in most areas of the world, China’s strong willingness to support the development and deployment of renewable energy can be attributed not only to motivations regarding climate change but to those concerning sustained economic growth, green jobs and energy security. Since the early 1980s the Chinese government has implemented multiple policies aimed at promoting the domestic production of renewable energy. In recent years investment into this sector has greatly increased. In 2011 China invested US$51 billion in renewable energy – with photovoltaic solar panels (PV) and wind power technologies receiving by far the largest proportion: 87.7% or $39.6 billion of total investment. Targets for total renewable energy consumption under the current 12th five-year economic plan (12-FYP: 2011-2015) are set at 478 million metric tonnes of coal equivalent, representing around 9.5% of the overall energy consumption mix by the end of 2015. Subsequently this national target has been allocated regionally within China as provincial quotas. In assuming that regional targets are met, this study offers a detailed analysis of the regional impacts of China’s Renewable Portfolio Standard as well outlining a number of international implications. Specifically the following are addressed: 1) how can investment in renewables drive upstream growth in employment and economic output? 2) what are the implications of a new energy mix for international trade? 3) what will be the change in China’s national carbon emissions? Selected due to its suitability in describing the distribution of an industry’s product throughout an economy, multi-regional input-output (MRIO) analysis is the principle method used. In accordance with the number of provinces in receipt of renewable energy targets, a MRIO table organises China into 30 regions and disaggregates each provincial economy into 38 industries. China’s original MRIO table aggregates the energy industry into one sector however within this study the sector is disaggregated into eight sub-sectors of primary energy sources (coal, natural gas, crude oil products, nuclear, hydroelectric, wind, solar and biofuels). It is expected that if the targets set by the Renewable Portfolio Standard are achieved, then there naturally would be a relative reduction in carbon emissions – but that these alone would not be sufficient to meet China’s emission intensity target of 17% by 2015 (compared with 2010 levels). Furthermore, given the level of investment required to increase the proportion of renewables, it is also probable that job opportunities, directly and indirectly related to the renewables sector, would result. As well as employment, increases in output are foreseen for those upstream and downstream industries connected to the renewables sector. However, a contraction in the growth of industries reliant on coal is anticipated, as is an increase in coal exports (ignoring price dynamics).

Bryn Daniel Stott