While Chinese air pollution has become world famous, over the last couple of years there has been a slowly growing awareness that the Chinese government is working hard to reduce it, and in fact in the last five years pollution levels have been falling. What has not yet come to world attention, and in fact, few Chinese have really focused on, is that China has the potential to become the world leader in standard setting, at least in the two most polluting sectors, power and oil and gas. What this means is that China is now or soon will be demanding new technologies and new solutions to reduce air pollution, and thus its regulatory demands will become a driver of innovation.
We’ve seen this pattern in the past, particularly in the United States. Academics call it technology forcing. When EPA began setting standards for vehicles and power plants in the 1970s, the suite of technologies that we are accustomed to were in their infancy or not yet developed. In particular for vehicles, there were no technologies available to meet the requirements of the Clean Air Act at the time of its adoption in 1970. As the industry association itself says: “When strict vehicle emission standards were first set in the Clean Air Act Amendments of 1970, automakers did not possess the technology to significantly lower vehicle emissions. Catalytic converters for automobiles were developed to meet the standards set by the U.S. Congress.” The case was similar in the power sector, as well. The technology that became critical to meeting the requirement of the Clean Air Act, flue gas desulfurization (FGD or scrubbers) was in its infancy, and its technical problems were not resolved until the 1980s. Advances made in the 1970s and 1980s relied on innovation responding to new regulation. But in recent years, the US Congress has tended to want to see proof of an effective low-cost solution before the implementation of new requirements. This eliminates one possible driver of innovation.
Until the last year or two, Chinese air quality and pollution abatement standards have simply been a matter of catch-up. The Chinese government looked to the US and Europe for models. In fact, for vehicle standards in particular, Chinese environmental officials have told me that for the first five levels of standards, China I through China V, they simply translated Euro I through Euro V, and implemented them with a lag behind when they were adopted in Europe. Power sector standards were similar, using US and European models with a lag behind when they’d been adopted in those countries.
Developing New Standards
But something new began to happen in 2009 in the power sector, where the Chinese environment ministry began to draft a standard that while largely in line with US and European standards of the time (no lag) took into account specific Chinese needs, including China’s higher population and industrial density, particularly along its East Coast. The result was the first Chinese standard that was every bit as tough as its developed world counterparts. Adopted in 2011, that standard has already been superseded by a new set of national requirements called the ultra low emissions plan (ULE). ULE is a completely new standard for coal-fired power plants, designed to reduce air pollution from coal plants to a level that was previously only expected from natural gas plants. This new program was announced in December 2015 and has phase-in requirements between 2017 for the East Coast and 2020 for the far west of the country. When I visited power plants in both the eastern and middle regions, with 2017 and 2018 deadlines, they were already in the process of retrofitting this new equipment, and some had already completed it.
A similar process is underway with vehicles, where standards through 2020 are the same as European standards, i.e. the China V standard, due to be phased in by the end of 2017, is the same as the Euro V standard. But with China VI, currently under review, and slated to be implemented in 2020, Chinese standard setters have decided to draft their own standards, again based on the fact that China is simply much denser and in some areas faces more challenging atmospheric conditions than is typical of Europe or the US as a whole. Experts I spoke with said the new standards will be tougher than the US national standards, though not as tough as those in California, a state that also faces particularly dense transport use and tough atmospheric conditions.
Thus, in the two most polluting sectors, power and vehicles, China is forging ahead with very ambitious standards. In fact, the ULE is so strict, some environmental experts I spoke with both in China and in the U.S., question their feasibility. There are two issues: can they get emissions down that low and can they accurately measure at those low thresholds. There are serious questions on both fronts, but it is worth remembering that when the United States adopted the standards in the Clean Air Act of 1970, we didn’t know technically how we were going to achieve them either. The Chinese power sector is going to need to innovate, both on the performance side and on the measurement side to meet these goals.
While the new vehicle standards will not be as technically challenging as the new coal-fired power plant standards, since California already has such tough standards, adding another huge market with such strenuous standards should also drive innovation to produce better equipment at a lower price.
From Follower to Leader…With Opportunities for the U.S.
Thus, the Chinese environmental program is moving from being a follower to being a leader. With this there will be real opportunities for innovation, including innovation by foreign firms. At every testing lab I visited while looking at environmental regulation I saw a great deal of imported equipment, including from the United States.
This hardly means that China’s air pollution problems are solved. That will still take years. But there has been considerable progress in enforcement over the past decade, and in the last five years that has resulted in measurable improvements. These new standards should contribute to continued improvements. Other factors will be the long-term shift from energy-intensive industry to the service sector, a transformation that also brings with it climate benefits, and a need, still not fully met, to bring the level of regulation in these two sectors to other industrial sectors. But what is clear is that the type of regulation that drives technological change is now at least as likely to emanate from China as it is from the developed countries (the US, Japan and Europe) that have been the traditional technology drivers.
Deborah Seligsohn, a ChinaFAQs expert, is a researcher in environmental governance at the University of California, San Diego.
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