By Craig Cammarata
Despite passing the United States as the largest contributor to global CO2 emissions in 2006, China is not classified as an Annex I country under the United Nations Framework Convention on Climate Change (UNFCCC), and therefore, is not required to reduce its CO2 emissions. This paper evaluates the impact that categorizing China as an Annex I country, and thus requiring China to report and reduce its CO2 emissions below a designated percentage of a base year, would have on global CO2 emissions. Specifically, the paper evaluates China’s projected reductions according to two base-year scenarios, 1990 and 2000 levels.
Under the United Nations Framework Convention on Climate Change (UNFCCC), and the subsequent provisions that govern the reductions of CO2 emissions under the Kyoto Protocol, China is not designated as an Annex I country despite passing the United States as the largest contributor to global CO2 emissions in 2006 . As a non-Annex I country, China is not required to reduce its current or future CO2 emissions and may benefit from carbon offset projects that are funded by Annex-I countries looking to reduce their own emissions. However, China has experienced explosive economic growth since signing the Kyoto Protocol and it is becoming clear that an unregulated China could significantly hinder the UNFCCC’s carbon mitigation efforts.
This paper evaluates the impact that categorizing China as an Annex I country, and thus requiring China to report and reduce its CO2 emissions below a designated percentage of a base year, would have on global CO2 emissions. China’s economic growth has exploded since 2000, and requiring China to reduce emissions below the Kyoto Protocol’s base year of 1990 could be an unrealistic goal. Therefore, this paper forecasts and compares the reductions that China would be required to meet under two base-year scenarios, 1990 and 2000.
Due to rapidly accelerating CO2 emissions associated with China’s current rate of economic growth, requiring China to reduce CO2 emissions according to the Kyoto base-year of 1990 may be unrealistic and could impede future climate change negotiations. Economic data from the International Monetary Fund (IMF) and emissions data from the World Bank (WB) and the United Nations (UN) show that, since 1990, China’s 143% rise in real GDP (indexed to 1995 Yuan) has led to a 433% increase in CO2 emissions [5,6 & 7]. In fact, that same data show an explosion of economic growth (67%) over the last 5 years of data (2002-2007), leading to an 80% increase in CO2 emissions.
This paper analyzes the future emissions reductions that China would be required to make if China became an Annex I country. Using time-series data and regression analysis to project China’s emissions according to a business-as-usual (BAU) trend, this paper calculates China’s future Annex I reductions under two base-year scenarios, 1990 and 2000. The former base year represents the current base year for all current Annex I countries and the latter is an attempt to capture the beginning of China’s explosive growth.
In addition to the two base-year scenarios, the paper also evaluates two reduction rates for each scenario. Since China’s share of world CO2 emissions is comparable to the United States [1 & 2], a high reduction rate is set at 7% (Table 1), which is the same base-year reduction rate that the Kyoto Protocol assigned to the United States . A lower base-year reduction rate of 5% represents the lowest reduction rate required of Annex I countries.
In order to properly analyze the future reduction of emissions under the two base-year scenarios, four separate regressions were run to capture the full impact of population and real GDP on emissions growth. As shown below, the first regression (R1) estimates the impact that China’s population has on the country’s total emissions. The Population Reference Bureau (PRB) projects that China’s population will peak around 2025 at about 1.476 billion and fall as low as 1.437 billion in 2050 . The hypothesis behind R1 states that as population decreases so will emissions.
As a check against the measured impact that the population variable has in R1, the second regression (R2) tests the impact of both population and real GDP on total emissions. WB and UN data show that emissions per capita has been rising substantially since 2000, which indicates that real GDP may have a greater impact on China’s future emissions than population [6 & 7]. If this is true, it is possible that China’s CO2 emissions could continue to increase, even though population is projected to decrease. Such a result would indicate that real GDP per capita (GDPPC) is the driving force behind the level of CO2 emissions. With this in mind, the third regression (R3) generates a forecasting line for real GDP over time in order to forecast future GDPPC according to the fourth regression (R4), which analyzes the impact GDPPC has on China’s emissions. The results of those regressions were then used to construct a forecast of China’s future emissions. The equations for the regressions are as follows:
Regression 1 (R1) → E = β0 + βpop(pop)
Regression 2 (R2) → E = β0 + βpop(pop) + βGDP(GDP)
Regression 3 (R3) → GDP = β0 + βt(t)
Regression 4 (R4) → E = β0 + βGDPPC(GDPPC)
Table 2 shows the results of regressions R1 through R4. All results in Table 2 are statistically significant at a 99% confidence level. The conflicting population coefficients (positive correlation in R1 and negative correlation in R2) in the first two regressions explain a bias created in R1 due to the omission of real GDP. Therefore, real GDP is influencing emissions, which was expected. The clearest results occur when population and real GDP are combined into one variable, GDPPC. Using the GDPPC term in R4 better captures the fact that emissions increase when individual wealth throughout the population increases. An R2 coefficient of about 0.92 provides strong evidence that R4 explains the observed variation for the historical data and should act as a reasonable BAU trend line for projecting China’s future emissions.
Figure 2 compares China’s projected emissions and population based on the results in Table 2 and PRB’s population projection. Due to population control policies, China’s population is expected to decrease after 2025 . However, the BAU model predicts further growth in real GDP, which causes GDPPC to grow. Despite the future decrease in population, the growth in GDPPC is large enough to cause CO2 emissions to rise.
Figure 3 compares China’s historical and projected GDPPC with CO2 emissions (mt) per capita. The two variables move in concert, which suggests that China’s potential economic boom could lead towards future unsustainable CO2 emissions levels. However, it is important to note that the slope of the GDPPC curve is steeper than the emmissions per capita curve, which indicates that emissions are expected to grow at a slower rate than GDP. With new emission reduction and/or more efficient technologies in the future, the discrepency between those rates in the BAU case should become more pronounced. Although China’s projected CO2 emissions are expected to increase considerably, they are still expected to be much lower than the per capita emissions of the United States, which is currently around 20 metric tons .
This analysis also projected the future reduction of CO2 emissions based on two base-year reduction rates for each base-year scenario. Tables 3 and 4 summarize China’s future reductions based on reduction rates of 7%, which is comparable to the United States’ assigned reduction levels (Table 1), and 5%, which is the lowest base-year reduction rate assigned to Annex I countries. Under both base-year reduction rates, China’s allowable CO2 emissions using a base-year of 2000 is roughly 40% higher than using a base-year of 1990. Even under the 2000 base-year scenario, if the reduction provisions took affect next year, China would be required to reduce emissions below the BAU trend by about 47% under a 7% base-year reduction rate and by about 45% under a 5% rate. In 2050, those percentages would increase to 79% and 78% respectively. Those results indicate that although the base-year does significantly influence the level of future reductions, the rate that governs those reductions does not. Thus, setting an appropriate base year is more important for establishing a reasonable mitigation policy.
As expected, the 2000 base-year scenario at the lower base-year reduction rate would be the least demanding mitigation option for China. China’s dramatic growth since 2000 has lead to an incredible rise in CO2 emissions, especially when evaluating emissions from a per capita perspective. Being the largest emitter of CO2 in the world, comprising about 24% of global CO2 emissions (Figure 1), China’s continued growth presents a serious concern for the future mitigation of anthropogenic CO2 emissions.
Using the same datasets and regression techniques outlined in the methods section, Table 5 demonstrates the impact China’s future reductions would have on global levels of new CO2 emissions. According to the BAU model, China’s emissions will comprise about 30% of global CO2 emissions in 2025 and could reach an astounding 40% in 2050. If China agreed to cap its CO2 emissions at 7% below its 2000 level, the resulting prevention of anthropogenic CO2 emissions could be enormous. Table 5 shows that if China did mitigate according to that schedule, projections of global CO2 emissions would decrease by 16 percent. The BAU model predicts that this same mitigation schedule would lead to a 22% reduction in expected global CO2 emissions in 2025 and a 35% reduction in 2050. These results are astounding and further demonstrate the urgency the UNFCCC must take in negotiations with China to prevent a disastrous explosion of global CO2 emissions.
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