China’s green development plan

July 01, 2016

The global agenda on green or sustainable development primarily took shape in 2015. At two important meetings—the annual Conference of Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris and the United Nations Sustainable Development Summit in New York—the international community adopted ambitious goals and guidelines to mitigate greenhouse gas emissions and foster green, non-carbon growth by 2030. Notably, the United States of America and the People’s Republic of China—the world’s two largest carbon dioxide (CO2) emitters—have put aside conflicting goals and called for joint efforts to combat climate change.

Despite such needed progress, there still is a long way to go to combat climate change and environmental pollution. The future impact of the Paris Agreement (COP21), which 175 nations signed in April 2016, depends on the subsequent ratification of the agreement and national implementation plans, respectively. Slow economic growth, political volatility, and plunging oil prices could hamper progress. A low oil price makes the adaption of zero-carbon electricity more difficult. In addition, some experts argue that joint temperature targets (1.5-2.0 Degree Celsius), as laid out by the Paris Agreement, already are not ambitious enough to prevent the negative impact of climate change, regardless of the level of each nation´s contribution.

As argued in this opinion piece, the concept of circular economy can help to integrate the various commitments, policies, and actions and to overcome the apparent contradiction between economic growth and environmental protection.

China’s green five-year plan

China already experiences the negative impact of climate change, rising temperatures, and excessive levels of pollution. Longer periods of drought are challenging water supplies. Glaciers are retreating, and groundwater levels are declining. Hazy weather conditions, caused by air pollution, also seem to lower rainfalls. Such stress on natural water supplies ultimately challenges China’s food security. A key factor impacting climate change is China’s dependency on coal consumption, which doubled during the past decade. The result of burning coal for energy is extreme air pollution and emission of greenhouse gases. As a global manufacturing hub, China also releases many other toxic substances into the environment, thereby contaminating air, land, and water. Despite the recent slowing down, China’s economy will continue to grow. China’s GDP will surpass that of the United States’ probably within a decade. With such growth the pressure on China’s environment and people’s health also will increase if the government does not intervene and manage to reduce pollution or even decouple its economic growth from carbon energy and rampant resource exploitation.

During the past five years, China has made tremendous progress. It has become the world’s second largest economy, achieving an average GDP growth of 7.8% and reaching an urbanization ratio of 55%, thus further lifting millions of people out of poverty. Despite this unparalleled achievement, the Communist Party does realize that China faces structural server problems, one of which concerns high levels of pollution. Unlike the West with its long history of environmental pollution, China has the opportunity to learn and implement faster measurements to counter environmental pollution. Within the next months, China will finalize its 13thFive-Year Plan (FYP) for 2016 to 2021. Compared to its previous FYPs, the emerging 13thFYP is already seen as the “greenest” one. The Communist Party has pledged to build a “beautiful China” by promoting “green development” and “incorporating it into all aspects and the whole process of advancing economic, political, cultural, and social progress.” As much as sustainable development has become one of the U.N.’s Millennium Development Goals (MDGs), it will be a key pillar of the new FYP.

Various areas of environmental protection are highlighted in the 13th FYP proposal, notably the control and reduction of carbon emissions, especially in the sectors that have accounted for China’s past rapid growth, such as steel and construction materials. The country’s future energy architecture should be increasingly based on clean resources and replace coal and other fossil fuels. In 2015, the government already pledged to put a peak on its growing carbon emissions by the year 2030. To achieve this, the FYP also includes the implementation of carbon emission permit systems (ETS). Such a cap-and-trade scheme could enable China to cut pollution through directing capital toward low-to-zero carbon emission investments, as well as encouraging operational efficiency and providing an incentive for the deployment of new technologies. China is already piloting seven carbon-emission trading systems and aims to implement a nationwide scheme by 2017. China can certainly learn from Europe’s emissions trading system, which was the first and is globally the largest one. Especially volatile carbon prices and caps that were set too high undermine the trading-with-emission permits and objective of reducing carbon emissions. Thus far, Europe has failed to enact a functioning cape-and-trade system with a clear minimum carbon price helping to reduce carbon emission. Nevertheless, Beijing has chosen the trading system over the more transparent and easier-to-administer carbon tax.

The government not only focusses on emission reduction and rehabilitation of already contaminated nature (with priority on the most polluted regions), but also on the transformation of the country into a green economy, i.e., on preventing pollution and extreme resource exploitation from occurring in first instance. In other words, if your home is flooded with water, it’s not enough to dry up your home again; instead, you must stop the flooding in the first place. Hence, the government has set the ambitious goal to tackle the very causes of pollution and resource exploitation. The new plan seeks to promote “green transformation” as the new engine of economic growth. The government will focus on the traditional manufacturing industry as well as on the development of low-carbon and recycling industries.

Previous FYPs also incorporated green targets. The past has demonstrated, however, that the implementation of such necessary goals poses a huge challenge to resolve the apparently conflicting objectives between economic growth and environmental protection. But today, what still appear to be utopian goals could become a reality. The concept of circular economy (CE) offers a realistic path towards a truly green economy. Circular economy should not be reduced to the concept of recycling, which Germany, for example, already implemented in the 1980, and which China adopted in previous FYPs and regulations. Although recycling is a crucial element, CE requires a system change. It promotes an economic system that replaces the traditional linear production and consumption flows (“take, make, dispose”) with restorative business models that decouple economic growth from the availability and exploitation of natural resources.

Linear economy

Industrialization and globalization has been determined by a “one-way” economic model of production and consumption in which goods are manufactured from raw materials, sold, used, and then disposed of as waste after their use. While this liner model has made possible a tremendous economic growth and great strides in increasing resource efficiencies, its dependency on consumption and natural resources bears severe financial and environmental risks that raise concerns about the model’s long-term viability.

Financially, as the global middle class is forecasted to more than double in size over the next two decades, consumption and material intensity will rise correspondingly, driving up input costs and price volatility at a time when access to new resources is becoming more challenging and expensive. Commodities and particular natural resources are already vulnerable to availability and extreme price volatility, which has discouraged investments, lowered economic growth, and created uncertainties. In the past ten years, high price volatility has especially been seen for carbon energy resources, metals, and agricultural outputs. Governments also spend billions of dollars to reverse the negative consequences of environmental pollution and waste generation.

Environmentally, today’s linear economy mainly relies on non-renewable natural resources for the generation of electivity and manufacturing of goods as well as on over-consumption. This causes numerous environmental problems, including climate change, water, air, and soil pollution and degradation, or biodiversity loss. The linear model also perpetuates consumer and industrial waste. Due to lack of waste management or leakages during waste processing, the linear economy does not only create tons of waste, which is mainly sent to landfills or incinerators, but also hemorrhages economic value. Specifically, plastic waste remains a valuable resource at the end of its lifecycle, but it is hardly used as a resource for the development of new products. Such stress on the environment and economy will only increase with a rapidly growing population of middle-class consumers (3 billion by 2025), creating an unprecedented demand for resources.

A plastics planet

Plastics play an integral part in the global economy and the waste problem. They make modern life possible and deliver many benefits. Products have become much more efficient and less costly. Plastic production has therefore strongly increased over the past five decades. Overall, 311 million tons of plastic were manufactured in 2014. This amount is expected to double over the next 20 years. Packaging is the dominant application of the global plastics economy. Despite the advantage of plastics, there are important drawbacks with plastics. With 14% globally, plastics comprise one of the least-recycled materials compared to paper (58%) or steel (70-90%). Plastics that are recycled are mostly converted into lower-value applications or simply burned for energy generation. Only 5% of their material value is retained for subsequent use. In addition, 6.4 million tons of waste ends up in the oceans each year, of which 75% is plastic waste. Approximately 269.000 million tons of plastic waste is floating in the oceans. This creates a tremendous problem, for plastics often have a lifespan of several hundred years and degenerate very slowly. Larger plastic and micro parts are found in marine animals. They kill marine animals and enter the food chain. It is estimated that 80% of all seagulls are contaminated with plastics, and that by 2020, the ocean is expected to contain 1 ton of plastic for every 3 tons of fish.

Not only such uncontrolled leakage of plastics, but also the general production and use of plastics can be problematic for environmental and human health. Plastics are often composed of various chemical substances and additives mainly to improve product performance. Many of them raise concerns about negative health effects. While the implications are not always conclusive, especially due to the difficulty of assessing the long-term exposure and compounding effects, there are sufficient indicators that warrant accelerated action.

China is the largest plastic producer and consumer, and it imports large quantities of plastic waste from outside China. Since 2007, recyclable plastics have been one of the United States’ largest exported goods to China. In 2013, however, China introduced the “Operation Green Fence” program mainly to curtail the amount of contaminated plastics. Due to thorough inspections at the customs and the rejection of contaminated plastics and other waste, the total amount of imported plastics has declined since then. Conversely, many recyclers in the U.S. and Europe have upgraded their recycling facilities to produce a higher quality of recyclable materials. This is also due to the increasing awareness that plastic is not waste but also remains a valuable resource at the end of its use cycle.

Today, however, most green approaches still aim to reduce the negative impact on the environment, but the underlying patterns of production and consumption, which are the source of environmental pollution and excessive waste generation, largely remain the same. Products are developed with a single lifetime in mind, and only at the end of the lifecycle the issue of recycling becomes addressed. The use of toxic substances not only harms the environment, but also further complicates the recycling of products. Given the continuous expansion of the plastics economy over the next decades, it is no longer sufficient to cope with waste once it occurs. Instead, it is necessary to find solutions that reduce or prevent waste and pollution from the outset, i.e., already at the stage when products are designed, so that products or their materials can have multiple lives or be decomposed to their raw ingredients once they are not used anymore or re-enter the biosphere.

Circular Economy

The Circular Economy has emerged as a vital alterative to the resource-dependent and consumption-based linear economy and provides a framework for decoupling growth from resource constraints. The circular model will help them to decrease the financial and environmental risks that are embedded in the linear economy and spur innovation. Today’s “take-make-dispose” economy is replaced by one that is restorative by design and emphasizes manufacturing and consumption cycles based on value chains of “take-use-re-use.”

One of the defining features of circular economy is a product design that maximizes the value and life cycle of products as well as their materials and inputs. Virgin raw materials are extracted and used for the manufacturing of products and then remain in the cycle of make, use, and reuse. Hence, products are designed so that they can be easily re-used, repaired, refurbished, disassembled, or recycled for the development of new, high-quality products. Durable or technical resources either remain used within the same industry or are reused in other industries and for new purposes to extend their useful life and maximize their value. In this process, stocks and flows of resources are continuously built as opposed to degraded and disposed. The main source of energy for the production and processing of the restorative resources is based on renewables sources. Depending on their functionality, however, products are also consumed and therefore degrade over the course of their use cycle. In this case, materials and their substances are safely released to the biosphere. Therefore, the purity of materials and their substances, that is, the lack of toxic substances and additives, are also a defining feature of the circular economy. In the linear economy, products are often toxic by design; meanwhile, in the circular economy, toxicity is avoided from the outset. Without the purity of materials, recycling remains difficult or impossible in addition to the hazardous effects towards the environment and human being.

The product design also follows the criteria of environmental effectiveness, i.e., the optimal combination between product functionality, material, and production costs, and environmental footprint. The optimum between those criteria determines the material choice and design, including whether to use a feedstock, for example, of virgin or recycled raw materials based on petro-chemical or biological, durable, or degradable resources.

From the perspective of environmental effectiveness, petro-chemical resources still often have a much lower energy and water footprint as opposed to biological resources. For the circular economy, it is important, however, that resources remain in the cycle of use and reuse. Resources are no longer exploited but become efficiently used.

Finally, the circular economy opens up entirely new business models. Traditional “open-loop” businesses turn into “closed-loop” businesses and value chains to ensure the flow of products and materials continues across industries. Products are no longer simply consumed but are increasingly used. Physical products are sold as a service to enable such a regenerative system of take-back and remake. The circular economy also spurs innovation as new materials or material combinations and the underlying business models still need to be invented.

Integrated Framework

China’s new FYP addresses the most urgent areas of an environmentally responsible economy including the objective of transforming its economy into a truly regenerative and restorative one. However, circular economy is not a new concept for China’s central government. China has a long record of incorporating green legislation. Already during the 11thFYP (2006-10), the circular economy was identified as a national policy, and a circular economy law was issued by the Standing Committee of the National People’s Congress in 2008. The most recent guidance about China’s circular economy strategy and action plan was provided by the State Council of China in 2013. In addition, some of the CE policies and guidance can be traced back to laws and regulations from the mid-1980s and mid-1990s, prioritizing better resource utilization and cleaner production. Given the excessive level of pollution in China today, the question of the effectiveness of the implementation of China’s CE regulations must be raised.

Appreciating that the implementation of policies is a complex undertaking, however, one important dimension that explains the lack of implementation and adaption of CE principles relates to the understanding of the concept of CE itself. China has been focusing on resource utilization and pollution reduction, yet not in terms of promoting and implementing an inherently restorative economy; instead, it has been focusing on such notions in terms of “repairing the old linear model.” Within the linear model, government and industries deal with pollution and waste once it occurs. Within the circular model, materials and products are designed to avoid pollution and waste in the first place. The Ellen MacArthur Foundation has highlighted through its work with the World Economy Forum that sustainability and green development does not contradict or suppress economy growth. On the contrary, The Ellen MacArthur Foundation has shown for Europe that a shift toward a circular economy can realize net-material cost savings worth up to U$630 billion p.a. heading toward 2025, stimulating economic growth and activity in the areas of material innovation, product development, manufacturing, and recycling. Circular business models not only help saving costs, but also fulfill the demand of societies that increasingly demand green products and services.

China has called globally for joint efforts in combating climate change, and its new FYP is recognized as the greenest and most ambitious one. For the Chinese government to coordinate effectively the various policies and measures of transforming China to a green economy, CE can function as an integrated framework that overcomes the apparent contradiction between economic growth and environmental protection. Such change must be implemented top down, but the central government needs to set the right incentives for the public and private businesses as well as for the provincial governments to take action. Businesses need to think in terms of restorative product design and of supply chains crossing organizational, industry, and even national boundaries to enable a circular flow of goods and services. Using incentives and measurements for low-carbon energy reduction is an efficient approach because resource consumption can be measured. The avoidance of toxic substances can be controlled and reinforced through China’s chemical laws and further transparency achieved through its system of classification and labelling of chemicals. However, the Chinese people need to develop an environmental mindset and knowledge that helps to create a strong demand for responsible manufacturing and consumption. The good news is that China does not need to wait through decades of industrialization to make this happen, yet environmental projection requires international goals and standards.

About the author: Thorsten Jelinek, Ph.D.

Thorsten is the Managing Director of Poly Terra Innovation, a German R&D firm developing sustainable plastics and products from idea through to market readiness. He is also a member of the Taihe Institute, a nonprofit, independent, public-policy think tank based in Beijing. His professional work is based on his in-depth experience in the areas of business strategy and development, sustainability and international relations. Prior to his current role, Thorsten was an Associate Director at the World Economic Forum responsible for economic relations in Europe, and held various leadership roles in the industry. He holds a Ph.D. in political economy from the University of Cambridge and is a Member of the Clinton Global Initiative.



Should you have any questions, please contact us at