Without raising awareness of emissions, people will continue to pursue higher incomes, buy more things, consume more energy and produce more emissions
The Paris Agreement proposes that global warming should be limited to 1.5 to 2 C within this century. The task of reducing carbon emissions to achieve this goal is daunting. According to the Emission Gap Report 2019 issued by the United Nations Environment Programme, to limit global warming to 2 C above pre-industrial level, global carbon emissions need to fall by 2.7 percent annually over the next 10 years. To limit warming to 1.5 C, global carbon emissions need to fall by 7.6 percent each year. Yet the reality is that global carbon emissions have not declined. Instead, they increased by 1 percent in 2017 and by 2 percent in 2018. Since energy is substitutable, energy prices are key to the success of clean energy and the transition to a low-carbon economy. An effective energy price mechanism can improve energy efficiency and promote energy conservation and emissions reduction. For example, if energy prices increase, consumers will require companies to make capital investments to produce more efficient engines to save fuel and balance the price increases. So increasing energy prices can lead to technological progress and energy efficiency. But assuming consumers"" incomes and energy prices remain unchanged, if the government makes capital investment to improve energy efficiency, consumers will increase their energy consumption. Therefore, the market-oriented reform of energy prices is very important. If we simply increase energy efficiency and maintain relatively low energy prices, we will not achieve the goal of energy conservation and emissions reduction. On the other hand, there are different choices for transportation energy consumption such as electric, gasoline or diesel. There should be a balance in the substitution of various types of energy. This balance is largely a price balance. The key to large-scale commercial utilization of renewable energy is to reduce costs. Through technological progress and government subsidies, the price of renewable energy has dropped significantly in recent years. However, according to the current situation, the proportion of renewable energy in total energy consumption is too low. Renewable energy cannot be expected to replace fossil fuel energy when there is an increasing demand for energy consumption. The market-oriented reform of energy prices depends on market pricing to optimize the allocation of resources. The term externality is used to describe the hidden costs of the production of fossil fuels. The most obvious externalities of fossil energy production are environmental externalities, including air pollution and climate warming. These external costs are difficult to measure, such as the impact of air pollution on human health. Even some external costs that can be quantified often cannot be internalized in reality. The so-called market-based prices in reality usually reflect only the financial price and the scarcity of energy, and do not include external costs such as environmental pollution and climate change. Therefore, simple market-oriented reform of energy prices may not solve the problem of optimal allocation of resources. Energy market-oriented reforms should take into full consideration of external costs of fossil fuels. Since 1965, global energy consumption and GDP have basically maintained a synchronous upward trend. Global energy intensity has fallen slowly, and it has been difficult for technological progress and energy efficiency to offset the impact of income growth on energy consumption. We generally believe that technological progress and improved efficiency can reduce energy consumption and decouple GDP from energy. However, as a simple example, a piece of clothing can be worn for a long time, but if income allows, we will often buy a lot of clothing. In this way, even if unit energy efficiency is improved, the total energy consumption of multiple clothes will still be much more than one. Therefore, especially when the economy is on the upswing, the improvement of energy efficiency usually cannot offset the pressure of rising incomes on energy consumption. We have chosen an economic model that is most suitable for human development, and called it the market economy. Basically all countries are market economies, and China has been carrying out market-oriented reforms. So what is the core issue of the market? From the supply side, it must be selling. As long as a product is bought, a company can succeed. Therefore, in reality, countless people want to sell things to us every day. From the demand side, people have endless desires for material possessions. As long as their incomes allow, people will buy. According to statistics, the garment industry produces an average of 20 pieces of clothing for each person annually, and 30 percent of the clothes produced are never worn. The market economy, as the most suitable model for human development, puts a lot of pressure on natural resources. The simple increase in efficiency can""t offset the pressure of income growth on energy demand. Therefore, energy consumption and carbon emissions, especially in emerging countries, remain a major problem. It is true that some developed countries in the European Union are showing a flat or even slightly declining energy demand, but it is still too early to say that their energy demand is decoupled from GDP. Assuming that there is no environmental pollution in developing countries, such as pollution caused by manufacturing in China, India, and Southeast Asian countries, none of the countries in the world can claim that its GDP growth has been decoupled from energy consumption. Therefore, we need to truly understand the pressure of the market economy on resources and pollution emissions to improve the energy saving awareness. The author is dean of China Institute for Studies in Energy Policy at Xiamen University. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
SONG CHEN/CHINA DAILY
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The Paris Agreement proposes that global warming should be limited to 1.5 to 2 C within this century. The task of reducing carbon emissions to achieve this goal is daunting. According to the Emission Gap Report 2019 issued by the United Nations Environment Programme, to limit global warming to 2 C above pre-industrial level, global carbon emissions need to fall by 2.7 percent annually over the next 10 years. To limit warming to 1.5 C, global carbon emissions need to fall by 7.6 percent each year. Yet the reality is that global carbon emissions have not declined. Instead, they increased by 1 percent in 2017 and by 2 percent in 2018. Since energy is substitutable, energy prices are key to the success of clean energy and the transition to a low-carbon economy. An effective energy price mechanism can improve energy efficiency and promote energy conservation and emissions reduction. For example, if energy prices increase, consumers will require companies to make capital investments to produce more efficient engines to save fuel and balance the price increases. So increasing energy prices can lead to technological progress and energy efficiency. But assuming consumers"" incomes and energy prices remain unchanged, if the government makes capital investment to improve energy efficiency, consumers will increase their energy consumption. Therefore, the market-oriented reform of energy prices is very important. If we simply increase energy efficiency and maintain relatively low energy prices, we will not achieve the goal of energy conservation and emissions reduction. On the other hand, there are different choices for transportation energy consumption such as electric, gasoline or diesel. There should be a balance in the substitution of various types of energy. This balance is largely a price balance. The key to large-scale commercial utilization of renewable energy is to reduce costs. Through technological progress and government subsidies, the price of renewable energy has dropped significantly in recent years. However, according to the current situation, the proportion of renewable energy in total energy consumption is too low. Renewable energy cannot be expected to replace fossil fuel energy when there is an increasing demand for energy consumption. The market-oriented reform of energy prices depends on market pricing to optimize the allocation of resources. The term externality is used to describe the hidden costs of the production of fossil fuels. The most obvious externalities of fossil energy production are environmental externalities, including air pollution and climate warming. These external costs are difficult to measure, such as the impact of air pollution on human health. Even some external costs that can be quantified often cannot be internalized in reality. The so-called market-based prices in reality usually reflect only the financial price and the scarcity of energy, and do not include external costs such as environmental pollution and climate change. Therefore, simple market-oriented reform of energy prices may not solve the problem of optimal allocation of resources. Energy market-oriented reforms should take into full consideration of external costs of fossil fuels. Since 1965, global energy consumption and GDP have basically maintained a synchronous upward trend. Global energy intensity has fallen slowly, and it has been difficult for technological progress and energy efficiency to offset the impact of income growth on energy consumption. We generally believe that technological progress and improved efficiency can reduce energy consumption and decouple GDP from energy. However, as a simple example, a piece of clothing can be worn for a long time, but if income allows, we will often buy a lot of clothing. In this way, even if unit energy efficiency is improved, the total energy consumption of multiple clothes will still be much more than one. Therefore, especially when the economy is on the upswing, the improvement of energy efficiency usually cannot offset the pressure of rising incomes on energy consumption. We have chosen an economic model that is most suitable for human development, and called it the market economy. Basically all countries are market economies, and China has been carrying out market-oriented reforms. So what is the core issue of the market? From the supply side, it must be selling. As long as a product is bought, a company can succeed. Therefore, in reality, countless people want to sell things to us every day. From the demand side, people have endless desires for material possessions. As long as their incomes allow, people will buy. According to statistics, the garment industry produces an average of 20 pieces of clothing for each person annually, and 30 percent of the clothes produced are never worn. The market economy, as the most suitable model for human development, puts a lot of pressure on natural resources. The simple increase in efficiency can""t offset the pressure of income growth on energy demand. Therefore, energy consumption and carbon emissions, especially in emerging countries, remain a major problem. It is true that some developed countries in the European Union are showing a flat or even slightly declining energy demand, but it is still too early to say that their energy demand is decoupled from GDP. Assuming that there is no environmental pollution in developing countries, such as pollution caused by manufacturing in China, India, and Southeast Asian countries, none of the countries in the world can claim that its GDP growth has been decoupled from energy consumption. Therefore, we need to truly understand the pressure of the market economy on resources and pollution emissions to improve the energy saving awareness. The author is dean of China Institute for Studies in Energy Policy at Xiamen University. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
SONG CHEN/CHINA DAILY
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