Transcript: Energy transition policies for sustainable development in China: With guest Lydia Qiu

Onya: Hello, Onya Idoko here. Welcome to our new podcast ‘Life of PIE’- PIE- Prosperity, Innovation and Entrepreneurship. Life of PIE is an original podcast from UCL’s Institute for Global Prosperity and features research by our MSc PIE students. Our mission is to start a different kind of conversation with researchers, practitioners, entrepreneurs and policymakers doing cutting edge work, rethinking entrepreneurship and innovation to achieve structural and systemic transformations.

Manolo: A clean energy transition has been regarded as a crucial phase in China’s future sustainable development. To transform the primary energy from coal to natural gas, electricity and other renewable energy, central government issued different policies promoting a clean energy transition, especially in the heating industry. In other words, we are delving into possibilities to transition into more sustainable practices in China, one of the countries with higher CO2 emissions and in the industry that emits the most greenhouse gases from coal burning. So, it is important to ask what are these policy’s main characteristics, impacts and limitations? And considering different sectors such as the government, residents, and enterprises, what are the consequences regarding the implementation of each policy on the winter heating sector?

Lydia: My research examined the consequent influences of the approach to the environment, residents’ wellness and comprehensive sustainability.

Manolo: The analysis of this case in the Jin Jin Jin metropolitan region can be a reference for future energy transition policy in other regions and on a national scale. In this episode, Dr. Onya and Lydia will discuss the interrelationship between policymaking, ecological conditions and sustainable development.

Onya: For this episode, I have a special guest, Xiao Yang Chu, who we also call Lydia. And Lydia   came from a business background before applying for the MSC PIE course, she pursued her bachelor’s degree at the University of Bath in Accounting and Finance, and later worked for PwC. After completing the PIE course at UCL’s IGP, she’s currently a risk analyst at TikTok and detects potential risks of public opinions for TikTok and its parent company ByteDance. Welcome, Lydia.

Lydia: Hello Onya, I am very honored to be here today to talk about my dissertation.

Onya: Great, I’m excited that we get to have an interesting conversation about the research that you did on energy transition policies. So I’m going to start off, my first question will be in your research, you looked at energy transition policies in China, and what I’d like is for you to give our listeners the summary of the problem - the context and the importance of the study.

Lydia: So the phenomenon and the problem is about the energy transition and the structural change in China. So, the revolution of the clean energy transition has been regarded as a crucial phase in China’s future sustainable development. To transform the primary energy from coal to natural gas, electricity and other renewable energy, the central government issued different policies to promote clean energy transition, especially in the heating industry which emits the most greenhouse gaps from coal burning. When I was doing a literature review, I found that the initial energy transition policy which is coal to gas, can be actually dated back to 1997. But with 20 years of implementation, the air quality in the winter months remains harmful. And since 2013, greenhouse gas emissions and fine particulate matter which is PM 2.5, have significantly increased and are reflected in the Concerned Air Quality reports in northern cities in China, especially in the Tingzin Z region. However, 2017 is a milestone for establishing various energy transition policies since the local government in the Jinzinzi metropolitan area started to introduce payload mandatory co replacement policies. So here comes to the research problem of interest why policies implemented after 2017 effectively reduce the consumption of coal in winter heating sector and significantly alleviate the environmental concerns and by elaborating and analyzing features, impacts and internal factors of the published coal to gas, coal to electricity and hydrogen energy development policies. My research examined the consequent influences of the approach to the environment, residents’ wellness and comprehensive sustainability. Moreover, I also linked to the policies to the current carbon picking and carbon neutrality goals, aiming to discover opportunities and challenges regarding the energy transition field.

Onya: Thank you Lydia for that summary and for highlighting the research problem that your study focused on. I’d like to unpack some of what you talked about but before I go, before I actually do that, I want to understand what was your motivation for this study?

Lydia: Right so the first inspiration for me to do this research is actually taking a module when I was pursuing the PIE course, which in that course that I studied, we talked about degrowth and green growth. So the concept inspired me to think of the energy transition policies. So the mentioned two policies, which is Coal to gas and Coal to electricity is actually a degrowth policy and the hydrogen energy development policies is actually a green growth policy. So I would like to discover what are the differences and similarities in my research. And I would also like to find what are the consequences of implementing these two different policies. And the reason why that I would like to focus on this thought is that dimensioned problem is really important right now because of its severity and urgency of the energy transition. So here I want to elaborate the severity first. So coal has traditionally dominated the Chinese energy system and has historically been associated with high energy intensity. From the national development perspective, China has experienced a continuous expansion of its economy mainly due to the development of its industrial and technological sectors. However, on the other hand, enormous carbon emissions from coal burning resulted in various environmental concerns nationally and internationally. And in 2006, China actually became the world’s largest carbon emitter and contributed over a quarter of the greenhouse gas emissions. Therefore, to effectively reduce the massive carbon emissions China must diminish the use of coal which is the primary producer of excessive carbon dioxide and other detrimental pollutants then that’s moving on to the urgency of changing the energy consumption structure and the global warming concern is gradually exposed to the public and became a hot potato due to the detrimental consequences. So the urgency of looking for the sustainable and clean energy resources has been recognized internationally in recent years. As a result, government began adopting policies and regulations regarding energy transition due to worsened environmental problems and its unexpected energy wars and increased energy prices. China in particular has been facing international pressures on emission mitigation significantly since it emits the highest level of greenhouse gas globally. Consequently, the Paris Agreement, which was established in 2015 was developed to limit greenhouse gas emissions and diminish global warming by two degrees celcius. To respond to the worldwide proposal. China has been committed to reduce carbon dioxide emissions by at least 40% by 2020 through the proposed 13 Five Year Plan project, which was proposed by the chairman in China. According to the relevant data, the proportion of coal consumption among the total energy usage in China has declined over five decades from more than 80% to currently 55%. So it is also noteworthy that coal consumption has plummeted since 2011, and by 2019, China has reduced its carbon emission intensity by 48%, which is over the 40% reduction goal. So the rapid reduction in coal consumption is due to the strict implementation of coal replacement policies and measures introduced by the Chinese government. Introducing the coal to gas and coal to electricity policies is the principal strategy to replace coal in the current century. So that’s basically my inspiration and my thoughts before developing my dissertation.

Onya: Thanks, Lydia. That was very interesting and I think quite cool that the inspiration came from one of your modules on the program. So you highlighted these two different policies, a degrowth policy and a green growth policy. Degrowth being the coal to gas and coal to electric and the green growth being the hydrogen policy, the policy related to hydrogen. My question is when you did your comparison between these two types of policies, what did you observe in terms of their effectiveness? Considering that one policy has been around since 1997 I believe which is the degrowth policy, the coal to gas and the other is more recent. So what are some of the differences when you did the comparison in terms of effectiveness, in terms of consequences? Can you talk a little bit about that please?

Lydia: Yeah, sure. So it’s actually one of my main findings from this dissertation. So there are actually differences between these two policies. So firstly, although both policies have been prepared to be implemented for decades, the Coal to gas and coal to electricity strategy has been introduced, like I said, over 20 years ago. And in contrast the development of hydrogen energy policy has been promoted since 2020. So as a result the former which is the de growth policy has actually reached the steady operating stage and the latter remains in the initial exploration stage. So because they are actually in different stages so they have different limitations. For example, the Coal to gas policy or coal replacement policy still emits carbon dioxide and natural gas as we all know is not a renewable energy resources which does not help us to achieve a fully environmental sustainable in the long term. They consequently resulted in different impacts on society and the environment. On the other hand, hydrogen energy development remains uncertain, especially in the application of the heating industry. The incurred cost still remains high and therefore clean energy cannot reach an economic sustainability. So the scale of implementing this hydrogen energy will not be significant. Thirdly, the natures of natural gas, electricity and hydrogen energy are distinct. Coal replacement policies have brought safety to the society but hydrogen energy increases the possibility for explosion and leakage. So in conclusion, based on my analysis and the discussion on my dissertation, coal replacement and hydrogen energy development policies differ in three points. Firstly, there are different timelines and phases for implementing policies and secondly, government policies bring with them different levels of urgency and pressure. And thirdly, the impact of coal replacement policies have brought more significant than the impact of hydrogen energy on the economy, social wellness and progress of energy transition so far. But in the long term the impact of hydrogen energy might change because the development of hydrogen energy application will come to the mature stage and if they are actually comes to the operating stage, the benefits they bring to the society and to the environment and to the whole sustainability might be significant.

Onya: Thanks Lydia. Now, can you share with us what your specific research question was in this dissertation and how did you answer your question?

Lydia: So, I basically employed a case study as my research method and regard the coal replacement policies and hydrogen energy development policies as two cases. And I developed two main research questions and each of them leads to several separate questions. So the first main question is how are the energy transition policies different from each other? So, under the main question, I’ve got two minor questions. Firstly, what are the main characteristics, impacts and limitations of each policy? And secondly, what are the consequences of implementation each policy has on the winter heating sector? So the second main question is that what is the value added to the environment and to the society of implementing the policies? And within the main research question, I also included two questions to study the challenges and opportunities for carbon picking and carbon neutrality regarding the energy transition field. So, since my research only used secondary data to ensure the creditability and reliability and so all the information related and obtained from the Environmental transition policies has been obtained in two ways. So first they are either from official government website or they are from published reports from credible consulting and finance firms. I then applied and summarized all the qualitative data and implemented and embedded all of the sources into the two models that I used in this research. And I basically used two models to analyze the data. So the first model that I adopted is the policy analysis triangle framework, within the policy analysis triangle framework but there are four factors which are content, context, actors and process. So the contents of each policies are summarized first and then I use the rest of the factors to explore the policy in depth by examining if the government implements effective policies. I use different criteria to evaluate, for example by addressing historical traditions, social structure, determinants, the self interest of political powerful sectors, etc. To assess the effectiveness of these policies and by evaluating these factors. The research develops a relatively comprehensive political background of the policymaking and it also helps examine the policy’s benefits and impacts. As for the process factor, it includes the urgency and pressure to react and risk involved in policy making and the timing for policy response. So this factor in the policy analysis model considers more from the policymakers perspective and then it answers the question research question of what are the consequences to the government implementing such policies. The analysis also focuses on examining the power of local governments, especially the character of policy maker as well as size and quality of civil service. And the second model that I adopted is actually also that I learned in the modules from PIE. So I used the triple bottom line model which has been used to identify possible impacts on the environment and relevant households and enterprises in the energy industry. So by combining the triple bottom line model assessment and the policy analysis triangle model, my research also evaluates the second central research question in which the policies add value to the environment and to the societies are examined.

Onya: Thanks for that, Lydia it’s quite interesting to see that you combine these two models the policy analysis framework and the triple bottom line model which typically is used for businesses as you said, what I’d like to know is what came out of the analysis? What did you find?

Lydia: Right? So by using the policy analysis model, I found that each factor that I mentioned in the model is actually really closely intertwined. So let me just share a really interesting example. When analyzing core replacement policies in Tianjin, which is the city, one of the cities that I aim to analyze, I found that the central Environmental Protection Inspectorate criticized the accountability of Tianjin’s government and People’s Daily, which is one of the mainstream news agencies, in 2017 disclosed that some departments in Tianjin even manipulated the local environment assessment results and indulged in illegal construction projects. So after the disclosure of this scandal, it exonerated the urgency and pressure for the government to respond and resulted in shrunk budgets allocated from the central government. So after this scandal, the effectiveness of implementing coal to gas and coal to electricity policies are much better than before. As a result, I found that governing authorities make decisions based on current ecological conditions and objectives for future sustainability and apart from the contents of policies that are affected by the environmental conditions, context, process and actors are also related to policy making. These factors from the policy analysis model are also intertwined with the environment and sustainability and in return, efficient and effective policies improve the environment and strengthen economic and social sustainability. And when analyzing factors in the policy analysis model by cities and provinces, I also find that the factor context explains well of why policies should be tailored in different cities or provinces and why the impact are different in different areas after implementing similar policies. For example, to ensure the significant positive impacts of introducing coal replacement policies in the capital, Hurbey would need to sacrifice by allowing factors moving from Beijing to Hurbey. So that will actually make Beijing’s policies more effective. But actually, wasn’t Hurbey’s air quality and the policy effectiveness because of Beijing is a political important city and has an important historical background, so Hurbey would have to sacrifice regarding the value added by implementing those policies to the environment and society. My research also examined the challenges and opportunities for carbon picking and carbon neutrality objectives. So the announcement of carbon picking and carbon neutrality is primarily due to the significant results of Cosl to gas and Coal to electricity policies. So, coal picking is the stage where the coal consumption reached to the highest level, and after this stage, the coal consumption will reduce after this point. So the coal to gas and coal to electricity policies effectively reduced the proportion of coal consumption and adjusted the energy structure. However, the coal replacement trend exacerbated the dependency on natural gas imported from other countries. As a result, the heavy reliance may reduce Chinese proactive initiatives in the Energy Transition Project and in comparison, the exploration of hydrogen energy may release the pressure on the heavy reliance on natural gas. However, the current phase of hydrogen energy development remains uncertain in practical application and technological innovation.

Onya: That’s really interesting Lydia, particularly you talked about so. From the way, the dynamics, the way has played out, from the social tensions that took place in the geographical region that you studied all the way to China, wanting to shift away from its reliance on importing natural gas and therefore exploring hydrogen energy. That dynamic is interesting because I think, at least from my perspective, even though hydrogen is still in its infancy, there’s a lot of work being done in that area. And as I said earlier, we will obviously begin to see the implementation or results or consequences of these new technologies, these new innovations, as we move forward. So thank you for that. Thanks for sharing those findings. Now, the next question I have is how does what you found differ from what prior studies found?

Lydia: The difference between my research and previous research is that prior research used a lot qualitative analysis and quantitative approaches such as data modeling and quasi natural experimenting to analyze energy transition policies, environmental impact and effectiveness. And the models that I adopted have not been used to analyze energy transition field before. The policy analysis model was originally used to analyze public policy in health industry. However, the model also provides valuable references for other industries. And I think here it is applicable to the energy transition field. And public policies paid particular attention to the content they bring and normally ignore the actors involved in the policy revolution. So the process and political background behind the policy making is actually really important as well, because decisions over policy content are not simply technical, but also reflect what is politically feasible at the time of policy choice. So this model highlighted the critical role of the access in the policy process, which exists at not only international or national level, but also subnational levels. So inside their model, they considered historical, economic, political and social cultural factors to evaluate specific policies. Moreover, previous research did not discuss how policies influence different parties. So in my research, I adopted the Triple Bottom Line model to consider how policies affect household’s wellness, heating enterprises and the environment. My research aims to adopt the model to identify policies impacts from different perspectives. Like Onya said before, the model was actually being used in business sectors and it was actually originally used as a sustainability framework to examine an enterprise’s, social, ecological and financial impacts. By considering these aspects, companies can become more sustainable. The three factors in Triple Bottom Line, which is planet, people and profit correspond to three groups. They are namely environment, residents and enterprises. So, adopting this model, scholars usually consider the consequences of business activities on the people, planet and profit from the enterprise’s perspectives. However, in this research, the Triple Bottom Line was used to consider impacts from different involved parties and assessing policies impacts from the three perspectives give the qualitative analysis a fair and comprehensive view. Therefore, I believe that by adopting the model, the analysis results can explore the interrelationship between policymaking, sustainability and the environment.

Onya: Thanks for sharing with us the difference between your findings and what has been done by prior studies. My last question then, Lydia, is, so what are the implications of your findings for policy makers, entrepreneurs, corporates and even citizens?

Lydia: Right, so I reckon that the analysis gained from my research could assist coal replacement and hydrogen development plants in other cities in China. Since energy transition is a long and innovative process, the current work in this study can be used as a foundation for the consequent relevant investment investigations. And I think the research methodology and the models that I’ve used can also be a hint for other social science research for references in the policy impact assessment by illustrating the consequences of dimension policies and impacts to the government household and enterprises. So companies in the relevant industry can also use the analysis in my dissertation as a guidance and a forecast when they entering the winter heating industry and collaborating with the government’s Energy Transition Project, because my dissertation provides them with a comprehensive view of the traditional backgrounds and historical backgrounds of the local governments and the projects. So, based on the analysis results and key findings, I also suggest that a further study can focus on the remaining regions. What may not be taking adjusting energy structure and replacing coal as a vital work. Because in my study, I only focus on three cities. And this is just like the start of changing energy structure in China. As a result, my analysis will firstly alert local governments in other provinces to weather, accelerate the energy transition pace and secondly provide a comprehensive structure of the energy transition progress and assessing the impact and competitiveness would also be a valuable area for further research when hydrogen energy is successfully applied to the heating industry.

Onya: Thanks very much for that Lydia, and it was such a pleasure having you on the show and sharing insights from your dissertation. It was very interesting to know the social and environmental impact of different energy transition policies and as well as the impact on the energy sector. Thank you again for joining us Lydia.

Lydia: Thank you
 

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