Green growth’s invisible ingredient

Information technology has the potential to transform China’s low-carbon narrative – but the opportunities need to be grasped, writes Simon Zadek.

China’s green growth is a collective imperative that can enable the country to improve the economic conditions of its 1.3 billion citizens without creating the mess that today’s wealthier societies have produced over the past 150 years. Carbon is by no means the only piece of this challenge. Nevertheless, China’s decarbonisation is the key to securing a stable climate, which is in turn a pre-requisite to continuity in our global society.

A key ingredient of green growth is information and communication technology (ICT). It is the stuff that makes our energy systems, transport, electricity grids and buildings more efficient, and that underpins the technologies that enable us to make use of renewables, travel less whilst communicating more and in general reduce our environmental footprint. One recent study, Smart 2020, estimated that effective use of ICT could secure 15% of the total carbon reductions needed by 2020.

ICT-enabled growth in China is a key to “greening” the country’s development pathway, but until now there has been no data-driven analysis to support this, and so no way to design the policy framework to make it happen. At the end of last year, China’s Ministry of Industry and Information Technology (MIIT), along with a group of ICT companies under the umbrella of the Digital Energy Solutions Campaign (DESC), hosted its first major event in China on the role of ICT in low-carbon growth.

The key policy research input to the event, “ICT and Low Carbon Growth in China”, was prepared by a combined Chinese and international team, including myself. The core aim of the research was to produce a headline number for the potential mitigation impacts of realising ICT potential, building on the work done internationally. Clearly, with data weaknesses and indeed conceptual issues, this is a “fuzzy number” at best, but we have done a lot of data mining and conceptual thinking and have come up with a number sitting, of course, in a range estimate.

The information and communication technology (ICT) industry contributes to both the emissions and economic sides of the carbon-intensity equation. Breakthroughs in information technology provide the basis for leaps in labour, capital and firm productivity. In developed countries, a World Bank study concluded that each US dollar invested in the ICT asset base results in the annual creation of up to US$1.4 (9.3 yuan) of added value from the productivity uplift of ICT on other sectors.

In China, one estimate suggests that, from 1995 to 2003, ICT was responsible for 8% of economic productivity growth. It is estimated that for every 10% in the uptake of basic telecommunication and ICT technologies in emerging economies, there is an incremental GDP increase of up to 1.4%.

ICT use has already delivered productivity enhancements for many traditional and new Chinese businesses, in renewable energy generation, improved efficiency of transport and better and faster communications But an economy-wide analysis indicates there are significant further opportunities for improvement in China. This is borne out by the comparable figure for ICT-driven productivity improvements among the G7 industrialised nations, where ICT contributes an estimated 20% of growth.

China’s ICT sector has been, and will continue to be, a critical contributor to economic growth, with the main gains concentrated in manufacturing, but also with a growing software and service sector and increasing indigenous innovation. The report estimates that, by 2020, China’s ICT sector will contribute 5.9 trillion yuan of added growth to the economy, accounting for 7.2% of the economy and contributing 8.6% of overall economic growth over the decade. This is crucial to achieving the shift from a heavy industry to a knowledge and services-oriented economy, which is core to China’s low carbon, and overall economic-development strategy.

Between 2007 and 2020, it is estimated that the carbon intensity associated with the ICT sector could fall by over 60%. The ICT sector itself has relatively low energy and carbon intensity, although its absolute emissions are growing. In 2007, it was responsible for about 190 megatonnes of carbon-dioxide equivalent, or 2.4% of China’s total emissions. At that time, the sector contributed about one trillion yuan of added value, and so emission intensity was around 190 megatonnes of carbon dioxide per million yuan.

By 2020, the ICT industry is expected to produce 415 megatonnes of emissions, or 3% to 3.3% of China’s total (assuming the overall carbon-intensity reduction target of 40% to 45% is reached nationally). At the same time, the sector will provide 7% of economic output, meaning emissions intensity of 70 megatonnes of carbon dioxide per million yuan.

This analysis takes into account the significant potential to control and reduce emissions growth associated with ICT use, particularly through the development of more efficient data centres. However, it does not take into account the economic value added associated with telecoms network services, which would be likely to drive down further the overall emissions intensity of the sector.

The potential for ICT-enabled emissions reductions is larger than the direct footprint of the production, use and disposal phase of ICTs themselves. ICTs can be used by other sectors to unlock the potential for emissions and energy savings through monitoring and optimising energy use (such as in heating, lighting and industrial processes); optimising product and service provision (such as through smart logistics and transport and traffic controls); and by enabling substitution of virtual services such as virtual meetings, and music downloads for real world office space, travel, products and shipping.

Overall, we estimate that if China’s industries make good use of the opportunities for ICT-enabled emissions reductions, they could reduce emissions in other sectors by 1.4 to 1.7 gigatonnes of carbon-dioxide equivalent between 2007 and 2020. This would amount to between 13% and 18% of the national 40% to 45% intensity-reduction target for 2020, compared to a 2005 baseline, and be between 3.5 and four times greater than the direct emissions related to ICT over that period.

Achieving these opportunities for low-carbon growth requires action by technology providers and users, as well as enabling frameworks provided by public policy and procurement. There is currently a practical, communication and policy gap between the ICT and low-carbon agendas. While China has strong policies both for “informatisation” and for energy efficiency, they are not linked together. This has led to some missed opportunities during the 11th Five-Year Plan as energy-efficiency measures only made limited use of ICTs.

This suggests there is potential to strengthen China’s approach to low-carbon growth through full integration of ICT opportunities in the 12th Five-Year Plan period, which begins this year.

There are practical obstacles to widespread implementation of low-carbon ICT. They include the lack of: information and awareness about the potential for cost and energy savings; capabilities to implement and integrate ICT-enabled solutions; alignment between cost, availability of capital and returns; established business models for new technologies; and the necessary co-ordination for systemic transformations of infrastructure.

However, collaborative action, supported by technology providers, could help to realise the potential contribution of ICTs to low-carbon growth. Key areas for immediate productive action would include:

·     Development of metrics and measurement tools to assess and communicate the carbon-reduction potential and performance of key technologies. 

·     Case study learning and sharing of experience both from technology providers, adopting companies and public bodies to advance the level of awareness and understanding in China, and provide a platform for mutual learning and potential collaboration. 

·     Leadership by sector in reporting and benchmarking on its own carbon performance. The ICT sector can take a leadership role not only in showing how it is applying its own technologies, but also in developing and demonstrating world-class corporate processes in target setting, performance management and reporting. 

·     Developing training and capacity building for key personnel within both technology-providing companies and technology-using companies to understand and implement low carbon ICT solutions.

Simon Zadek is a non-resident senior fellow at the Center for Business and Government of Harvard University’s Kennedy School.

The full report, “ICT and Low Carbon Growth in China”, in English and Chinese, and related information can be downloaded here. 

Homepage image from yurok