Dear Vice Chairman Gu, Chairman Gao, and Vice Minister Wang,
Ladies and Gentlemen,
Thank you so much for inviting me to address this important Forum on National Affairs. On behalf of the World Bank Group I send you greetings and hope your deliberations will be successful.
As we enter the second half of 2021, the international community is facing unprecedented challenges. The COVID-19 pandemic has devastated economies and human lives around the world, hurting the poor particularly hard. While China, Europe and the United States have enjoyed a rapid recovery this year, boosted by the rollout of vaccines and large domestic stimulus packages, for low income countries economic prospects are far less positive. Many may take years just to recuperate the level of income they had prior to the pandemic. Inequality, which was already high before the pandemic risks getting worse.
While grappling with COVID-19, the year 2021 has also reminded us – if we needed any reminder - of the growing risks of climate change. Floods in Europe and in China, forest fires and heat waves on the West Coast of America and in the Eastern Mediterranean are just some of its manifestations.
There is another lesson, however, emerging from the past two years: no country on its own can confront the global challenges of today. As World Bank Group President David Malpass said at the Venice Climate Conference in July this year: “Our collective responses to poverty, inequality and climate change are the defining choices of our age. We must tackle them together to make progress in reducing poverty and boosting shared prosperity.” The upcoming Conferences of the Parties on Biodiversity in Kunming and on Climate Change in Glasgow provide important opportunities to reaffirm this collective responsibility.
At the World Bank we are leaning forward to provide the maximum support possible to our clients in developing countries. Indeed, in the 15 months between April 2020 and July 2021, we lent close to USD 160 billion to support the emergency health response, the roll out of vaccines, and the realization of a green, resilient, and inclusive recovery. Every crisis is also an opportunity. Let us use it to accelerate action towards a better development path, which does not trade-off economic progress and environmental sustainability and which offers opportunities for all. We believe such a path is possible and want to support country-led actions to reach it.
This approach also characterizes our partnership with China. Over the past 40 years our cooperation with China has continuously evolved and our priorities have shifted. Today, nothing is more central to our partnership than supporting China in the transformation of its economy towards a zero carbon future. The announcement by President Xi of China’s aim to reach net zero emissions by 2060 has initiated an important process of adjusting policies and plans to make them consistent with this goal. In the remaining few minutes of these opening remarks, let me briefly outline the key challenges and opportunities we see for China in this transition to a zero carbon future.
At the heart of the zero carbon transition lies a fundamental transformation of the Chinese economy, away from heavy industry, construction and infrastructure towards greater reliance on services. This is a new challenge. China’s remarkable progress in reducing the emission intensity of its economy over the past decade was almost entirely driven by the expansion of renewable capacity and improvements in energy efficiency in the industrial sector. Both will continue to play a role but will not suffice to bring absolute emissions down. Instead what will drive China’s decarbonization is a greater reliance on innovation in services, in the use of data, and harnessing nature-based solutions.
The required structural transformation is not without cost. Regions will be affected very differently – the richer coastal cities may benefit, less developed interior regions will need to restructure their economies. The resulting reallocation of jobs will require governments at the national and local level to provide support, through retraining, investments in social housing and in greener and more livable cities, through improvements in the business environment to encourage the entry of new industries, and through reforms to the labor and capital markets to make it easier for resources to flow from shrinking to growing sectors.
In the face of these challenges, some may argue for going slow and taking time to adjust. But this ignores the huge opportunities the transition towards greener, resilient and inclusive growth entails. China today is a technological leader in many of the industries of the future. It has the capabilities to innovate and generate new drivers of economic growth and job creation. China is already making changes to its innovation system, to make it more results oriented, to provide greater support for basic research. It should continue these efforts and it should keep its innovation system open to the rest of the world. China also has deep financial markets and high domestic savings, which can help finance the transition as climate risks and impacts are increasingly incorporated into decisions where to allocate capital.
Additionally, for the opportunities of the zero-carbon transition to be realized, China should consider broadening its policy mix. China’s climate goals provide important long-term guidance to investors and consumers, but little short-term incentive to adjust. For that stronger price signals and greater reliance on market-based instruments will be needed. The IMF estimates that a carbon price of US$ 75 per ton is required globally to reach the Paris climate goals. This compares with the current trading price of US$ 9 per ton in China’s Emissions Trading System.
As we go into the 2020s, the actions governments around the world take today will determine how we collectively confront the challenges facing our age. China’s success in keeping COVID-19 under control, its administrative capacity and ample macroeconomic policy space, and its technological capabilities put it in a position to lead the world in the transition to a greener and more resilient future. We stand ready to remain partners with China on this exciting and important journey.