CHINA SETS NEW ENERGY GOALS STILL HIGHER

12th Five Year Plan – Chinese Leadership Towards A Low Carbon Economy
April 4, 2011 (Deutsche Bank Climate Change Advisors)

"…With China’s introduction of the 12th Five year Plan on March 5, 2011, we see the many new and expanded strong policy initiatives [energy intensity targets and renewable energy deployment goals] in the Plan as clear evidence that China's low-carbon policies remain global best-in-class…

"…33.3% of the targets in the 12th Five Year Plan address resource or environmental objectives compared to 27.2% in the prior 11th Five Year Plan…[T]he summary Draft 12th Five Year Plan…lays out significant progress in key areas, describing the high-level objectives of China's National Climate Change Program…[P]ilot cap-and-trade systems for carbon and other criteria pollutants will be undertaken…[In contrast] to the stalled efforts at the US Federal level…[China] is preparing for carbon markets by 2013 and, as the world's largest manufacturing economy, it is stepping up to join the carbon markets in Europe."

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"The Draft Plan establishes goals for 2015, in addition to many of the 2020 targets already announced…[E]nergy intensity by 2015 will improve by 18% from 2010…[N]on fossil fuel energy will increase to 11.4% of total generation…[for] 235 GW of renewable and low carbon energy generation capacity…including wind capacity increasing by at least 70GW (from 42 GW currently) and solar capacity increasing to 5GW (from 625 MW currently). Importantly transmission lines for renewable are also targeted for expansion as part of State Grid of China's announced plans to invest RMB 500 billion (US$76.7 billion) over the next five years…

"…[F]orest cover is targeted to increase by 12.5m hectares and high-speed rail is targeted to expand by 47,000 km between now and 2015…In our estimation, China remains committed to low-carbon nuclear energy development…Despite the Fukushima event, we do not expect China to cancel any nuclear plants, although timetables for development may be disrupted…We believe that China will continue to look for the safest nuclear options…[and] multi-year delays for an estimated 24 GW of planned nuclear capacity should, we believe, give a strong boost to cleaner energy sources such as renewable solar and wind, along with more gas for base load…[T]urmoil in the oil-producing regions of the world serves as further impetus…"

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"In our estimation, the 12th Five year Plan creates a broad range of climate change-related investment opportunities for: (1) equipment and services companies in the wind, solar power and hydro sectors; (2) equipment and technology companies in the low-carbon transportation sector and; (3) project finance activity in the several areas of renewable power farm development. The Fukushima situation and Middle East unrest, we believe, further amplify these trends.

"We believe the continued trend toward higher energy efficiency also creates investment opportunities in the hardware, software and services areas since energy services and energy management businesses have received clear support in the 12th Five Year Plan. Shifts away from carbon-intensive electricity to both low carbon nuclear and cleaner natural gas generation are, in our opinion, likely to be fertile areas for investment as well."