An Interview with Professor Pan Jiahua, Deputy Director of the Sustainable Development Center of the Chinese Academy of Social Sciences

Wang Bo, Special Correspondent

Editor’s note: As an expert in sustainable development, Professor Pan Jiahua, Deputy Director of the Sustainable Development Center of the Chinese Academy of Social Sciences pays close attention to the change of global sustainable development. Sustainable development includes three major aspects: social justice, economic development and environmental sustainability.. Sustainable development is becoming a general tendency in the world. To adapt to the international trend of sustainable development and to push forward the sustainable development of the world and also of the petroleum industry are new strategic tasks for the energy industry, especially for the petroleum industry. Concerning this topic, Professor Pan Jiahua expressed his views.

Q: As a developing concept and a strategic direction, how does sustainable development become a general tendency in the world?

A: As a general trend initiated in the world, sustainable development has four milestones in its long history. The concept first appeared in the book Silent Spring written by Carson 40 years ago. The book awakened people’s awareness of the harm that pesticide had done to the environment. The second stage began in 1972, when UN Conference on Residential Environment officially put environment protection into the agenda of the governments of all countries as a political activity. The third milestone is that on the Summit Conference of Environment and Development in Brazil in 1992, both development and environment were considered of equal importance for discussion. The fourth milestone is that on the UN Summit Conference of Sustainable Development in South Africa in 2002, sustainable development became the guiding principle in coordinating the relationship among man, environment and development.

History shows that at the very beginning people became aware of the threat to man that is brought about by harms to the environment and realized that if man did not take actions, the problem would become even more serious. And actions to be taken involved the problem of who should be responsible for environment protection. This led to another problem—the wealth gap between developed countries and developing countries. Environment and development need coordination. Only by building a framework of sustainable development can man realize the wish to protect the only Earth that all human beings share.

Q: On the UN Summit Conference on Sustainable Development, what new contents were added to the definition of sustainable development?

A: The UN Summit Conference defined sustainable development as social justice, economic development and environmental sustainability. These three pillars of sustainable development are closely related and complementary to each other. No social justice, no healthy growth of the economy. If the wealthy manipulate the majority of resources, the poor will unavoidably bring damage to the environment for a living. No growth in economy, no money for environment protection. If the environment is not preserved well enough, the development of economy will have to face challenges.

Several issues were stressed at the summit conference, such as sharing the responsibility for sustainable development; establishing partnership between governmental agencies and non-governmental organizations, between local government and enterprises; and all participation in sustainable development.
Q: At the conference, what focal issues concerning sustainable development were brought forward for discussion?

A: Several specific aspects concerning sustainable development were discussed: water, energy resources, human health, crops and diversity of living beings. Of all energy problems, the major concern is the insufficient use of commercial energy resources among the poor. At present, about one-third of the global population has no access to commercial energy resources which are efficient and economical. Those people obtain energy by such traditional method as burning stalks. Poor people’s accessibility to commercial energy resources drew close attention from all participants present at the conference.

To realize sustainable development, to apply good governance is very important. Generally speaking, developed countries tend to be successful in sustainable development as they have a good mechanism. In contrast, some developing countries cannot incorporate sustainable development in the agenda because they have not established a sound mechanism and administration in those countries is not orderly.

Apart from that, several disputes took place at the conference. The most controversial one is the development of recyclable new energy resources. EU required a higher proportion of recyclable energy resources in whole energy consumption; however, the U.S. did not agree to that considering the tremendous expense.

Q: What new requirements does sustainable development make of the future world energy consumption?

A: Support and participation from the energy industry is indispensable for the growth of the world economy and environment protection. The development of the energy industry in return will promote the progress of society. Energy consumption is closely connected with the three pillars of the world sustainable development. To adapt to the trend of sustainable development, we should pay attention to the following issues:

First, the quantity of energy resources should be guaranteed. No energy supply, no growth in economy. In the coming two decades, energy consumption may double, and oil consumption may also double and redouble. The present annual consumption of oil in China will probably rise from 210 million tons to 380 million tons in 2020. Without an increase in quantity, it will be very difficult to achieve the stable continuous healthy growth in economy. Although China is rich in coal reserves, coal cannot replace oil functionally. Moreover, for environment protection, oil has peerless advantages over coal. The consumption of oil in China will definitely rise.

The second problem is the accessibility of high-quality energy resources. In the past, only rich people could afford to consume high-quality energy resources. At present, we are required to make good and cheap energy affordable to everyone. We should even enable the destitute to share high quality but inexpensive energy, the fruit of civilization that is brought about by the development of economy and technology. Hence, we must consider how to enable the poor to use high-quality energy resources.

The third problem is environment protection. At present, one of the major causes of environmental pollution is energy consumption. To be specific, air pollution caused by energy consumption not only damages ecology，but also worsens the increasing warmth of climate on the globe. In the long run, it is necessary to develop environment-friendly energy resources.

The fourth problem is the security of energy resources. Sustainable development needs a stable energy supply. If energy supply always fluctuates, the global economy will be affected. Therefore, how to maintain energy security in the world is a realistic question. The lack of secure supply of energy resources will become a potential threat to the development of economy. That is why governments of all countries attach great importance to the security of energy resources. For instance, energy security has been a part of the Middle East policy of the United States.

The fifth problem is the sustainability of energy utilization. At present, fossil energy resources play a major role in energy consumption in the world. Such reusable and recyclable energy resources as solar energy, wind energy, tidal energy and biomass energy have large room for development; however, they cannot become the mainstream of energy consumption in the future. When reorganizing the structure of energy resources, we should formulate a reasonable goal for adjustment after taking all the factors into consideration, such as the total demand of energy, the endowment of resources, and environment protection.

According to the trend of energy consumption in the world, the proportion of sufficiently supplied, highly efficient and environment-friendly energy resources will increase in the structure of energy consumption; the total consumption of inefficient, polluting energy resources will decrease. The general trend of applying clean energy of high quality is speeding up. Because of its uncleanness and serious damage to the environment when exploited and transported, coal will be reduced in energy structure. Oil and natural gas will increase, especially in developing countries.

Energy consumption is at different stages in developed countries and in developing countries, and the trend will also diverse. The demand for energy resources in developed countries is becoming more and more stable while their population is declining. For instance, in Europe, on average, every thousand people have 500 vehicles. As their demand for energy remains relatively stable, the next problems for them are how to further improve the efficiency of energy and how to reduce the cost of recyclable energy resources. In contrast, for their expanding population and growing economy, developing countries must accelerate the process of using energy of high-quality, increase the consumption of high-quality and highly efficient energy resources like oil and natural gas. In China, for instance, the annual increase of autos is 200,000 in Beijing, and gas is the main fuel. In ten years, oil consumption in China will amount to 28% of the total energy consumption, while in EU and in Japan, oil consumption will reach 40% of total energy consumption.

Q: What is the prospect concerning the development of oil and natural gas as conventional energy resources?

A: As an energy of high quality, oil still plays a major role in the structure of energy. However, natural gas is even more efficient and cleaner, and the proportion of natural gas will definitely increase in the structure of energy in the world.

Some people may be concerned that oil will be abandoned for the occurrence of substitute energy resources when large amount of oil still exists. I believe this will not happen. Of all energy resources, oil rather than coal is the most popular fuel in many countries though these countries are rich in coal resources. Oil and natural gas have dominant advantages over coal. Not only are they highly efficient, but also they may cause less damage to the environment. Moreover, the carbon emission of oil is only one-third of that of coal, and the carbon emission of natural gas is even less. That is why people try to use clean and highly efficient energy resources. Furthermore, it is impossible for renewable energy resources to immediately replace conventional energy resources, especially in transportation. In Britain, where renewable energy resources are valued most, 90% of the energy supply is from conventional energy resources, while the rest comes from renewable energy resources. Compared with conventional energy resources like oil and natural gas, renewable energy resources are not economical because they require higher investment and more advanced technology, and they cannot satisfy a large demand. To an economist, being uneconomical means unrealistic.

In addition, even though oil consumption decreases in developed countries due to emission reduction, oil consumption rises steadily in developing countries and thus counterbalances the reduction in developed countries. Therefore, in the near future, the overall oil consumption remains to be rising.

We should remain sober minded about the development of new energy resources. At present, as new energy resources remain a strategic alternative due to the high opportunity cost, we should not invest too much in the development of new energy resources. The U.S. Department of Energy has made a large investment in labs research on the development of new energy resources because the U.S., as a developed country with considerable funds and advanced technology, wants to dominate the energy industry in the future. For this strategic consideration, China should take all opportunities to make full use of conventional energy resources and make low-cost energy consumption possible. China’s economy will collapse if China competes with developed countries in the development of new energy resources. We should take a practical attitude toward choosing new energy resources and should focus our attention on conventional energy resources, especially on oil and natural gas.

Q: How can the oil industry adapt to and promote sustainable development?
A: Sustainable development is an opportunity as well as a challenge for the oil industry. It is no doubt that the demand for oil will increase for sustainable development. To adapt to sustainable development, the oil industry should be prepared in following aspects:

First, the oil industry should expand the supply and raise the efficiency of oil and natural gas. Oil is not a renewable energy resource, and it is a capital-intensive and technology-intensive industry with a very high profit rate. As a natural resource, oil needs to be exploited, refined and sold, and then is transformed into monetary capital that can be utilized in the capital market. In order to achieve sustainable development of the oil industry, we should exploit and utilize oil in the same way as we operate capital.

Second, the oil industry should encourage frugality. As an energy-consuming industry, the oil industry shoulders the responsibility to broaden the sources and reduce the waste of energy in the process of exploration, development, and refining.
Third, enterprises in the oil industry should broaden their horizons, keep a close eye on research of new energy resources and try safe multivariate management actively. Many oil companies have actually become energy companies, developing new energy resources while exploring oil. For instance, BP has established a new company dealing with solar energy. The advice that EU offered to the oil producing countries in the Middle East was also to practice multivariate management rather than to be confined only to the oil industry. Appropriately developing non-oil industries can counterbalance the market risk that an oil company may face. Otherwise, all businesses will be under attack were there a sign of threat in the oil industry. At present, research of new energy resources draws global attention. For instance, hydrogen fuel cell is found to emit 25 grams of carbon dioxide per kilometer while gasoline is found to emit 450 grams per kilometer. Some multi-national companies take part in the development of new energy resources for reservation of high technology. This will be beneficial to the sustainable development of the company in the future.

Fourth, innovation in the system is also crucial. Oil companies should advance sustainable development by abiding by the market mechanism and legal system.
Q: In terms of sustainable development of the energy industry, what experience can China learn from other countries?

A: In the process of replacing old energy resources by high-quality resources, the government should play a guiding role in enhancing sustainable development. The large output of coal formerly caused serious pollution in Britain and most of the acid rains in Europe. In 1970s and 1980s, after the exploitation of oil in the North Sea, oil and natural gas eventually replaced coal and became major energy resources in Britain. The British government paid subsidies to solve the problem of unemployment in the coal industry and gradually changed and improved the structure of energy that was dominated by coal. In order to meet the demand of oil and natural gas in the country, China is importing oil from other countries. For instance, each year, China is to import 30 million tons of crude oil and liquefied natural gas from Australia to Guangdong. Such actions will surely accelerate the development of economy and improve the quality of environment.

The leverage function that the government makes taxes to play is indispensable in the process of optimizing the structure of energy resources. In European countries and in Japan, tax on energy has a strong influence on energy consumption. In those countries, tax on energy accounts for 50% of the price and thus has had a great effect on the coordination of supply and demand, the promotion of the use of high-quality energy resources and the improvement of energy efficiency. This meets the requirement of sustainable development.

In addition, the government should act as a good judge and take the responsibility to keep order in the market. In western countries, if any gas station is caught giving short weight and selling low-quality gas, the station will be punished severely. The station may even go out of business. If the gas station is not responsible to the market and consumers, what is the point of its existence?

China needs to further optimize its energy structure by increasing the proportion of gasoline consumption. We have the condition and the ability to get more petroleum and natural gas. Actually, from an overall standpoint, it is less expensive to import oil and natural gas from other countries than to exploit the resources in China. We should make full use of the market. If the international market has a certain kind of energy resource that we need and is of low price, we should try to occupy a right niche.

Furthermore, it should not be neglected that the energy industry should also give due attention to the development of related industries while achieving the development of its own. For instance, the energy industry is closely related to the automobile industry as well as the transportation industry. When the traffic condition is improved, energy consumption will reduce effectively as a result of less traffic jams. It is important for the government to have a sensible vision when making plans and to establish a coordinating mechanism between the energy industry and other industries. Otherwise, due to ineffective coherence, the government will lose one while attending to the other, which will definitely cause a waste of social resources. Many foreign countries have tripped on this problem, and we should learn the lesson from their experience.

“Expansion first and efficiency next” is a valuable insight that many developed countries have offered. The economy in European countries and in Japan is becoming ever saturated with little room for expansion. In contrast, for its large population and vast territory, the U.S. has larger room for expansion. That is why the U. S. stresses development and does not make strict limitation on energy resource consumption. Each camp has its own distinctions. Developed countries are the biggest beneficiaries of globalization because they have abundant capital and technology, global vision and multinational companies which exist in any corner of the world. Therefore, those developed countries are manipulating the process of globalization while many developing countries are still passively accepting globalization. China should go in its own way and try to gain the initiative in globalization.

A Profile
Pan Jiahua was born in 1957 in Zhijiang, Hubei Province. He earned his PhD degree in economics at Cambridge University. He is a researcher in the Institute of World Economy and Politics in the Chinese Academy of Social Sciences. He is the deputy director and secretary general in the Sustainable Development Center. Meanwhile, he is a member of the Postgraduate Institute Committee and a PhD advisor.
(Translated by Ren Xin)