Introduction

Growth rates in energy-related emissions of carbon dioxide (CO2) in developing countries, particularly the People's Republic of China, have increased rapidly in recent years. Emissions from the original signatories to the Kyoto Protocol (known as “Annex B countries”)— essentially the developed world and economies in transition—will almost certainly be surpassed by emissions from non-Annex B countries before 2010. Previous analyses projected that this crossing point would occur in 2020 or later (Weyant et al. 1999). The main source of unexpected emissions growth is China. According to the historical record provided by Marland et al. (2008), since 2000 the average annual growth rate in China's emissions has exceeded 10 percent, compared to 2.8 percent in the 1990s. Globally, the average growth rate since 2000 has been 3.3 percent, compared to 1.1 percent in the 1990s.

Raupach et al. (2007) decompose emissions growth in several regions into the factors of the Kaya identity: population, per capita income, energy intensity of gross domestic product (GDP), and carbon intensity of energy. In China, the first and last factors have been stable: population growth is slow and carbon intensity has remained consistently high due to heavy reliance on coal. Emissions growth has been driven by a combination of rapid economic development and the reversal of the past trend of declining energy intensity. Between 1980 and 2000, energy intensity in China had been falling faster than in any other major economy. This decline has been attributed to efficiency improvements at the firm level as market reforms privatized formerly state-operated enterprises (Fisher-Vanden et al. 2004).