| Project Detail |
Wenzhou is the third largest city in Zhejiang Province, in the Yangtze River Delta, of the Peoples Republic of China (PRC). The city is a major manufacturing hub for consumer and industrial goods. However, the manufacturing process of these goods is energy- and carbon-intensive. In todays climate crisis, industries green transition is critical to reduce their carbon emission levels and mitigate climate change impacts. In this context, Wenzhou Finance Bureau (WFB) requested technical assistance (TA) from the Asian Development Bank (ADB) to facilitate the industrial sectors green and low-carbon transition. The TA will help create the conditions to establish a digital economy and facilitate local private enterprises transformation to greater technical and energy efficiencies. The low carbon footprint will contribute to the PRCs commitment to achieve carbon peaking before 2030 and carbon neutrality before 2060 under the Paris Agreement.
Project Name The Role of the Digital Economy in Supporting Enterprise Green Development
Project Number 57119-001
Country / Economy China, Peoples Republic of
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Wenzhou is the third largest city in Zhejiang Province, in the Yangtze River Delta, of the Peoples Republic of China (PRC). The city is a major manufacturing hub for consumer and industrial goods. However, the manufacturing process of these goods is energy- and carbon-intensive. In todays climate crisis, industries green transition is critical to reduce their carbon emission levels and mitigate climate change impacts. In this context, Wenzhou Finance Bureau (WFB) requested technical assistance (TA) from the Asian Development Bank (ADB) to facilitate the industrial sectors green and low-carbon transition. The TA will help create the conditions to establish a digital economy and facilitate local private enterprises transformation to greater technical and energy efficiencies. The low carbon footprint will contribute to the PRCs commitment to achieve carbon peaking before 2030 and carbon neutrality before 2060 under the Paris Agreement. The TA will be financed under a 50-50 cost recovery arrangement with the WFB.
The TA is aligned with the PRCs 14th Five-Year Plan, 2021-2025; ADBs Strategy 2030; and the ADB PRC country partnership strategy, 2021-2025, which all place high priority on low-carbon development and climate change finance. In addition, ADBs Strategy 2030 and the PRCs five-year plan promote advancing the digital economy through greater connections between new technology adoption and business operational efficiency. This will help create innovative approaches via the latest digital technologies to achieve improved energy efficiency and reduce climate change impacts. In addition to these objectives, the TA will improve digital economy sector development through (i) knowledge creation, development, and sharing; (ii) institutional and market capacity development; and (iii) regional collaboration and learning, based on international best practices and local implementation experiences. The TA is included in the list of projects agreed between ADB and the Government of the PRC on 12 June 2023.
Project Rationale and Linkage to Country/Regional Strategy
The Peoples Republic of China facing challenges to achieve carbon peaking before 2030 and carbon neutrality before 2060. The PRC has achieved unprecedented economic success by transforming a largely agrarian nation into an industry powerhouse and the worlds second largest economy within 40 years, while lifting a country of about 1.3 billion people out of poverty. The industrialization process, along with rapid infrastructure development and urbanization, has been achieved largely by using coal and other fossil fuels as energy sources. As a result, since 2006, the PRC has been the worlds largest carbon emitter, responsible for about 30% of global carbon emissions. To correct this course, the government has developed a comprehensive policy and regulatory framework, set emission targets, invest in renewable energies, develop transition technologies, promote green finance, and establish carbon markets, among other initiatives. With estimated investments totaling $270 billion equivalent as of 2023, the PRC is among the worlds largest renewable energy investors. In terms of international treaties, the PRC was among the 197 parties that signed the Paris Agreement at the 2015 United Nations Framework Convention on Climate Change Conference (21st Conference of the Parties [COP21]). As part of the PRCs nationally determined contributions, at the 75th session of the United Nations General Assembly in 2020, the PRC announced its "aim to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060" (dual carbon goals). The PRC urgently needs to accelerate the identification of innovative approaches in all applicable enterprise and industry sectors to reduce their carbon intensity and emissions, including small and medium-sized enterprises (SMEs) and those led by the private sector.
The shift to a digital economy demanding innovative approaches to improve business operational efficiency and energy intensity. The PRC has made substantive progress in industrial carbon transition, especially since 2017, when the country announced a further strategic shift to improve its environmental conditions. The initial focus has been on transitioning the heavy industries of steel, cement, petrochemicals, and glass, including by shutting down inefficient plants and/or upgrading viable production lines. However, light industries and manufacturers (e.g., private sector SMEs) also emit a significant amount of carbon in aggregate. The digital economy, when adequately developed, could be used as an innovative tool to facilitate their green and low-carbon transition process. For example, digital technologies such as cloud computing, big data, artificial intelligence (AI), and machine learning could help generate optimal decisions over the entire production chain through broadband networks, data centers, and software frameworks. They could also facilitate manufacturing automation, supply chain management, product quality control, and real-time analytics for monitoring and optimizing energy consumption against varying production patterns. Further, digital commerce such as web advertisements, electronic transactions, and digital payment services could facilitate more efficient marketing and sales, logistics, and payment collections. These operational improvements would help private sector SMEs enhance business efficiency, reduce costs, and improve service quality. The environmental benefits and sustainability that the digital economy produces create positive sector externalities, even at a regional level beyond the PRC.
The development of a digital economy requiring a comprehensive framework and a pilot site. The use of the digital economy to improve business operational efficiency and reduce energy and carbon intensity in the PRC is still a novel concept. The development of a digital economy requires a comprehensive framework that includes policy and regulation, system and infrastructure support, knowledge and awareness promotion, and/or technical and institutional capacity. These fundamentals have yet to improve in the PRC. To support sector development, the government has adopted both a top-down approach (by setting the strategy, policy, regulation, and implementation plan as stated in the PRCs 14th Five-Year Plan) and a bottom-up approach (by pilot-testing the digital economy concept in enterprises). Under the bottom-up approach, the identification of a pilot region with strong support from the local government is important to (i) commence the scoping work, (ii) identify technical and commercial deficiencies during the implementation period, and (iii) provide feedbacks on the implementation lessons and experiences back to policymakers and regulators for finetuning the sector development approaches.
Wenzhou as a cradle of the countrys private sector development. The PRCs rapid ascent to the worlds second largest economy relies in part on the countrys booming private sector as the manufacturing base and a major driving force for innovation and growth. Wenzhou is widely regarded as the cradle of the PRCs private economy. It is dominated by five traditional industries focusing on a range of consumer and industrial supply chain goods: electric equipment, garments, shoes, automotive equipment and parts, and pumps and/or valves, which are manufactured by private sector SMEs. In addition, Wenzhou is developing five new industries: the digital economy, intelligent equipment, life and health, new energy and smart vehicles, and new materials, which are also driven by the private sector SMEs. The development of the digital economy is expected to facilitate operational improvements in these agile and adaptive private sector SMEs to meet the dual carbon goals. Given these characteristics, Wenzhou municipal government has proposed its city as a pilot site for the PRCs new digital economy, a major theme under the countrys high-quality growth agenda.
Impact
Carbon emission from private-sector manufacturers, particularly SMEs, in Wenzhou reduced |
