Although China and the United States are the two largest emitters of greenhouse gases, China’s emissions on a per capita basis are significantly lower than those of the U.S.: in 2005, per capita emissions in China were 5.5 metric tons—much less than the U.S. (23.5 metric tons per capita), and also lower than the world average of 7.03 metric tons. China’s total GHG emissions were 7,234.3 million tons of CO2 equivalent (tCO2e) in 2005, 15.4 percent of which came from the agricultural sector. By comparison, total U.S. emissions were 6,931.4 million tCO2e, 6.4 percent of which were from agriculture. Within China’s agriculture sector, 54.5 percent of emissions come from nitrous oxide, and 45.5 percent come from methane, which is the opposite of the composition of global GHG emissions from agriculture.

Economic studies show that climate change will affect not only agricultural production, but also agricultural prices, trade and food self-sufficiency. The research presented here indicates that producer responses to these climate- induced shocks will lessen the impacts of climate change on agricultural production compared to the effects predicted by many natural scientists. This study projects the impacts of climate change on China’s agricultural sector under the A2 scenario developed by the Intergovernmental Panel on Climate Change (IPCC), which assumes a heterogeneous world with continuous population growth and regionally-oriented economic growth. Depending on the assumptions used related to CO2 fertilization, in 2030 the projected impacts of climate change on grain production range from -4 percent to +6 percent, and the effects on crop prices range from -12 percent to +18 percent. The change in relative prices in domestic and international markets will in turn impact trade flows of all commodities. The magnitude of the impact on grain trade in China will equal about 2 to 3 percent of domestic consumption. According to our analysis, trade can and should be used to help China mitigate the impacts of climate change; however, the overall impact on China’s grain self-sufficiency is moderate because the changes in trade account for only a small share of China’s total demand.

The effect of climate change on rural incomes in China is complicated. The analysis shows that the average impact of higher temperatures on crop net revenue is negative, but this can be partially offset by income gains resulting from an expected increase in precipitation. Moreover, the effects of climate change on farmers will vary depending on the production methods used. Rain-fed farmers will be more vulnerable to temperature increases than irrigated farmers, and the impact of climate change on crop net revenue varies by season and by region.

In recent years, China has made tangible progress on the implementation of adaptation strategies in the agricultural sector. Efforts have been made to increase public investment in climate change research, and special funding has been allocated to adaptation issues. An experiment with insurance policies and increased public investment in research are just two examples of climate adaptation measures. Beyond government initiatives, farmers have implemented their own adaptation strategies, such as changing cropping patterns, increasing investment in irrigation infrastructure, using water saving technologies and planting new crop varieties to increase resistance to climatic shocks.

China faces several challenges, however, as it seeks to reduce emissions and adapt to climate change. Fertilizers are a major component of nitrous oxide emissions, and recent studies indicate that overuse of fertilizer has become a significant contributor to water pollution. Application rates in China are well above world averages for many crops; fields are so saturated with fertilizer that nutrients are lost because crops cannot absorb any more. Changing fertilizer application practices will be no easy task. Many farmers also work outside of agriculture to supplement their income and opt for current methods because they are less time intensive.

In addition, the expansion of irrigated cropland has contributed to the depletion of China’s water table and rivers, particularly in areas of northern China. Water scarcity is increasing and will constrain climate change mitigation strategies for some farmers. One of the main policy/research issues—as well as challenges for farm households—will be to determine how to increase water use efficiency.

Despite the sizeable amount of greenhouse gases emitted by and the environmental impact of China’s agriculture sector, it also offers important and efficient mitigation opportunities. To combat low fertilizer use efficiency in China, the government in recent years has begun promoting technology aimed at calibrating fertilizer dosages according to the characteristics of soil. In addition, conservation tillage (CT) has been considered as a potential way to create carbon sinks. Over the last decade, China’s government has promoted the adoption of CT and established demonstration pilot projects in more than 10 provinces. Finally, extending intermittent irrigation and adopting new seed varieties for paddy fields are also strategies that have been supported and promoted as part of the effort to reduce GHG emissions.

Executive summary:

Statoil was founded in 1972 as the national oil company (NOC) of Norway.  Along with Brazil's Petrobras, Statoil today is a leader in several technological areas including operations in deep water.  With its arm's length relationship to the Norwegian government and partially-private ownership, it is generally considered to be among the state-controlled oil companies most similar to an international oil company in governance, business strategy, and performance.

Statoil's development and performance have been intimately connected to its relationship with the Norwegian government over the years.  The "Norwegian Model" of distinguishing Statoil's commercial responsibilities in hydrocarbons from regulatory and policy functions granted to other government bodies has inspired admiration and imitation as the canonical model of good bureaucratic design for a hydrocarbons sector. 

However, the reality is that Norway's comparative success in hydrocarbons development, and that of Statoil, has been about much more than a formula for bureaucratic organization.  Belying the notion of a pristine "Norwegian Model" that unfolded inexorably from a well-designed template, the actual development of Norway's petroleum sector at times was, and often still is, a messy affair rife with conflict and uncertainty.  But Norway had the advantage of entering its oil era with a mature, open democracy as well as bureaucratic institutions with experience regulating other natural resource industries.  Thus far, the diverse political and regulatory institutions governing the petroleum sector-and governing the NOC-have collectively proven robust enough to handle the strains of petroleum development and correct the worst imbalances that have arisen. 

Mark Thurber and Benedicte Tangen Istad make the following six principal observations from their research.

First, Norway's policy orientation from the start was focused on maintaining control over the oil sector, as opposed to simply maximizing revenue.  As a result, the country was more concerned with understanding and mitigating the possible negative ramifications of oil wealth than with any special advantage that could be gained from it. 

Second, the principal means through which Norway was able to exert control over domestic petroleum activities was a skillful bureaucracy operating within a mature and open political system.  Civil servants gained knowledge of petroleum to regulate the sector through systematic efforts to build up their own independent competence, enabling them to productively steer the political discourse on petroleum management after the first commercial oil discovery was made.  Robust contestation between socialist and conservative political parties also helped contribute to a system of oil administration that supported competition (including between multiple Norwegian oil companies as well as international operators) and was able to evolve new checks and balances as needed.

Third, Statoil did play an important role in contributing to the development of Norwegian industry and technological capability, in large part because it had the freedom to take a long-term approach to technology development.  With a strong engineering orientation and few consequences for failure as a fully state-backed company, Statoil developed a culture valuing innovation over development of a lean, commercially-oriented organization.  These priorities may not have always contributed to maximization of government revenues in the short run-costs came to be perceived as high in Norway (for various reasons not all related to Statoil) and Statoil was on occasion responsible for significant overruns.  However, the focus on innovation contributed to significant technological breakthroughs and helped spur the development of a high-value-added domestic industry in oil services.

Fourth, the formal relationship between Statoil and the government has become more arm's-length as Norway's resources and oil expertise have matured.  Under its first CEO, experienced Labour politician Arve Johnsen, Statoil aggressively flexed its political muscles to gain special advantages in licensing and access to acreage.  As domestic resources began to mature, Statoil's leadership (starting with Harald Norvik in 1988, and continuing through the tenures of subsequent CEOs Olav Fjell and Helge Lund) focused more on forging an independent corporate identity and governance structure that would allow the company to compete effectively abroad. 

Fifth, notwithstanding changes in their formal relationship, it has remained impossible to sever the close ties between the Norwegian state and a company with the domestic significance of Statoil.  These residual ties can manifest in various ways, including: 1) the effect on policy decisions of direct personal connections between Statoil leaders and politicians; 2) persistent "Norway-centric" influences on Statoil's strategy even in the larger context of efforts to internationalize; and 3) public pressure from politicians who continue to see themselves as Statoil's masters.  Such pressures can affect large strategic companies, public or private, in any country, but their effect is magnified by Norway's small size and Statoil's importance within it as the largest petroleum developer.

Sixth, Statoil's experience thus far casts doubt upon the conventional wisdom that NOC-NOC connections provide material benefit in opening resource access around the world.  To the extent that such linkages are important, Statoil would seem to be among the best-positioned to benefit from them as both a highly competent producer and a company that might be sympathetic to the needs of resource-rich countries.  However, there are few instances so far where Statoil's status as an NOC has been an obviously decisive factor in unlocking resources that would otherwise be off-limits.