By Adrian Pang
China announced recently that the country pledges to speed up emissions reductions to reach carbon neutrality by 2060. The announcement by the Chinese president was a pleasant surprise for many experts, who along with environmentalists, welcomed the news and opined that this significant step by the world’s largest polluting nation will significantly slow climate change. Some even called the announcement “the most significant climate policy move for years” (China’s carbon neutral pledge could curb global warming by 0.3 degrees Celsius: Researchers, 2020). Researchers from Climate Action Tracker said the move could curb global warming by 0.2 to 0.3 degrees Celsius this century if China achieves the target (China going carbon neutral before 2060 would lower warming projections by around 0.2 to 0.3 degrees C, 2020). Under this goal, China also pledged that its emissions would peak before 2030 before undergoing drastic reduction until 2060.
Chart for illustrative purposes only. Source: Paia Consulting
This is a significant milestone as the country is the biggest carbon emitter in the world. Prior to the announcement, China was reserved in its long-term commitment to carbon neutrality. The country’s previous goal was to reach emissions peak by 2030 at the latest. As the largest emitter in the world, China accounts for 28% of the world’s emissions (Myers, 2020). This figure dwarfs the proportion of total emissions – 11% of the over 60 countries that pledged to achieve carbon neutrality by 2050 in 2017 (Sengupta & Popovich, 2020). With China’s commitment, the world might witness a nearly 40% carbon emissions reduction between 2050-2060. However, as with many of the aforementioned 60 countries, China also did not specify how it plans to achieve the targets. At present, these question marks will continue casting shadows on China’s ambition until the country set out a solid action plan with near- and long-term targets. Even so, it is obvious a critical area of focus would be its energy scene. Here, we look at China’s energy landscape to examine challenges and opportunities while awaiting the plans from the government.
Challenges: Energy Revolution Still in the Pipeline
The sector with perhaps the biggest role to play is the energy sector. China still relies on fossil fuels for about 85% – with coal at 60%, of power production (Shepherd, 2020). This amounts to about half of the country’s carbon dioxide emissions from fossil fuels. While the rest of the world is gradually shifting away from fossil fuels, China’s emissions rose in 2018 and 2019. The setback was induced by the country’s efforts to boost a sluggish economy. In 2020, Beijing has approved coal-fired power plants at the fastest pace since 2015 (Hale, 2020). There were more construction permits granted for these power plants in the first six months of 2020 than 2018 and 2019 combined. This is evidently to regenerate the economy devastated by the pandemic but at the detriment of progress made on cutting coal consumption. As a result, carbon emissions from China’s main economic activities – energy production, cement making, and industrial uses were 4% higher year-on-year in 2020. This is despite an overall 25% pandemic-induced reduction of emissions at the start of the year. Therefore, reversing recent and current energy and emissions trends is pivotal to kickstart the 40-year plan to carbon neutrality.
The country’s upcoming five-year plan is expected to spell out necessary economic, industrial, and environmental agenda. Experts speculate the plan would maintain a cap on coal power capacity as well as accelerate the production of 20% of electricity supply from renewable sources by 2030 (Shepherd, 2020). Experts from Bernstein Research have estimated that China needs to reduce fossil fuels consumption from the 85% of total energy mix to 25% to reach carbon neutrality (Zhou & Yep, 2020). Unfortunately, there currently are no substantial incentives for grid operators to buy renewables, casting the spotlight on needs to reform power pricing mechanisms.
Elsewhere, China’s Emission Trading Scheme (ETS) struggles to make an impression. Its ETS, which would eclipse the EU in size and accounts for a third of China’s national emissions, has been delayed several times (Temple-West, 2020). China’s ETS encountered difficulties in establishing a comprehensive data collection system that would allow policymakers to set target levels and allocate carbon credits accordingly (ibid). It was also scaled back to limit carbon credits trading to the power generation sector rather than the eight industrial sectors  in the original outline (ibid). The numerous setbacks to establish the scheme have been hampered by the pandemic-induced economic downturn as well as political uncertainties. There are also persistent doubts on the effectiveness of the trading scheme. Overall, there needs to be equitable contribution by the stringency of the coal power cap, enforcement of regulations, power sector reforms, political and social will, etc for a country of China’s scale.
Then, there is the conundrum of disrupting socioeconomic and socioenvironmental status quo to pave way for rapid transitions. This is a legitimate issue, as China currently has the biggest population in the world at 1.4 billion people. The 40-year commitment equates to rapid transformation within one generation of people. Thus, there are potential upheavals for people’s lives and incomes in a still-industrialising country. This is because social fabrics and fundamentals like energy consumption, food production, physical mobility and works will be radically affected.
Opportunities: Press on with Progress
On the country’s renewable energy development, China’s capacity now accounts for 30% of the world’s total. It is currently a leader in clean energy technologies where it is leading in wind turbines and solar panels production and installation. Therefore, one of China’s main opportunities is to press forward with current progress such as speeding up the transition to renewable energies for its industrial and commercial sectors. China has also shown that it has the capacity on other fronts. Aside from renewable energy infrastructures, China is also a global leader in batteries and electric vehicles productions.
While the ETS has faced repeated setbacks, a nationwide scheme is nonetheless taking shape. Eight regional authorities, including those from the most populous Beijing and Guangdong regions are piloting their own ETS albeit at much lower scales. These pilot schemes cover more sectors than the national scheme. They operate alongside the national scheme with a view to be incorporated into the national programme eventually (Temple-West, 2020). In the process, there should be no new coal-fired power plants
More importantly, China’s focus on expediting its carbon neutral commitment will have significant “spillover” effects on the global energy landscape and emission reductions. A good example is the decreasing solar panels prices all around the world due to China’s high demand for solar energy (Pollitt, 2020). This would result in higher adoption of renewable technologies worldwide – and higher emissions reduction in other parts of the world even if other countries do not implement new climate policies (ibid). China is also the world’s biggest energy financier and biggest market aside from being the biggest emitter. It is consistently the top investor in clean energy globally for nine out of the last ten years according to the Frankfurt School of Finance and Management (Campbell, 2019). It has invested heavily in many developing parts of the world such as South America, Africa and Asia. While political intentions might be cornerstones of many of such investments, China’s contribution remain significant from the environmental perspective, driving the global transition to renewable energy.
Finally, a significant opportunity for China is its own governance and regulations. The country should implement more significant economic measures targeting at energy and emissions intensive sectors still reliant on fossil fuels and coals. The country can also have stronger enforcement of laws against environmental offenders. That might see a significant shift away from current fossil fuel driven economic discourse and paradigm. Socioeconomically, creative destructions of technology, skills, and jobs such as those in coal extraction spurred by the energy revolution are inevitable (Pollitt, 2020). Thus, transformations require fine balancing acts by the government to ensure a smooth transition to clean renewable energy sources, such as creating new industries and jobs as well as subsidising infrastructural developments. This is to ensure the least disruption will be caused to the socioeconomic stability of its society.
In essence, China’s 2060 pledge is driven by encouraging progress in the renewable energy sector. Together with other major actions and policies shift such as strengthening the ETS and tailoring carbon neutrality into the next Five-Year-plan, it is possible for China to reach zero carbon by 2060. All eyes are indeed on China’s 14th Five-Year-plan. Their next course of action will be pivotal for the climate change trajectory in the next decades.
What do you think are the challenges and opportunities as we await China’s action plans to achieve carbon neutrality? Share your thoughts with us in the comment section.
 Power generation, steel and iron, non-ferrous metal, building materials, chemical industry, petrochemical industry, paper making, civil aviation
Campbell, C. (2019, November 1). China Is Bankrolling Green Energy Projects Around the World. Retrieved from Time: https://time.com/5714267/china-green-energy/
China going carbon neutral before 2060 would lower warming projections by around 0.2 to 0.3 degrees C. (2020, September 23). Retrieved from Climate Action Tracker: https://climateactiontracker.org/press/china-carbon-neutral-before-2060-would-lower-warming-projections-by-around-2-to-3-tenths-of-a-degree/
China’s carbon neutral pledge could curb global warming by 0.3 degrees Celsius: Researchers. (2020, September 24). Retrieved from Channel News Asia: https://www.channelnewsasia.com/news/world/china-carbon-neutral-pledge-global-warming-climate-change-13139974#cxrecs_s
Hale, T. (2020, June 25). China expands coal plant capacity to boost post-virus economy. Retrieved from Financial Times: https://www.ft.com/content/cdcd8a02-81b5-48f1-a4a5-60a93a6ffa1e
Myers, S. L. (2020, September 25). China’s Pledge to Be Carbon Neutral by 2060: What It Means. Retrieved from The New York Times: https://www.nytimes.com/2020/09/23/world/asia/china-climate-change.html
Pollitt, H. (2020, September 24). Analysis: Going carbon neutral by 2060 ‘will make China richer’. Retrieved from CarbonBrief: https://www.carbonbrief.org/analysis-going-carbon-neutral-by-2060-will-make-china-richer
Sengupta, S., & Popovich, N. (2020, September 25). More Than 60 Countries Say They’ll Zero Out Carbon Emissions. The Catch? They’re Not the Big Emitters. Retrieved from The New York Times: https://www.nytimes.com/interactive/2019/09/25/climate/un-net-zero-emissions.html
Shepherd, C. (2020, September 23). China’s carbon pledge revives hopes of a climate game change. Retrieved from Financial Times: https://www.ft.com/content/e893f840-361c-4858-94e1-517d6016ec65
Temple-West, P. (2020, June 5). China’s carbon trading scheme struggles to take off. Retrieved from Financial Times: https://www.ft.com/content/35a0a860-8eab-11ea-af59-5283fc4c0cb0
Zhou, O., & Yep, E. (2020, September 23). China’s carbon neutral pledge signals turning point for fossil fuel markets. Retrieved from S&P Global: https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/092320-chinas-carbon-neutral-pledge-signals-turning-point-for-fossil-fuel-markets