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Chinas carbon neutral target 2060

China’s 2060 Carbon Neutral Target – Challenges and Opportunities

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.

China carbon neutral targetChart 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 [1] 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.

[1] Power generation, steel and iron, non-ferrous metal, building materials, chemical industry, petrochemical industry, paper making, civil aviation

 

References

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

Towards net zero emissions

Towards net-zero emissions real estate in Asia

The following article first appeared on GRESB Insights

by Song Lin.

Massive wildfires in California, the worst flooding in China since the beginning of this new millennium, and the second most active Atlantic hurricane season on record – this is a snapshot of what a 1 °C warmer world looks like. Such extreme weather events have become more unpredictable in intensity and frequency year after year, and they are expected to become more devastating as the world gets warmer if we do not take immediate actions to drastically reduce greenhouse gas (GHG) emissions.

IPCC’s Special Report on Global Warming of 1.5 °C (SR15) makes it clear that it’s not too late to prevent the worst impacts of climate change, but there is no time to waste. To have a fair chance of limiting global warming to 1.5 °C, we need to halve global by 2030, achieve net zero CO2 emission by 2050, and achieve net zero on all GHG emissions by mid-2060s.

In addition to rapid and deep reductions in gross CO2 emissions (i.e. decarbonisation), pathways outlined in the IPCC Special Report also require ramping up of CO2 removals from the atmosphere. Some GHG emissions are difficult or impossible to be eliminated. For example, despite the impact of the COVID-19 pandemic, aviation and shipping are still expected to be major contributors of CO2 emissions in near future. Meanwhile, non-CO2 GHG emissions, such as refrigerant gases from buildings and methane from agriculture, will continue to contribute to climate change. Removal of these non-CO2 gases is not technologically feasible at the moment. In order to achieve a net zero emissions of all GHGs, the rate of CO2 removals has to exceed the rate of CO2 emissions past 2050 to offset residual non-CO2 emissions.

From a real estate industry perspective, achieving a net zero global target requires drastic transformations in how we design, construct and operate buildings. Currently, buildings consume 32% of global energy supply. With relatively longer life cycles measured in decades, developing zero energy and zero emission new buildings is especially important. Studies show that in order to achieve 80-90% reduction in building energy consumption by 2050, new constructions need to be near-zero energy by 2020. Further investments are also needed to retrofit existing buildings to the same level of energy efficiency.

Since the publication of the Special Report, more than 20 countries have adopted net zero targets. Some of these targets are published in policy documents, while others have been written into laws. With Europe leading the charge towards net zero targets, three Asian countries have made it to the list. Bhutan, which has been carbon neutral since early 1990s, pledged to maintain net zero emissions. Perhaps more meaningful examples come from Singapore and Japan. With much larger economies than Bhutan, both countries aim to reach net zero GHG emissions in the second half of this century. Collectively, however, these net zero targets only cover about 10% of current global GHG emissions. Corporate commitments to net zero emissions to support and supplement governmental actions are critically important.

Initiatives launched by industry associations, such as World Green Building Council’s Net Zero Carbon Buildings Commitments, have garnered meaningful support among developers and real estate investors. Adoption in Asia, however, has been relatively slow, especially in the rapidly growing markets of China, India and Indonesia. To date, there is only one Asian developer signatory from the Philippines.

In Singapore, efforts towards decarbonising real estate industry are mostly led by the public sector. As the national regulator, the Building and Construction Authority (BCA) piloted Southeast Asia’s first Zero Energy Building (ZEB) in 2009, and subsequently introduced Super Low Energy (SLE) and Zero Energy categories for the national Green Mark building certification scheme. Since then, the number of net-zero energy buildings in Singapore have grown to include the newly constructed SDE4 at National University of Singapore and seven retrofitted buildings on Nanyang Technological University’s (NTU) campus. In October 2019, Singaporean utility provider SP Group launched the first net zero emission building in Southeast Asia. Powered entirely by a solar and hydrogen energy system, the zero emission building is disconnected from the national electricity grid and generates zero GHG emissions during its operations.

SDE4 building on NUS Kent Ridge campus

SDE4 building on NUS Kent Ridge campus. Photo: NUS Office of Estate Development https://uci.nus.edu.sg/oed/projects/capital-projects/sde-4/

So far, most net zero energy and carbon building programmes, including World Green Building Council’s Net Zero Carbon Buildings Commitments, focus on eliminating Scope 1 and 2 GHG emissions from the operations. In the construction industry, GHG emissions embodied in the construction materials are important emission sources as well, especially in fast growing Asia markets. The production of many construction materials, such as cement, steel and glass, have traditionally been a carbon intensive process, but some manufacturers are committed to change this.

 

Cement producer Heidelberg Cement and steel producer ThyssenKrupp have both committed to achieve net zero emission in their production by 2050, partially through carbon capture, utilisation and storage (CCUS). Beyond the production of building materials, world’s fifth largest construction company Skanska also committed to net zero emission target throughout its value chain by 2045. Other alternative solutions, such as use of bio-materials, have been piloted in Singapore. In 2017, NTU launched the first large-scale building in Southeast Asia constructed primarily with mass engineered timber.

The Wave at NTU is the first large-scale building in Southeast Asia constructed primarily with mass engineered timber

Image 3 The Wave at NTU is the first large-scale building in Southeast Asia constructed primarily with mass engineered timber. Photo: Wee Teck Hian/TODAY

As a natural extension of setting science-based emission reduction targets, the Science-Based Targets Initiative (SBTi) published a set of recommendations earlier this year to guide corporates in setting meaningful and effective net zero targets. Among other things, SBTi emphasises that corporate net zero targets should include all value chain emissions (Scope 1, 2 and 3). Reductions and eliminations of GHG emission sources within corporate value chain (abatements) should be prioritised over offset measures that either reduce emissions outside corporate value chain (compensation measures) or remove CO2 from atmosphere through bio-sequestration and carbon capture, utilisation and storage technologies (neutralisation measures). Corporate net zero targets should also include separate strategies and targets for abatements, compensations and neutralisations.

With pilot projects proving feasibility of new technologies and clearer guidance from SBTi on corporate net zero target setting, we can expect growing interest in net zero targets among real estate developers and investors. These efforts could be further supported by the growing market of green financing. In Singapore market, green financing in the real estate sector has grown more than seven-fold in the past 3 years. Combined with effective net zero targets, targeted green financing schemes could catalyse a transformation in Asia’s real estate and building markets.

 

Sources:

  1. IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. In Press.
  2. Kuramochi, T., Höhne, N., Schaeffer, M., Cantzler, J., Hare, B., Deng, Y., Sterl, S., Hagemann, M., Rocha, M., Yanguas-Parra, P. A., Mir, G.-U.-R., Wong, L., El-Laboudy, T., Wouters, K., Deryng, D., & Blok, K. (2018). Ten key short-term sectoral benchmarks to limit warming to 1.5°C. Climate Policy, 18(3), 287–305. https://doi.org/10.1080/14693062.2017.1397495
  3. Pineda, A. C., Chang, A., & Faria, P. (n.d.). Foundations for Science-Based Net-Zero Target Setting in the Corporate Sector. Retrieved 18 September 2020, from https://sciencebasedtargets.org/net-zero/