China’s Decarbonisation

Six reasons to stay confident about China’s decarbonisation.

Hongqiao Liu looks at the indicators that China remains on course in its decarbonisation endeavours:

  • Multiple indicators suggest China remains on course to decarbonize but whether emissions skyrocket before carbon peaks depends on one’s confidence in its economy
  • Non-fossil energy = 51% of installed power gen capacity & set to grow; China is moving beyond CO2 to include other emissions, and expected to release its methane plan before COP28
  • Market-based approaches will further be explored – experts anticipate higher carbon pricing; China has as much motivation to decarbonize but we need to be more patient

Three years back, President Xi Jinping of China unveiled its commitment to peak carbon emissions by 2030 and attain carbon neutrality by 2060. This commitment has expedited China’s decarbonisation efforts as part of China’s updated Nationally Determined Contribution (NDC) and Long-term Strategy (LST) to the United Nations.

Nevertheless, the recent economic downturn and geopolitical tensions have cast doubts on China’s decarbonisation progress. Speculations have emerged regarding China’s economic rebound strategies, especially the potential resurgence of coal for domestic energy security.

Despite these uncertainties, multiple indicators suggest China remains on course in its decarbonisation endeavours. Here are six reasons to stay confident about China’s decarbonisation:

1. Carbon peaking: Carbon emissions may have yet to peak, but emission growth is unlikely to be sustained

The “silver lining” of a not-yet-decoupled economy with carbon emissions is that when economic growth slows, emissions also slow down. To some extent, climate may benefit from China’s real estate slump and the downturn in macroeconomics rather than bearing collateral damage.

On this note, whether China will see emissions skyrocket before eventually reaching carbon peaking depends on one’s confidence in its economy.

Currently, there is no clear sign that Beijing plans to throw out another four trillion yuan economic stimulus plan besides a few newly permitted coal power projects to safeguard energy security. On the contrary, major carbon-emitting sectors like steel, cement, and chemicals are on the right trajectory to peak carbon emissions while continuing de-capacity.

2. Unstoppable clean: Renewable installed capacity just declared a historical win, shaking coal’s dominance in China’s electricity structure

As of June 2023, renewable energy has taken over coal to become China’s largest installed power generation capacity. When counting nuclear, non-fossil energy now makes up 51% of installed power generation capacity, and the share of non-fossil energy in China’s power mix will only increase.

According to the Helsinki-based non-profit Centre for Research on Energy and Clean Air (CREA), clean energy growth “could be enough” to cover China’s rising demand until 2025.

In just the first half of 2023, China added 101 GW of wind and solar power, similar to the total installed capacity in India as of 2022. Similar record-breaking trends are found in new energy vehicle (NEV) production, deployment and exports, demonstrating the economic scale of clean energy development in China.

3. Beyond CO2: China is broadening climate actions to address non-CO2 emissions

Although the carbon peaking target doesn’t apply to non-CO2 emissions, the carbon neutrality goal does.

According to Beijing-based thinktank iGDP, non-CO2 emissions may peak in 2029 with strengthened and continuous policies included in the 14th Five-Year Plan.

Actions are taking place and will likely be further accelerated after Beijing releases the “National Action Plan on Methane Emission Reduction” before COP28.

The widely anticipated action plan may deploy comprehensive measures similar to the “Air Ten” and “Water Ten” to tackle methane emissions from key sectors like agriculture, energy, and solid waste.

4. New markets: The carbon market, among other market mechanisms, is gradually taking shape, generating additional market incentives for emission reduction

While China is renowned for its robust administrative capabilities, its policymakers are not hesitant to explore market mechanisms. Over the past three years, China has fervently developed a range of market-based approaches that span the carbon market, green certificates, and the green power market.

Notably, the 2023 China Carbon Survey reveals market insiders’ confidence in more robust carbon pricing in China: they anticipate carbon price in the China ETS will rise to US$18 per tCO2e by 2030 and soar to US$33 per tCO2e by 2050.They may not appear to be high compared to the carbon price in the EU ETS. Still, once China introduces a gradually declining cap on emission allowance, which is on the market designer’s agenda, the carbon price may continue to increase.

The forthcoming relaunch of the voluntary emission market, China Certified Emission Reduction (CCER), will further catalyse low-carbon emission reduction initiatives, particularly propelling the swift advancement of nature-based solutions that address multiple concerns—ranging from natural habitats and biodiversity to climate change.

5. ICT transition: Net zero by 2030 is possible, and Chinese listcos are walking the talk

Since first announcing their 2030 carbon neutrality targets, Chinese ICT companies Baidu, Alibaba, and Tencent have considerably improved their carbon management and climate disclosure to varying extents. From renewable energy procurement to efficiency improvement, they are catching up with their Silicon Valley counterparts in the race to net zero. Leading by example, other ICT companies shall follow.

Without adequate mitigation measures, the sector will head towards the opposite direction of China’s national emission trajectory, risking jeopardising the hard-earned mitigation efforts made in other sectors due to soaring energy consumption dominantly powered by fossil fuels.

In a recent report, we analysed the good, bad, and ugly of Chinese ICT Listco’s carbon neutrality pledge and disclosure in great detail.

6. Think long-term: We are merely at the starting point of a four-decade-long decarbonisation journey

Bearing an immense adaptation burden to climate change, China has as much motivation, if not more, to decarbonise its economy and actively act on climate mitigation as any other country. But transforming the social and economic models that China once depended on in the past four decades demands time.

Indeed, we don’t have much time to run against the highly possible 1.5C overshot by 2025.

Nevertheless, we might all have to be more patient about China’s decarbonisation: the political readiness will materialise as climate targets are being incorporated into all aspects of policymaking.

Once the necessary conditions are in place – from legislation to education – China’s climate action will accelerate in the right direction.

SourceCWR,  20 Sep, 2023.

Author: Hongqiao Liu i is a Paris-based independent consultant.